Paper that makes a comparison between Independent Labels and majors.

1. Independent Labels…
A better artist support
Miguel Rodrigues
Class number 2
Student number: 11351
Intake code: BRA0906
Industry perspectives / RA203
Seminar Presentation Report
Word count: 1327 words

2. Independent Labels… A better artist support
Table of Contents
Page
Abstract 3
Indies Objectives 4
Typical Structures 4
Finance 4
Deals 5
A&R 6
Marketing 7
CONCLUSION 9
REFERENCE LIST 10
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3. Independent Labels… A better artist support
Abstract
We believe independent labels offer a better support for
artists. We chose this topic because we think that is an important
aspect for the development of the music industry and music in
general.
We start our research asking ourselves questions about
what objectives has a independent label, what are the typical
structures of Labels, how they deal with finances, Deals and
Marketing.
So, we did an enquiry with some questions and sent it, by email
to dozens of record labels with the help of the book “The
unsigned guide – UK edition one”.
Unfortunately, no one replied to our email.
We structured our research in several areas that we think
that are important when an artists or record label want to sell
records, always trying to make comparisons between majors and
indies to answer our question.
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4. Independent Labels… A better artist support
Indies Objectives
Independent Labels search for innovative and creative
artists as a way to bring relatively unknown artists or ideas to the
audience, this helps in creating a sonic image for the label as well
as a mean to refresh the music scene.
Indies are more on the lookout for newer market strategies,
as the necessity of growth, makes them search for new means of
marketing to outcome the major's strong financial power that
indies do not have.
Typical Structures
Indies have different managing approaches as they use no
conventional methods to manage their strategies, so the need of
a certain number of departments changes from case to case.
That is why it is so difficult to trace a common profile of an
Independent Label.
Finance
Investments in new artists are always a big risk and this
kind of investments are classified as an intangible asset because
banks have no warranties that loans will be paid off and that is
why it is so hard to get a loan from this type of institutions.
The solutions are private investment or licensing to majors
but, always on a later stage.
‘Traditionally what indies have done is to license their acts to
majors in Europe…Thou most majors financing indies end up with
the death of the indie’ (Lewis, 2002, p9, 2p, 4c, 1bw).
This type of actions gives the artists enough time to
develop their music.
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5. Independent Labels… A better artist support
Deals
Regarding with deals, we researched about contracts,
royalties, profit-sharing deals, advances, exclusivity, options in
contracts, copyright and merging.
Royalties are usually bigger on an indie. Majors, usually,
offer a percentage between 10 to 15% of the standard retail price
(some times indies may try to imitate majors) and then they
deduct for packaging expenses, free goods and other items.
It is more common now, for indies to do profit-sharing
deals with the artist. ‘The advantage of profit-sharing deals is that
it is more understandable and it is a simple way of deal where the
money comes in, expenses comes out and the profits are split
between the artist and the label. The disadvantage is that more
expenses are taken out of the gross revenue before the profit-
sharing begins. In typical deals, costs of manufacturing, publicity,
marketing, and other such costs are not passed on to the artist
but are considered part of the label’s overhead. In profit-sharing
deals, all expenses are taken into account, so it might take a
while (if ever) for an album to show a profit, and, therefore, longer
for an artist to actually receive any share. Once an artist is more
successful, these deals become more lucrative for the artist.’
(Friends a, 2006).
Major’s advances are much bigger than what an
independent label can offer. The way that advances works have
advantages and disadvantages. The record company pays a sum
of money to the artist and then keeps the artist’s royalties until the
money is back to the record company. The process of keeping
the money to recover an advance is called recoupment and it is
recoupable from royalties.
‘The advantage of having a small or nonexistent advance
is that the artist will have less to pay back from his or her
royalties, and could be earning record royalties more quickly.
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6. Independent Labels… A better artist support
The disadvantage, since there are so many costs for the
label to recoup before paying the artist their royalties, an advance
is often the only money an artist will see for some time. The size
of an advance can also depend on the artist bargaining power.’
(Friendsb, 2006).
Usually, independent labels do not include the term
‘exclusivity’ and artists are not bond to options in their contracts.
What independent labels do, is buy-out clauses, those are
sets of rules that will apply if a bigger label want to sign the artist.
This is a good exit deal for indies.
Some small indies lack of information on copyright laws,
thus they do not protect themselves or the artists. Copyright
protection is acquired automatically when a tangible copy of the
work is made and there is no need for registration.
The ‘sound recording copyright’ is a protection of the
sounds recorded and belongs to the record company who has
released the work.
Independent labels merge together to expand their market
and at the same time to support each other in order to maintain
their independence from the majors.
A&R
The A&R department of a label seeks and evaluates
potential talent for potential audience’s tastes but it is not all. They
also:
• Provide creative input and direction on artist's songs
• Find suitable producers and recording studios
• Plan the recording budget with the financial
department.
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7. Independent Labels… A better artist support
On independent labels, the A&R department is closer to
artists, as they concentrate more on local artists and as Nick
Phillips, chairman of Warner Music said, ‘Independents are key to
finding good artists as part of the artist and repertoire (A&R)
process. They are a huge A&R source for everybody and the
music business is healthy when they are healthy.’ (Allen, 2006a)
Marketing
The marketing strategy of a record label is divided in four
areas: Artist and Product development, Promotion (Radio, TV and
Internet Airplay), Publicity and Performance.
Artist development deals with songwriting skills and music
development. They create a consistent and coherent image of the
artist. The artist development department also deal with copyright
and publishing, co-musician and band issues, recording and
mastering arrangements, as well as management and legal
needs.
Product development deals with all the issues that must be
consider after a record has been made: cover artwork (design
and printing), manufacturing choices, market research data, as
well as distribution and sales strategies. Product development at
a label means marketing strategy because it uses tactics and
strategies that help selling the release.
Promotion means Airplay. Radio, TV and Internet Airplay
are the most effective means of exposing music to the public.
It can be very competitive but the product development marketing
ideas and a significant investment are the tools to have any real
success.
Publicity is the press and media campaign. It consists of a
press release that contains materials like biographies, fact sheets,
cover letters, photos and press clippings. It becomes necessary
to have an effective campaign to get the music press to review
the releases, write stories about the band and their music, as well
as interviews. This campaign will act as a support for all others
areas of the music marketing.
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8. Independent Labels… A better artist support
Finally, the last area of the marketing strategy of record
labels are live shows and touring plans or for other words
performance.
‘Playing live in front of your fans is the best way to develop
a loyal and dedicated fan base'. (Knab, 2006 a)
Promotion, publicity and performance act as a support for
artist and product development. All these areas are interrelated
and interdependent upon each other, in order to get your product
into mass distribution, the distributors want to know what your
promotion, publicity and performance plans are, or, in order to get
significant airplay the radio stations want to know what your
product development, publicity and performance plans are. Also,
in order to get publicity, the editors and writers at the magazines
and newspapers want to know what your promotion, product
development and performance commitment is, and to get the
better live performance gigs, the booking agents and club owners
need to know what success you have had with selling your
product, getting press support and any radio airplay.
Independent labels are very dependent on online
strategies, because they offer a cheaper mean of promotion,
having sometimes the same success as the majors marketing
strategies.
Indies have the capacity to create communities around the
artists or genres of music that the majors do not have the ability to
put that into practice due to a large variety of artists.
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9. Independent Labels… A better artist support
CONCLUSION
The way that Independent Labels work, push cultural
boundaries creating space and market for new genres of music
and new artists.
On the other way, majors offer an office structure that is
more conventional and based on huge budgets. This allows
bigger and more intense coverage for a bigger artist catalogue.
Whether, on an Indie or on a Major, investing in an artist is seen
as an intangible asset. Obviously majors take bigger risks when
investing in an artist. Thus, majors consider marketing investment
more important and indies are “forced” to invest on intellectual
property and believe more in the music.
Indies tend to offer artists better royalties percentages with
no options or exclusivity. Smaller rosters and better deals create
more friendly and close relations between artist and independent
labels. And this relations help to overcome the huge amount of
problems that indies face throughout their “journey” such as
copyright matters, financing, deals, etc.
‘There is still much scope for independent labels and
publishers to carve a niche in an increasingly crowded
marketplace.’ (Music Week, 27-03-2004, p22-23).
In regards to the overall presentation of the group I
personally thing that the objectives of how to do a research
methodology were achieve and to conclude our research I think
that independent labels are a better deal for new artists than a
deal with a major.
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10. Independent Labels… A better artist support
REFERENCE LIST
Books:
Loukes, S. and Donnelly, L. (2006) The unsigned guide UK
edition one. Manchester: mcr music Ltd., 2006
Magazines:
Garrity, B. (2006) Amp'd Mines The Indies.
Billboard; 7/1/2006, Vol. 118 Issue 26,
p8- 8, 1/3p, 1c
Are indie labels better at artist development?
Music Week; 10/29/2005, p12-12, 1/5p
Brandle, L. (2005) SONY BMG ADDS RED INK FOR EUROPE'S
INDIES.
Billboard; 12/3/2005, Vol. 117 Issue 49, p10-12, 2p
Bitar, F. (2001) Waiting For The Next Big Thing.
Billboard; 06/16/2001, Vol. 113 Issue 24, pLM-4, 2p, 2bw
Ashton, R. (2005) Indies call for chart delay over concerns they
are missing out.
Music Week; 4/9/2005, p5-5, 1/3p
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11. Independent Labels… A better artist support
Paths to market for independent labels.
Music Week; 5/22/2004, p10-10, 1/3p
Indies in strong position as sync teams cash in on 'cool'
Music Week; 3/27/2004, p22-23, 2p
Lewis, T. (2002) Legendary indies put a price on independence.
Music Week; 8/31/2002 Supplement, p9, 2p, 4c, 1bw
Solomons, M. (1999) BPI Is Reshaping Itself.
Billboard; 10/02/99, Vol. 111 Issue 40, p12, 2p
Clark-Meads, J. (1999) Victory For U.K. Indies.
Billboard; 06/05/99, Vol. 111 Issue 23, p6, 1/3p, 1bw
Sexton, P. (1999) Britain's State of Independents.
Billboard; 05/22/99, Vol. 111 Issue 21, p64, 2p, 1bw
Solomons, M. (1998) U.K. report pegs indies as loss sector.
Billboard; 08/22/98, Vol. 110 Issue 34, p7, 2p
Garrity, B. (2004) Sony Connects To Indies.
Billboard; 7/31/2004, Vol. 116 Issue 31, p43-44, 2p, 1c
Legrand, E. (2006) THE INDIE WAY. (cover story)
Billboard; 4/1/2006, Vol. 118 Issue 13, p25-26, 2p, 4c
Ashton, R. (2004) Indies resolve dispute with iTunes.
Music Week; 7/31/2004, p3-3, 1/2p
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12. Independent Labels… A better artist support
Web Sources:
Knab, C. (2006) An Introduction to the "Four Front" Music
Marketing Concept
Music biz academy [Online]. Available at:
http://www.musicbizacademy.com/knab/articles/fourfront.htm
(Accessed: 01-12-2006)a
Knab, C. (2002) Copyright and Songwriting Basics
Music biz academy [Online]. Available at:
http://www.musicbizacademy.com/knab/articles/copyright.htm
(Accessed: 02-12-2006)
Knab, C. and Day, B. (2001) Deals That Await Successful
Independent Music Labels
Music biz academy [Online]. Available at:
http://www.musicbizacademy.com/knab/articles/deals.htm
(Accessed: 02-12-2006)
Allen, K. (2006) Indie record labels form unlikely alliances with the
corporations
Guardian Unlimited Business. Available at:
http://business.guardian.co.uk/story/0,,1935440,00.html
(Accessed: 30-11-2006)a
Allen, K. (2006) As record sales dwindle, indie labels form unlikely
alliances with the corporate beasts
Guardian Unlimited Business. Available at:
http://business.guardian.co.uk/story/0,,1935440,00.html
(Accessed: 31-11-2006)b
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13. Independent Labels… A better artist support
Knab, C. (2001) Inside Record Labels: Organizing Things
Music biz academy [Online]. Available at:
http://www.musicbizacademy.com/knab/articles/insidelabels.htm
(Accessed: 01-12-2006)
Friends, S. Independent Label vs. Major Label Contracts
Performer mag [Online]. Available at:
http://www.performermag.com/IndieVSMajorContracts.php
(Accessed: 01-12-2006)a
Friends, S. Independent Labels What's the Deal?
Performer mag [Online]. Available at:
http://www.performermag.com/IndependentLabels.php
(Accessed: 01-12-2006)b
Knab, C. (2001) The Business of Live Performance
Music biz academy [Online]. Available at:
http://www.musicbizacademy.com/knab/articles/liveperf.htm
(Accessed: 01-12-2006)
Knab, C. (2001) What is Artist and Product Development
Music biz academy [Online]. Available at:
http://www.musicbizacademy.com/knab/articles/artistdevelopment
.htm
(Accessed: 01-12-2006)
Knab, C. (2003) What A&R Reps Do
Music biz academy [Online]. Available at:
http://www.musicbizacademy.com/knab/articles/aandr.htm
(Accessed: 01-12-2006)
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