Behind the music: Thom Yorke is wrong to write off the music industry

In a forthcoming book for GCSE students, Thom Yorke advises aspiring musicians to avoid signing to major labels, calling the music business "a sinking ship". His comments were raised this week at the music industry conference Musexpo, which prompted Rob McDermott (manager of Linkin Park and Pantera) to say, "I take issue with someone whose career was built by an industry, only to turn around and lambast it instead of support it."

Radiohead were signed to EMI for 12 years, a label which has been in the news recently for its financial problems, despite the fact its actual revenue rose last year (it also received another injection of funds recently).

One person who doesn't agree with Yorke's pronouncement about the industry is music manager Tim Clark, whose client Robbie Williams is signed to EMI. When I spoke to Clark last week, he did not rule out the possibility that Williams would continue working with the label once his record deal concludes following his greatest hits album. It's a surprising turnaround for someone who just a couple of years ago compared EMI chairman Guy Hands to a plantation owner. So what's changed? Clark agrees that, if record companies continue to operate in the way they have in the past, their days are numbered. Record sales have been falling at an alarming rate. Digital sales in the US have hit a plateau, and the revenue is not even close to making up for the lost money from physical releases. "There is no solution around the corner," says Clark. "I suspect more people than ever are listening to music, but they're doing it in such a way that they're not parting with any money."

For artists to survive, they'll have to look at other ways of monetising their rights, apart from record sales; playing live, merchandising and synch deals, for example. Clark is a big fan of what he calls "all-rights deals" (he refuses to call them 360 deals, because the term has been corrupted by record companies which use it as an excuse for a land grab without giving anything back). Clark and his partner, David Enthoven, have helped broker all-rights deals for Robbie Williams and Sia. This means the record label puts money into the artist's company, which in turn hires a selection of services while retaining all rights. Sia gets a much bigger slice of the recording royalties than the norm, but it goes back into the company. When the time comes for a profit share to be paid out, Sony gets their share.

The beauty of this kind of deal is that the artist knows exactly how much each service costs, and can use outside companies if they give better value for money. With traditional record deals, lots of costs are overcharged, says Clark: "Once you factor in packaging deductions [most labels deduct packaging from digital royalties], retail discounts, TV advertising discounts [if your record is advertised on TV, your royalty rate goes down for a period] etc, the artist gets less than 10%." He estimates that Sia is 10-15% better off than she'd be from a traditional record deal.

"The record industry is facing a catastrophic time," Clark adds. "It simply cannot sustain its models. I do understand that it's difficult for big companies. It's like turning around a big tanker at sea, but they should focus on their strengths: finance, distribution and marketing."

While Yorke appears to have written off his old label, Clark singles out EMI as a label that's realised the need for change. "It now has a sort of menu of services you can cherry-pick from. It still has an A&R function. It's still signing artists. But, as far as I'm aware, there are more JVs (joint ventures) – partnerships with the artists. That's a step in the right direction."

At Musexpo, other artist managers echoed Clark's view. "It keeps the labels on the game longer," explained Cerne Canning, who manages Franz Ferdinand. "If you give them ancillary rights, labels have got a vested interest to go down the road with you." Sarah Stennett, who co-manages Sugababes, VV Brown and Ellie Goulding, added that while major label deals have dropped in recent years, they're still vital when it comes to investment, as private investors won't invest in new music.

Yorke might not be in dire need of such investment any more, but to implore aspiring musicians to avoid "the music business establishment" is, to me, a bit simplistic (and I suspect some of the people who worked hard at EMI to help Radiohead succeed may feel a bit slighted). My advice would be to get a good manager, as Yorke has, who won't dismiss the help that the music business can provide. After all, Radiohead used Red (owned by Sony) to distribute In Rainbows, and has a partnership with Warner/Chappell Music (part of Warner Music Group) for their publishing.