What record industry slump? Independent labels say business has never been better.
Eight years ago, Nan Warshaw, Rob Miller, and their Chicago friends were lamenting the dearth of "new and exciting music - music that ignited their passion the way punk and alternative rock had before big record labels and Gap commercials co-opted their sounds.Skip to next paragraph
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Then they began noticing that several area bands were putting Hank Williams twists on their Nirvana and Elvis Costello influences. So they decided, for kicks, to put out a compilation album of "insurgent country." Warshaw and Miller anted up a few grand apiece.
"We had no expectation that this was going to become a business," Ms. Warshaw says. "The first few years, we'd put out a record and when it broke even, we would say, 'Oh, what record should we do next?' "
But 3-1/2 years after it first started, Bloodshot Records finally hired its first paid employee. Today, it's a popular and healthy independent label, one of many operating outside the grip of the five mega-majors: Sony Music Entertainment Inc., Universal Music Group, BMG Entertainment, EMI Group, and Warner Music Group.
While executives at those labels wail about the industry's imminent collapse, indie labels and artists are singing a much happier tune. Profits are up - in some cases by 50 to 100 percent. That's in contrast to overall album sales, which dropped about 11 percent in 2002.
"We don't do too much crying over here," Cameron Strang, founder of New West Records, admits proudly. The home of artists like Delbert McClinton, the Flatlanders, and John Hiatt has doubled its business for the past three years and is projecting a $10 million income in 2003.
Paul Foley, general manager of the biggest independent label, Rounder Records of Cambridge, Mass., happily brags, "2002 was actually Rounder's best year in history. We were up 50 percent over 2001."
You won't hear many of these labels' artists on pop radio - and ironically, that's one of the secrets to their success. By avoiding the major expenses associated with getting a tune on the air - which can cost upwards of $400,000 or $500,000 per song - independent labels are able to turn a profit far more quickly, and share more of those profits with their artists. Another secret of their success is that the labels target consumers - namely, adults - who are still willing to pay for their music, rather than download it for free.
Other artists, such as Aimee Mann and Michelle Shocked, are going even further - forming their own labels so they don't have to answer to anybody (see "Artists Sing Their Own Notes," at right).
At a major label, most artists are unlikely to earn anything unless they sell at least 1 million albums, and even then, they could wind up in debt. Everything from studio time to limo rides are charged against their royalties, which might be only $1 per disc sold. That compares with an indie artist, who can sell a disc for $15 at a concert. If they make $5 profit a disc on 5,000 discs, they pocket $25,000.
"That's the difference between us and them," Mr. Strang says. "Artists on our label who sell 200,000 copies make a very good living."
Independents also pay profits only after recouping expenses, but they keep those down by curbing marketing and overhead costs. They also have more equitable arrangements with artists, often sharing profits 50-50.
But perhaps the biggest difference is that they let artists keep the rights to their work. Michael Hausman, who manages Mann, says once the large labels get those rights, they may choose not to release a note of music but won't let the artist work for anyone else - essentially bringing career momentum to a halt.
When rock critic and author Dave Marsh spoke on a panel at last month's South By Southwest music conference in Austin, Texas, he pronounced bigger-label contracts a bad deal for artists from Day 1, "because of unequal leverage."
John Doe, who gained fame with then-wife Exene Cervenka in the '80s punk band X, says majors pump artists' expectations to unrealistic levels.
"With majors, your visibility is much higher, but it's for a much shorter period of time," he explains. "I feel bad for today's bands because they're loved and then they're discarded."
Doe, now on ArtistDirect imusic imprint, also says there's no word to appropriately describe the meddling of major-label A&R people, whose job is to "hear a hit" on each album.
"I personally wouldn't like to be told what kind of album to make," Doe comments. Most indie labels pick up already-recorded albums, or give artists creative freedom to make the music they want.
Adds Doe: "You can't replace the feeling [of] making a record that you're proud of."