The Beat Goes On

A year ago it was difficult to find a nightclub in Latin America that wasn't pulsating to "Gasolina," a raunchy number by reggaeton star Daddy Yankee. Bootleg CDs of the tune were on sale at street stalls from Santo Domingo to Tijuana. In the United States, though, the 28-year-old Puerto Rican was still a no-name outside of urban, largely Hispanic areas like the Bronx. Today the feverish chants of "A ella le gusta la gasolina/Dame mas gasolina" ("She likes gasoline/Give me more gasoline") blast from radios in suburban Connecticut; and hipsters shuffle back and forth to the song in upscale Manhattan bars. In late summer, Daddy Yankee set the stage alight at the MTV Video Music Awards. Finally, after roughly a decade of being a secret of the Hispanic world, Daddy Yankee has gone mainstream--and taken reggaeton with him. "Now it's a huge movement--a force to be reckoned with," he says.

The U.S. explosion of reggaeton--a blend of hip-hop, dance hall and salsa originating from Panama and Puerto Rico--owes much to Daddy Yankee's charisma, booming voice and risque lyrics, not to mention American hunger for a new brand of hip-hop. But the real force behind the invasion is a rapidly evolving, globalized music industry, driven by two catalysts: satellite radio and the Internet. Thanks to both, songs can be transmitted easily through cyberspace, creating strong consumer demand well before the supply arrives. Satellite radio and the Net allow niche music categories to reach an "affluent audience" without the backing of a major label, says Steve Kovsky of Current Analysis, a media research firm.

It used to be that you gained access only through less-savory channels. In the mid-1980s, the widespread distribution of pirated cassettes allowed rappers in U.S. inner cities to reach the wealthier suburbs. They then signed major recording contracts, and gradually turned hip-hop into a multibillion-dollar global industry. But as piracy techniques have improved and digital file-sharing has increased, the same U.S. record labels that once signed such innovative newcomers have taken a huge hit--and become cautious.

With profit margins down, the record labels are reluctant to sign new acts, especially from unestablished genres. "All the majors have cut their rosters," says Aram Sinnreich, cofounder of L.A.'s Radar Research. "The reason they only pursue big acts is the amount of investment necessary." (Although EMI's roster cuts have not targeted less-established musicians, according to EMI spokesperson Jeanne Meyer, "marketing and promotional expenditure is a lot higher for some acts than --others.") For niche musicians and small labels, satellite radio and the Web are the ultimate in cheap promotional tools. Sat-radio broadcasters like XM, Sirius and WorldSpace--which together boast nearly 5 million subscribers to more than 400 channels worldwide--make it possible for a small label, or even a band, to distribute almost anywhere. Says Sinnreich: "The economics of the industry have shifted."

The Net is playing its own role, generating fast, global word of mouth. Sites like and helped catapult the Senegalese rappers Daara J from the clubs of Dakar to Europe and now America--offer downloads, introducing music aficionados all over to new sounds. MP3s of everything from Indian bhangra to Portuguese fado are accessible from all over the world. Some analysts suggest that the many Spanish-language sites devoted to reggaeton were the main ticket for Daddy Yankee's entry into the U.S. market. His album has now sold more than 1.5 million copies. "The Internet brings together listeners with common interests that are divided over a geographical area," says Sinnreich. "Reggaeton is a great example."

In fact, Latin music could be one of the biggest beneficiaries of the digital revolution. After all, the demand is there: in recent years Latin music has enjoyed unprecedented global popularity, thanks to the initial U.S. crossover success of artists like Shakira and Juanes. But while U.S. sales of Latin music are rising--growing at nearly 20 percent this year--it's also the most-pirated genre. As a result, the supply chain has been cut: several major Mexican labels have folded in recent years, and in 2004, piracy prompted a Warner Music Group division to dump the popular Mexico City band El Tri. Although El Tri was selling out concerts, the group couldn't move enough records to generate a profit. Satellite radio could offer such artists a direct channel to listeners.

Even wary major labels could benefit. Industry leaders acknowledge they no longer control the process, which once ranged from signing artists to distributing their music to dictating commercial-radio airplay. The labels "recognize the old system just doesn't cut it," says Sinnreich. Most now scour satellite radio for talent. While there's no guarantee that local success will translate to mainstream profits, success stories abound. New Zealand rock band Steriogram, for instance, was discovered online by an independent L.A. scout; a few weeks later he got them a deal with Capitol Records.

And though Daddy Yankee will continue distributing his music through his own label, the buzz surrounding the genre has sparked a U.S. signing frenzy. Earlier this year Universal Records launched Machete Music, a label dedicated to the Latin urban music movement. More signings are expected after the decision by XM's main Latin channel, Alegria, to focus on reggaeton. Not so long ago the music business was in a period of retrenchment. With the proliferation of satellite radio and the ever-expanding reach of the Web, the future of music now looks to be more diverse than ever.