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What Record Industry Slump?

Posted By Barry Ritholtz On April 9, 2005 @ 5:20 am In Finance,Music | Comments Disabled

Csm_topinside [1]

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 [2] and P2P [3] have anything to do with that?


Independents’ day [1]
Lynne Margolis
The Christian Science Monitor, April 11, 2003

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URL to article: http://www.ritholtz.com/blog/2005/04/what-record-industry-slump/

URLs in this post:

[1] Image: http://www.csmonitor.com/2003/0411/p13s02-almp.html

[2] Grokster: http://bigpicture.typepad.com/comments/2005/04/new_arguments_a.html

[3] P2P: http://www.usatoday.com/tech/news/techpolicy/2005-03-25-indie-file sharing_x.htm?csp=36

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