Indies aim to grab share of online sales

By | January 20, 2007 at 4:57 PM

Independent record labels behind artists like The White Stripes, Deep
Purple and Arctic Monkeys announced a global deal Saturday to pool
access to their catalogs, seeking to grab a bigger share of online
music sales from the major record companies.
Indies and their trade groups from more than a dozen
countries signed up to Merlin, a nonprofit licensing agency that will
cut deals on their behalf with download sites under the terms of the
agreement unveiled at Midem, a music industry gathering in the French
Riviera town of Cannes.
Smaller record companies with just a handful of successful
artists fear being left behind in fast-growing digital music markets,
where the majors – Universal, Sony BMG, EMI and Warner Music – enjoy a
clear advantage in negotiations with online retailers such as Napster
and Apple Computer Inc.’s iTunes.
“Merlin may be the most important move we as independents
will ever undertake to secure our mutual prosperity in this rapidly
changing business landscape,” said Brett Gurewitz, owner of U.S.-based
Epitaph Records, whose artists include Tom Waits.
Indie labels account for about 80 percent of new music
releases in major markets but only 30 percent of total revenues,
according to industry data for 2005, partly because the majors spend
more on marketing and have – until recently – maintained tight control
over distribution channels.
That is already changing with the inexorable rise of online
sales, analysts say, as more artists achieve success and celebrity
through independent record companies, bypassing the top four.
“While you don’t get the benefit of their marketing
capabilities, the reality is that the majority of good new music being
adopted by younger people is mostly spread through social networking
and personal recommendations,” said Tim Bajarin, president of
California-based consulting firm Creative Strategies.

“The indies are where we see some of the fastest growth in the next generation of music adoption,” he said.
Billed as a “one-stop licensing shop,” Merlin will allow
download sites and other digital platforms to access its members’ music
in one deal, rather than the thousands of separate contracts they would
otherwise have to negotiate.
Martin Mills, chairman of The Beggars Group – which produces
Basement Jaxx, The White Stripes and the Pixies – said the new
Netherlands-based agency would create a “virtual fifth major” from its
combined catalog. “Merlin will license collectively the individually
unlicensable,” he said.
The scheme is backed by indie labels and associations from
countries including Australia, Brazil, Britain, Canada, Denmark,
France, Germany, Israel, Japan, New Zealand, South Africa, Spain,
Sweden and the United States.
According to Ted Schadler, an analyst with U.S.-based
Forrester Research, the licensing deal could alter the balance of power
within the music industry. Providing it is backed up with efficient
management of payments and distribution, it would make it viable for
even the smallest labels to sell music through mainstream sites by
removing the cost of negotiating and managing an individual contract
with each one.

“What this does is level the playing field between indies and majors,” Schadler said.

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