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I was plowing through some old links, and came across this story. Definitely worth a read:

What record industry slump?
Independent labels say business has never been better.

[Independents] operate 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.

Gee, I wonder if the internet, Grokster and P2P have anything to do with that?

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Source:
Independents’ day
Lynne Margolis
The Christian Science Monitor, April 11, 2003
http://www.csmonitor.com/2003/0411/p13s02-almp.html

Category: Finance, Music

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One Response to “What Record Industry Slump?”

  1. guerby says:

    I assume you’ve all read this NY Times article

    < < [...]
    It is a curious sight when a rock star appears before his flock and suggests they take his work without paying for it, and even encourages them to. Mr. Tweedy, who has never been much for rock convention, became a convert to Internet peer-to-peer sharing of music files in 2001, after his band was dropped from its label on the cusp of a tour. Initially, the news left Wilco at the sum end of the standard rock equation: no record/no tour, no tour/no money, no money/no band. But Mr. Tweedy released "Yankee Hotel Foxtrot" for streaming on the band's Web site, and fans responded in droves. Wilco then took on the expenses of its tour as a band.

    The resulting concerts were a huge success: Mr. Tweedy remembered watching in wonder as fans sang along with music that did not exist in CD form. Then something really funny happened. Nonesuch Records decided to release the actual plastic artifact in 2002. And where the band's previous album, "Summerteeth," sold 20,000 in its first week according to SoundScan, "Yankee" sold 57,000 copies in its first week and went on to sell more than 500,000. Downloading, at least for Wilco, created rather than diminished the appetite for the corporeal version of the work. [...]
    >>