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Record contracts used to be based roughly on three thirds — one slice to the star in advances and royalties; another to cover the costs of both sides; and the rest representing the label’s cut.

In the age of online distribution, stars are now questioning the third portion. Some argue the best thing a label has to offer is its advance — which EMI would dearly love to cut back.

For acts such as the Rolling Stones, with a giant following and strong back catalogue, it would be feasible to sell albums “on the out” — music speak for selling freshly minted copies of the performance as fans pour out of a concert venue.

It is not surprising that EMI and Coldplay are trying to do things differently. A free download of Viva La Vida’s first single, Violet Hill, shifted 2m units, emulating the success Radiohead had by distributing their In Rainbows album online. Harking back to the good old days, the track was also given away as a seven-inch single on the front cover of NME.

There are also free Coldplay gigs at Brixton Academy in London, Barcelona and Madison Square Garden in New York to drum up extra buzz.

“The measure of success will be whether the band can replicate the publicity and PR generated by Radiohead for In Rainbows, which drove up revenues for merchandise, ticket downloads and sales,” said James Bates, media director at Deloitte.

The effort appears to be working. iTunes, the download service, said it was the most pre-ordered album it had ever handled. Insiders said EMI’s willingness to test other routes to market was its new approach to the future.

Hands may be disappointed to learn that Martin regrets allowing AOL to sponsor a New York concert in 2005. Hands floated the idea of sponsors to cover the costs of up-and-coming artists.

EMI’s need for a hit was laid bare as its share of music sales in the US — the world’s biggest market — fell below 9%. Its publishing arm is performing better, hanging on to first place in the UK in the first quarter, with a 25.4% share of the album chart.

Hands told Terra Firma shareholders last month that efforts to cut annual costs by £100m were on target to be achieved this month. Some say his cuts, which include the loss of up to 2,000 jobs, have been implemented slowly so EMI can save money to meet its interest payments.

However, its loan was struck on “covenant lite” terms. So while Citi gets a regular update on EMI’s financial position, EMI doesn’t technically have any hurdles to leap in the near term. Its internal target is £150m of earnings for its recorded-music arm by the year ending in three weeks’ time. That is unlikely.

Then there is Robbie. After Rudebox, a far-from-critical or commercial success, he is resting and won’t deliver another album to EMI, his last under his present contract, until next year. A new contract will be a key concern for EMI’s new chief executive.

Meanwhile, Coldplay is the focus. “The challenge is not how it sells in the first few weeks,” said a music executive. “It is the months and months after that really matter.”

Like it or not, Martin may be about to make a karaoke singer called Guy Hands very happy.

In a spin over piracy

SOME 12% of revenues in the recording business are coming from tracks sold over the internet and by mobile phones, according to the British Phonographic Industry (BPI). Digital sales hit £70m in 2006, up from £5m in 2004. This rise is not enough to offset declining CD sales, and record labels are losing the piracy battle, with only one in 20 digital downloads made legally. No wonder the music industry is trying to get internet service providers on side.

Under its ‘three strikes’ initiative, the BPI wants internet providers to disconnect persistent illegal downloaders. Virgin Media has agreed to warn its broadband customers, but Carphone Warehouse’s TalkTalk service, Britain’s third-largest supplier with 2.7m customers, is not playing ball.

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