[opendtv] News: The Net Is a Boon for Indie Labels
- From: Craig Birkmaier <craig@xxxxxxxxx>
- To: OpenDTV Mail List <opendtv@xxxxxxxxxxxxx>
- Date: Tue, 27 Dec 2005 08:39:40 -0500
http://www.nytimes.com/2005/12/27/arts/music/27musi.html?th=&emc=th&pagewanted=print
December 27, 2005
The Net Is a Boon for Indie Labels
By JEFF LEEDS
Even as the recording industry staggers through another year of
declining sales over all, there are new signs that a democratization
of music made possible by the Internet is shifting the industry's
balance of power.
Exploiting online message boards, music blogs and social networks,
independent music companies are making big advances at the expense of
the four global music conglomerates, whose established business model
of blockbuster hits promoted through radio airplay now looks
increasingly outdated.
CD and digital album sales so far this year are down 8 percent
compared with the same period a year ago, according to Nielsen
SoundScan data. And while sales of digital tracks through services
like iTunes have risen 150 percent, to well over 320 million songs
this year, that rise is not enough to offset the plunge in album
sales. Overall sales are down less than 5 percent if the digital
singles are bundled into units of 10 and counted as albums, according
to estimates by Billboard magazine.
Still, despite the slide, dozens of independent labels are faring
well with steady-selling releases by, among others, the Miami rapper
Pitbull and the indie bands Hawthorne Heights, Bright Eyes, Interpol
and the Arcade Fire. Independent labels account for more than 18
percent of album sales this year - their biggest share of the market
in at least five years, according to Nielsen SoundScan data. (If
several big independent companies whose music is marketed by the
major music labels distribution units are included, the figure
exceeds 27 percent.)
The surge by independents comes as the four dominant music
conglomerates - Universal Music Group, Sony BMG Music Entertainment,
Warner Music Group and EMI Group - find themselves hamstrung in their
traditional ways of doing business by an array of forces, including a
crackdown on payola (undisclosed payments made to broadcasters in
exchange for airplay).
In a world of broadband connections, 60-gigabyte MP3 players and
custom playlists, consumers have perhaps more power than ever to
indulge their curiosities beyond the music that is presented through
the industry's established outlets, primarily radio stations and MTV.
"Fans are dictating," said John Janick, co-founder of Fueled by
Ramen, the independent label in Tampa, Fla., whose roster includes
underground acts like Panic! At the Disco and Cute Is What We Aim
For. "It's not as easy to shove something down people's throats
anymore and make them buy it. It's not even that they are smarter;
they just have everything at their fingertips. They can go find
something that's cool and different. They go tell people about it and
it just starts spreading."
There are several signs that as more consumers develop the habit of
exploring music online they are drawn to other musical choices
besides hitmakers at the top of the Billboard chart - a trend that
suggests more of the independent labels' repertory will find an
audience.
On the Rhapsody subscription music service, for example, the 100
most popular artists account for only about 24 percent of the music
that consumers chose to play from its catalog last month, said Tim
Quirk, Rhapsody's executive editor. In the brick-and-mortar world, he
estimates, the 100 most popular acts might account for more than 48
percent of a mass retailer's sales.
"It's no longer about a big behemoth beaming something at a mass
audience," Mr. Quirk said. "It's about a mass of niche audiences
picking and selecting what they want at any given time."
The independent sector as a whole already outsells two of the big
four companies, Warner Music and EMI. And the more ambitious of the
independent labels' managers have set their sights on seizing even
more terrain. This year they formed a new trade organization to
establish a unified front when striking deals with online music
services, among other priorities.
At the major labels, many executives privately dismiss the
independents' quick expansion as a blip that has more to do with
consolidation of the big companies - Sony and Bertelsmann merged
their music divisions last year - than it does with savvier marketing
by the small labels themselves. In fact, the independent labels
collectively are selling fewer albums than they did five years ago,
too - they just aren't sliding as quickly as their bigger rivals.
But the big music companies have also embraced many vehicles that had
primarily showcased independent material. Many labels buy advertising
space on blogs that post free music files, and this year Interscope
Records, a division of Universal, struck a deal to distribute music
from a new label created in partnership with MySpace, the popular
social networking site that claims 40 million members.
Even so, the gains of independent labels appear to stem from more
than online buzz: the small labels have also found themselves the
darlings of television and film music supervisors looking for
out-of-the-mainstream sounds; and the labels are placing their albums
on the shelves of big-box retailers like Best Buy, often with the
help of a distribution company owned by one of the four music giants,
like Warner Music.
But no factor is more significant than the Internet, which has
shaken up industry sales patterns and, perhaps more important,
upended the traditional hierarchy of outlets that can promote music.
Buzz about an underground act can spread like a virus, allowing a
band to capture national acclaim before it even has a recording
contract, as was the case this year with Clap Your Hands Say Yeah, an
indie rock band.
Yet the independent sector has felt the sting of the industry's
slump, which began more than five years ago. Many small labels
complain that widespread CD burning and trading of songs on
unauthorized file-swapping networks has dampened their sales the same
way it has those of the major record companies.
In addition, the music specialty shops and small retailers that once
provided an anchor for independent label sales are being squeezed out
by mass merchants who heavily discount new releases, and the broader
problems of piracy and competition from other products like DVD's and
video games. Still, the sense of foreboding that sends chills through
the hallways in certain major-label office suites does not pervade
the independent labels.
For many independent entrepreneurs, there is a degree of confidence
that comes from running leaner operations while aiming for more
modest sales levels. Unlike the majors, independent labels typically
do not allocate money to producing slick videos or marketing songs to
radio stations. An established independent like Matador Records -
home to acts including Pretty Girls Make Graves and Belle and
Sebastian - can turn a profit after selling roughly 25,000 copies of
an album; success on a major label release sometimes doesn't kick in
until sales of half a million.
"No one's trying to sell six million records; we're trying to sell as
many as we can," said Chris Lombardi, Matador's founder. "We're
working with realistic success."
The market slide, coupled with the pressure on the big companies to
meet quarterly financial targets, plays directly into the hands of
small labels that have the patience to attract new fans over time,
independent entrepreneurs say.
"They're all terribly under the gun to justify every investment and
tie it to an immediate return," said Steve Gottlieb, chief of TVT
Records, which is home to acts like Lil Jon and Ying Yang Twins, two
of a handful of independent acts to secure placement on major radio
playlists. "That type of discipline doesn't allow for the extra time
or the extra album it took to break a U2 or a Bruce Springsteen. The
majors are really just focusing on platinum artists and no longer
have an appetite for artist development except in the rarest
instances."
Britt Daniel, the singer and songwriter who leads the Austin, Tex.,
band Spoon, agrees, and counts himself among the beneficiaries. After
the band was dropped from the major label Elektra in 1998, Mr. Daniel
found his way to a new contract with the independent label Merge, and
Spoon's third album for the company, "Gimme Fiction," has racked up
sales of nearly 100,000 copies, outstripping the previous two and
ranking as one of the year's best-reviewed releases.
"There are great bands on major labels and bad bands on independent
labels, but it seems like the records made on independent labels are
more about real creativity and more heartfelt stuff," Mr. Daniel
said. "It may just be a three-, four-, five-year cycle where indie
music is cool. Sometimes I get cynical, but people tell me, 'No, this
is the way things are going to be from now on.' "
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