You might think, if you didn't work in the music business, that famous artists stand to make mad cash from popular albums on iTunes and other digital storefronts. Sadly, that's not the case, and Radiohead frontman Thom Yorke has spent the last week calling out the labels for it. He recently told BBC Radio 4 that "the big infrastructure of the music business has not addressed the way artists communicate directly with their fans. In fact, they seem to basically get in the way. Not only do they get in the way, but they take all the cash."

Yorke said the same thing in a widely-quoted recent interview with David Byrne. His advice to young artists in that piece was, "Don't sign a huge record contract that strips you of all your digital rights, so that when you do sell something on iTunes you get absolutely zero. That would be the first priority." He went on to say that selling the new album, In Rainbows, directly to fans made the band more money from digital distribution than "all the other Radiohead albums put together, forever."

It's a common complaint from artists. "Weird Al" Yankovic noted on his web site last year that "I actually do get significantly more money from CD sales, as opposed to downloads," though he seemed a bit puzzled about why this was the case. "This is the one thing about my renegotiated record contract that never made much sense to me. It costs the label NOTHING for somebody to download an album (no manufacturing costs, shipping, or really any overhead of any kind) and yet the artist (me) winds up making less from it. Go figure."

The labels do "go figure," of course, and they've spent decades coming up with figures that lower artists' royalty percentages. (If you want to get a general sense of how this works with physical distribution, the Future of Music Coalition has a nice explanation of many standard contract features and how they affect artists.)

Digital downloads should make many of the standard industry deductions irrelevant (such as breakage and production costs), but the whole issue is complicated by the fact that many contracts didn't included any provisions for digital download sales when they were signed. Radiohead's Yorke complained in the Wired article that "EMI wasn't giving us any money for digital sales. All the contracts signed in a certain era have none of that stuff." Artists today are savvier about the need to protect their download royalties, but the rate of return is still quite low.

Such contractual agreements have taken on a special importance this holiday season as major-label CD sales tanked by 20 percent from the same time period in 2006. Such a sudden collapse may be indicative of a real tipping point to digital, and it means that artists who sign with record labels need to pay special attention to their downloadable royalties.

Services like TuneCore and CD Baby now make it possible to get music up on iTunes and other services for low fees, and artists can maintain all their rights. The deals don't cover marketing or recording costs, of course, but with computer equipment and home studios driving the cost of recording into the ground, more bands could find that it makes little sense these days to aspire to a major-label contract.

Of course, if you're Radiohead, the built-in publicity makes a direct-to-fans model much easier than if you're, say, the "Free As In Beer" out of Dayton, Ohio.

So how many copies did Yorke & Co. move with their experiment? Yorke isn't telling, though he does dismiss as absurd the 1.2 million album guesstimate that has been floating around. And the band knows that it can't stay all-digital yet; a CD release of In Rainbows is planned as well. (Update: the disc came out on January 1 in the US.)