This should be a catastrophic time for the music industry. Over the past few years, the popularity of file sharing programs, particularly illegal downloading services, coupled with expensive album prices have created a slump in CD sales. While major labels have struggled over the past few years as a result of these developments independent record labels have thrived. They have boosted their sales and gained critical attention, largely from the exposure that file sharing services—the same programs that have hampered the majors—have provided.
Several factors could account for these financial differences. Major labels put more money into their releases than smaller independents. This money goes into everything from lavish advertising to over-the-top production costs. Therefore, it takes greater profits, or more copies sold, for a major-label release to break even.
Independent labels, meanwhile, have taken advantage of the exposure that file sharing can give less popular artists. For instance, Go Kart Records, a Brooklyn-based independent label, offered listeners the chance to download five releases for free from its website as well as offering a Downloading is Not a Crime compilation, which was co-sponsored by Kazaa.
“This was done in hopes that people would hear a song or two that they liked and purchase the CD or use that money to buy some merchandise or go to a show. It ended up being extremely successful for us, as so many people actually bought the albums because they supported what we were trying to do,” Melissa Mamatos, head of promotions at Go Kart, wrote in an e-mail.
“We just believe that people are going to find a way to download and share files no matter what, so the only way to survive in this highly competitive business is to ‘embrace’ this technology,” Melissa Mamatos wrote. This pro-downloading viewpoint, prevalent among a majority of the independents, has given these labels an important strategic edge in the constantly-evolving music industry.
A prime example is Victory Records, a Chicago-based independent label. Over the past summer, Victory released two of its most profitable albums to date. The first was Atreyu’s The Curse, which hit stores June 29, moving over 34,000 copies its first week and debuting at #34 on Billboard’s Top 100 chart. Less than one month later, July 27, Victory released Taking Back Sunday’s Where You Want To Be, which sold more than 163,000 copies its first week and debuted at No. 3 on Billboard. In one month, Victory shattered its first-week sales record not once, but twice.
Other independent labels, such as Barsuk Records, the home of Death Cab for Cutie, and Sub-Pop Records, the home of The Postal Service, have been receiving increasingly more radio play over recent months. In fact, it is more likely for one to hear Death Cab For Cutie in the Gap than Good Charlotte or Britney Spears. Although these major-label artists still get a good amount of air time, their popularity is quickly being challenged by independent artists.
Lately, major labels have been taking notice of the independents’ newfound success and are attempting to put their own spin on this low-budget/higher-potential strategy.
Most notably, several weeks ago, Warner Music Group announced the formation of two new incubator labels, one rock-oriented and one rap- and hip-hop-focused. These labels will offer “incubator” services to independent labels and small, emerging artists, involving marketing services and strategic long range artist development.
These incubators’ role is, as of yet, very nebulous, which provides major labels with a loophole that enables them to manipulate unsigned artists and smaller, independent labels. Both of Warner’s incubator labels are headed by at least one person with an extensive background in independent music.
The hip-hop/rap label, newly-named Asylum, is co-chaired by Todd Moscowitz, a partner in the independent-oriented Violator Management, while the rock label, still unnamed, is headed by Fred Feldman, owner of the independent label, Triple Crown Records. Universal Music Group is also in the process of launching a similar project with a planned independent distribution company, Fontana.
These off-shoot labels have the potential to net a huge profit, which would be a windfall for some of the currently-stuggling major labels. But it remains to be seen if listeners will be drawn to these more eclectic rosters.
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