Analysis

Indie labels give their views on the music industry’s inflection point (#midem)


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The transition from ownership of music to access – physical and download sales to streaming – is bringing headaches and excitement to independent labels in equal measure.

Are major labels exercising too much influence over the nature of the streaming services, including the terms of their dealmaking? Will more streams be hoovered up by the biggest artists (and labels) leaving indies scrabbling for pennies?

Or is the picture rosier: can this transition actually be a spur for the indie label community to grow its market share and establish a reputation for fairer digital dealings with artists? A panel session at Midem this morning discussed the opportunities and concerns for indie labels and artists.

Moderated by Tom Silverman, CEO of Tommy Boy and executive director of the New Music Seminar, the panel comprised: Kenny Gates, founder of PIAS Recordings; Martin Goldschmidt, chairman of Cooking Vinyl Group; Emmanuel de Buretel, CEO of Because Music; and Colin Daniels, MD of Inertia.

“A new world order is starting to establish itself,” said Silverman, to kick things off, before asking about the impact of new services and business models on indie labels.

Buretel talked about his decision to focus on digital with Because Music eight or nine years ago. “I already foresaw that downloads were not the goal. For me, streaming was already the goal, and I spent a lot of investment on how to optimise streaming,” he said. “The way you manage YouTube has nothing to do with the way you manage a physical release… It’s a total new world, and that’s why it’s exciting. It’s why I stayed in the music business.”

He added that platforms like YouTube have expanded with music, comparing them to supermarket chains in the physical retail world. “We need to surf with it, but we need to be respected by this big giants who are much more dangerous than Carrefour or FNAC or HMV. I’m talking from Apple to Google, all the new entrants like Beats, Spotify and Deezer. They are not big giants, but they become very very quickly huge companies compared to the independents we are.”

Goldschmidt said Cooking Vinyl has altered its business model a lot “mainly through luck and good fortune”, noting that the company “got really lucky” with the Prodigy in 2009, selling 1.3m records worldwide under a pioneering label services deal. That was the jump-off point for the company to attract more big artists.

He also talked about the company’s original deal with Billy Bragg – one of the first “artist service” deals – where Cooking Vinyl takes a percentage off the top – 20-25% – plus the costs, and whatever’s left goes to the artist. “Once all the costs are paid on digital income, there’s no further costs, so they’re getting 75% of the money. But the other side of it is they’re also getting the last money out of the deal, which means it’s safer for us.”

Cooking Vinyl does still sign traditional deals with artists, and Goldschmidt added that both options can pay off for artists. “Our margins are quite similar on a 50-50 profit-share artist services deal or a royalty deal if we’re paying a decent royalty,” he added. “We say to artists you can do whichever of these models you want, because we’ll probably end up earning about the same.”

Gates talked about how PIAS’ business has changed in the last 10 years. “It’s still down to the same thing: the means of accessing the public have changed, but at the end, it’s all about the music. You can talk about physical, digital, streaming until the cows come home, but it’s still about getting the great music,” he said.

He noted that one change has been investing in IT in order to access and use the huge quantities of data coming out of digital services: to understand how this music is being played, and how to reach those fans in new and better ways.

Over to Daniels, who gave Inertia’s perspective. “Theres a lot of talk in the industry continually about change in the business, but what it really comes down to is the music, and great companies still sign or work with really great bands. And that’s probably still the most important thing,” he said.

Silverman wondered whether signing deals with artists based on record sales is now an anachronism. “That’s the beauty of independence: the flexibility,” said Gates, with PIAS having a long-established label services business. “Now the major labels are trying to copy us… they’ve reinvented the wheel, which they call artist-enabled services. But we’ve been doing it for 20 or 30 years!”

The conversation turned to how artist services businesses differ from the 360 deals that were being talked up a few years ago within the music industry. “I hate the name 360…This is something invented by the majors to try to get a piece of everything but not bring any more value into the deal,” said Buretel.

The next topic was licensing, and the question of whether declining visitor numbers at Midem hint at a wider trend.  “Attendance at Midem has been falling, and one of the biggest reasons is people aren’t licensing the way they used to licence… There’s this perception that people believe because you have an iTunes deal or a Spotify deal, and direct digital deals in multiple territories, why do you need a label?” said Silverman, suggesting that even he was seduced by the idea that since going it alone meant keeping 100% of sales, it was the best strategy.

Now I’m realising unless you have a partner that can help you break an artist in a territory, you’re getting 100% of nothing!” said Silverman. “People think distribution is the same as marketing.”

Daniels talked about Inertia’s work with Passenger – an Australian company signing a global deal for a British artist – as an example of this. Interestingly, the spark for that artist’s success may have been an individual Dutch radio plugger who heard ‘Let Her Go’, thought it would be a hit, and convinced Daniels to let them take it to radio in the Netherlands. A few weeks later, it was being played on the major stations, was topping the iTunes chart in that country, and then… global success.

Online buzz fuelled this too, and Cooking Vinyl’s Goldschmidt said this is a crucial aspect for indies in 2014. “I think that’s a big thing that has changed. The internet is a great filter for bullshit. It’s far harder for crap to spread worldwide. You get found out a lot earlier,” he said.

“Yes, there are still gatekeepers, and ways to promote crap quite successfully. The majors are still working on the tools to do that… But it’s really levelled the playing field… Our market share is a lot higher on Spotify than it was in physical. The internet and the whole online distribution and sharing of information has really helped level the playing field.”

The panel also talked about the role of the label in 2014, after a few years of discussion about the potential for DIY releases, and management companies going it alone with album releases.”The whole idea that you don’t need a label? It’s bullshit!” said Gates.

“4-5 years ago the whole thing was you didn’t need a label. Management companies could put out an album and just find partners. But in some ways it’s gone full circle… You still need someone behind the scenes even more who has a vision and who works very hard. A lot of management companies found out after doing one or two DIY deals that they actually needed a label.”

Goldschmidt pointed out that some management companies – Ignition and Oasis for example – have managed to become essentially labels. “If they invest and have a staff of 5-6 people, that’s a label,” agreed Gates. “A lot of others doing all the nitty gritty realised it was lots of work and just gave up.”

People talk about DIY, and you ask them about metadata and they go ‘what’s that?’,” said Daniels. “Managers who do want to do it themselves need to understand that there’s a lot of work involved.” Goldschmidt said he sees a lot of management companies trying to grapple with this stuff, and missing opportunities as a result: “They’re doing the metadata or firefighting the video… they get dragged down in all the little stuff and can often miss the big-picture stuff for their clients.”

The conversation turned to the Grammys last week, and the acceptance speech of Macklemore & Ryan Lewis, “bragging that they didn’t have a record deal” according to Silverman, who suggests that this wasn’t quite the whole truth. “They had a big support team behind them… they’re an example of the perception that you can do it yourself, but you’ve gotta have a team… Warner Music got involved with them on an artist services kinda agreement.”

Will artists now think they can follow suit? “We’re all getting hung up on words. Artists don’t need labels. They need marketing and PR. They need a team. It dens’t have to be a label. It can be a label, a distributor, they can outsource their marketing and publicity in any country. They don’t necessarily need a label: they need a team around them,” said Daniels.

Buretel talked about the need for “crazy people inside record companies” to back the creative instincts of artists. “The best record companies, or the best indie record companies – and there are some very good A&Rs inside the majors – A&R is something you should accept. They are filters… Today, artists need another person. Of course, they can do everything themselves, especially in France where the French ego makes you get rid of all A&R sometimes, but I think it’s very important… A&R is the base.”

Goldschmidt said he agrees strongly with this view. “We’re all still here doing what we do, we’ve done it for a long time and we’re quite successful. What that means is if we do decide to work with an artist, that artist probably has more chance of success than if they do it themselves,” he said. And Gates agreed. “When we sign an artist, we believe in an artist: we’ll go the extra mile and we’ll stick with this artist,” he said.

The next topic: the consolidation of the major labels, and then the greater organisation of the independent sector, under the guise of various bodies. Are indie labels better off for the existence of the likes of Merlin, AIM, WIN and so on?

Dealing with Google is a super challenge today, and the independents being together on a worldwide basis for a platform of negotiation is a huge asset. I think we should work more together,” said Buretel. “Merlin is beautiful… it should have been invented 40 years ago. This is a very important tool for the future. I really think the market share of independents on global and digital will grow… We manage these rights better than the majors, we are focused on less artists so are doing, I hope, a better job. So if we join, we will be a beautiful partner for dealing with all these big companies who are going to be more and more difficult to deal with.”

I remember a time before Merlin. We’d just get raped in the digital deals. Some people were quite reasonable, most people you couldn’t really get deals with them, or they’d pick you off and the deals would be horrible,” said Goldschmidt.

“The Google negotiation was bloody, and we didn’t get a deal commensurate to our market share, but we got a much better deal than if Merlin hadn’t existed. And the Spotify deal was amazing…” Said deal being Merlin’s negotiation of an equity stake in Spotify, not just streaming rates. Goldschmidt suggested that Merlin’s stake in Spotify is now worth around $20m at its current valuation. “It’s phenomenal that they were able to negotiate that.”

Daniels praised Spotify and Beats – “Everyone there are music people. Google are not music people, and that scares me,” he said. And Gates agreed. “I want to publicly support Spotify :they came to us and wanted to work with us, not steal from us… Whatever some artist community might say about remuneration? I don’t want to get into that subject. The reality is they exist,  and they are a blessing: they want to work with the music community.”

One contradiction in this whole debate: independent labels say that their market share is increasing on streaming services compared to majors, which should be good news for independent artists. Yet some of the most prominent criticism of streaming from artists – Thom Yorke and Nigel Godrich, for example – suggests that it’s small, emerging artists who will suffer from the transition to streaming.

Silverman gave the latter concept short shrift, suggesting that few artists have the evidence or knowledge to back up these claims. “Anyone can make any kind of statement: the flying saucers are landing outside!” he said. “If the music industry can generate twice as much money, artists will end up with twice as much money…. If we triple in value, we can spend triple the money investing in artists.”

Buretel talked about transparent dealmaking, targeting major labels rather than streaming services, criticising the majors for their desire for deals where they get a fixed-cost or non-recoupable advance.  “This bonus is very rarely split with the artist. It’s much more transparent with the independent companies,” he said.

“We don’t try to finish our year with a bonus at the end. We don’t try to make Google pay for a fixed cost or non-recoupable advance that will not be split between everybody. For the artist it’s a notion that we are more transparent, and we should be more transparent.”

The panel were asked about social networks like Facebook, and whether they should also be seen as villains for getting in between artists and labels, and their fans – while increasingly expecting the former to pay (via ads) to reach the latter.

“You’re right, Google is better for us than Facebook. Facebook is using everything from us, and gives nothing… I think Facebook, if they go on like that, they will go down, because there will be a new model that will be a little more open,” said Buretel. “Google at least give back. They don’t give back what they should give back… They pay the majors but didn’t pay the independents. Facebook don’t pay anyone!”

Goldschmidt said it’s not right to look at the social networks as bad guys, though. “They don’t owe us a penny, they have their own business models, sometimes they coincide brilliantly, sometimes they coincide terribly, sometimes it’s somewhere in the middle,” he said.

“There’s issues where the business models challenge us, and sometimes we have to fight legally… One of the things I hate about the music industry is we’re always victims… I hate the concept of piracy. To me, piracy is our inability to connect with consumers… I’m sick of whingeing and complaining about bad guys and pirates. I think it’s a really exciting time, because with streaming we are starting to connect more.”

What about the notion floated yesterday at Midem by Deezer CEO Axel Dauchez that YouTube is a “legal pirate”, based on its payouts to music rightsholders and artists? Silverman didn’t agree: “It’s a top-five revenue source now at most of the labels, and it’s going up,”  he said. “It’s not perfect, but they’re moving in the right direction. Where we started, we were getting nothing, and every year he revenues are getting better.”

Goldschmidt finished off: “The big people who are suffering from all of this are the pirates. People are moving away from piracy en masse to YouTube, to streaming platforms etc,” he said, with Buretel nodding his agreement: “Piracy – downloading files, is now an old fashioned way of consuming music,” said Buretel.

Stuart Dredge

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