Illustration by Arthur Giron

October 10, 2007, is a day that will live in infamy in the hearts of major-label executives. That was the day Radiohead, after more than a decade with Capitol Records, self-released their seventh album, In Rainbows, digitally, without a price tag. The same day, news broke that Madonna was leaving Warner Bros., her label since the early '80s, to sign with Live Nation. Her deal cedes percentages of her touring, merchandising, licensing, and CD and DVD revenue to the concert promoter in return for a cool $120 million. Notably absent from both equations, at least at this early stage, was the mention of any traditional record label. The thinking went: If these two titans could get along without major-label muscle, wouldn't everyone else soon do the same?

"I expect fewer bands to be going the major-label route in the future," says Bob Lefsetz, an industry consultant who writes a widely read newsletter. "If you're a rock band, they can't get you on Top 40 radio. MTV doesn't play music. So what can they do for you other than pay you some advance and cry in your beer?"

Yes, it's a lousy time to be a major. CD sales are down nearly 30 percent since 2000, digital distribution has rendered the labels' once-coveted relationships with brick-and-mortar retailers (the ones that still exist) increasingly less valuable, cheap recording technology has made big advances unnecessary, and online promo avenues like MySpace, Facebook, and YouTube have leveled the playing field for acts without access to marketing dollars. In fact, Radiohead's release and Madonna's deal were merely the highlights of a remarkable month of developments that all pointed toward the seemingly inevitable -- if perhaps unnecessarily hasty -- conclusion that major labels are the buggy-whip industry of the 21st century.

October began with Brit-rock veterans the Charlatans announcing they'd be offering their tenth studio album for free through the website of U.K. radio station XFM. "We faced the fact that CDs are on the decline," says frontman Tim Burgess. "But people are getting the records somehow. What was so appealing about going to XFM is they're playing us 40 times a day."

The following week, Nine Inch Nails' Trent Reznor posted a message on his band's site, to say that after nearly two decades on a major, he was a "free agent," pleased to "finally have a direct relationship with [his] audience."

On October 21, ex-Kinks leader Ray Davies gave away his second solo album, which was mounted to the cover of 1.5 million copies of a British newspaper, following a strategy pioneered by Prince in July. Nine days later, Starbucks revealed it was adding a new artist, Hilary McRae, to its Hear Music roster, home to Paul McCartney, Joni Mitchell, and James Taylor. The same day, the Eagles released Long Road Out of Eden, their first studio album in 27 years -- but it was only available at Wal-Mart, walmart.com, Sam's Club, or through the band's website. (The album sold an astounding 711,000 copies in its first week.) The month closed with poet/rapper Saul Williams offering his Trent Reznor-produced fourth album for free (or a $5 donation) through his website.

"Trent had the idea a year and a half ago," says Williams. "At first I thought he was out of his mind. But as soon as we saw what Radiohead did, we were like, 'We should follow our guts.' " Williams and Reznor have indicated the release model is a trial balloon for the next Nine Inch Nails album. "Trent will take the best of this and drop the worst. I'm his black lab rat."

If these events weren't troubling enough for the majors, consider British rave-metal outfit Enter Shikari and Philly indie rockers Clap Your Hands Say Yeah each selling more than 100,000 CDs without the help of any record company at all. It becomes easy to understand the labels' apocalyptic outlook.

Just as telling was the industry's good news from October: A $222,000 verdict against a 30-year-old single mom for illegally downloading 24 songs, and the shutdown of the members-only file-sharing site OiNK. Both were apparent victories in the Recording Industry Association of America's long-running campaign to scare file-sharers straight -- one of the main strategies to halt CD sales' continuing death spiral -- but were also indicative of the ultimate futility of the labels' efforts and their continued inability to see the digital age for anything but its perils. Representatives from the four major music companies -- Sony BMG, Universal, EMI, and Warner Bros. -- declined to comment on the record for this story, but in a leaked company memo, Guy Hands, the new head of EMI, parent company to Radiohead's former label, acknowledged as much: "The industry, rather than embracing digitalization and the opportunities it brings for promotion of product and distribution through multiple channels, has stuck its head in the sand."

Lost among all these harbingers of doom is a considerable silver lining: While the present is messy and the future uncertain, there's every reason to think these developments will ultimately benefit both artists and fans. "You see these articles about the disaster in the music business," says James Mercer, frontman for the Shins, whose contract with Sub Pop recently expired. "When you think about how unhealthy the business has been, this is like lancing the fucking boil and cleaning it out. It's not a fucking disaster to regular bands out there. It's now more likely I'll be able to start my own label, release my work, profit from it, and have a more lucrative career. For a band at our level, it's all a bowl of cherries."