Playback and payback series; (part 24) How the Indies are eating the majors’ lunch (III)

“You don’t need the major record companies,” said Barry Bergman, president of the Music Managers Forum U.S., “for anything but mass media.”

Indeed, for a “name brand” artist, the indie route could be the best, perhaps the only way to go. Stu Cook, former bassist for Creedence Clearwater Revival, now plays with his old buddy Doug Clifford in Creedence Clearwater Revisited. While it started as just a way to play the old songs to an audience, they released a record via major-distributed independent record company Fuel 2000. This represents the best of both worlds – an independent with the distribution spank of a major.

It works for the major, as well. After all, it has a lot of people on the payroll as those distribution branches, and it needs to keep pushing product through that pipeline. And it’s a good deal for the artist, who participates in the profits with a 25 – 50 percent royalty – that 50/50 split at the high end. “We’re already into royalties,” said Cook. “Our break-even point was $10 000. We get the same royalty rate as Michael Jackson. That’s the way to do business.”

“These are great times for independent labels,” said David Sanger of Austin, Texas, indie Lazy SOB Recordings. “The reason is that manufacturing costs are within reach of anybody who wants to make a record.” Of course, the role indies play more often is as the farm club for the majors, doing the initial development that the major label then seeks to exploit and build on.

Sometimes it works, as it did for Nirvana, which got bought out of its contract with Seattle based indie Sub-Pop Records. More often it doesn’t, but in most cases the major will help expand the indie band’s following. Or so goes the conventional wisdom. Of course conventional wisdom often fails in an unconventional environment like the record business. The emo band Thursday sold 357 000 copies of its debut album on independent Victory Records. Universal Music Group imprint Island Def Jam Records bought the band out of its Victory contract. The IDJ record sold only 349 000.

Then consider the case of another Victory band, Hawthorne Heights. The Ohio-based hard rock band, with minimal radio support, managed to sell over 750 000 copies of its debut and saw its sophomore effort move more than 100 000 in its first week, debuting at #3 on the Billboard Top 200 Album chart. The band built its community of fans by pursuing an incessant, gruelling touring schedule and working the internet, particularly the online music-oriented social networking web communities.

So by keeping lean and mean, by using promotion outside of the mainstream, and by making sure the artists they sign have the determination to work to make it, independent labels might become a growth industry and perhaps even remind the major labels what the record business is all about: selling music that reaches people.

With an entire staff that would be small for a major imprint’s promotion department, Victory Records managed to beat the majors at their own game, getting into that rarified 200 or so records out of 40 000 that sell gold or better. And while a percentage of Victory’s sales go to the independent distributor, this way it only pays indirectly for all the sales and distribution nodes as opposed to the majors, which need to keep the product flowing to maintain the nodes.

The majors have twigged this, opening up their own “independent” distribution companies, giving the indies access to their distribution nodes (thereby adding product to their flow), channelling the distribution fees into their corporate bottom lines, and occasionally striking “upstreaming” deals that again use the indie as a farm club – when an album sells a certain amount, the indie sells the contract to the major that owns the distribution company.

So Sony/BMG controls the independent distributor RED, EMI (which later was acquired by Universal Music) bought independent distributor Caroline to serve this purpose, Universal revived their Fontana name as their independent distributor, and Warner has several, most notably the Alternative Distribution Aliance (ADA) and Rykodisc. Beyond these, there are still several totally independent distributors, such as New Jersey-based Big Daddy. As in so many things, each has its advantages and disadvantages to the indie company.

When the experts sat with the students, the indie record company president had an interesting metaphor for the way he worked versus the way a major label worked. He said that major labels were like elephants. Elephants are very large, very wilful animals. They tend to be difficult to turn once they’re heading in a particular direction, and it takes a lot to bring one down. Independent labels are like rabbits. Rabbits are small and fast. They can respond to circumstances and change direction quickly, and run circles around elephants. They just have to take care not to get caught under the elephant’s foot.

Cunning rabbits, can do very well.

The former head of Tommy Boy Records, Tom Silverman, sold his company to Warner Bros. and found himself starting his business from scratch once again. In response to the insanity of having to sell millions to maintain a major label relationship, he said something to the effect of: “Great. If they want to send me all the acts that will sell 250 000 copies, we’ll all make a mint.”