EAR WHACKS
by Jonathan D. King

Most independent record labels are born of a love of music, either as vanity labels for bands to self-produce albums free of artistic constraints, or by idealistic music lovers who champion unheralded musicians. Tom Benton of Planet Noise Records falls into the latter category. After over 20 years of practicing law, a few years ago Benton decided he was ready for a new career. He formed Planet Noise based on the theory that great music transcends genre. Speaking in his former law office in Kingston, Benton told me, “You’re fighting against gigantic odds and money to get things heard. I didn’t realize how seriously entrenched the whole system of music distribution is in terms of the major labels, and how seriously invasive their control is of the music that people even get to hear.”

Asked what exactly a record label does, Benton told me, “The record label puts up the money for a record to be made and then handles the marketing, promotion, and distribution once it is made. There are a lot of steps from the time that the musician is playing the music in a recording studio and when someone walks into a music store and there is the CD sitting there to buy.”

One of the obvious battles facing the micro-label is the fight to get their products heard. It’s estimated that over 30,000 CDs are released each year, not including the rapidly growing market of home produced CDs, as technology has made anyone with a computer, a decent sound card and a CD burner a recording engineer. Since the passage of The Telecommunications Act of 1996, which deregulated the airwaves, indies have had an even harder time getting their songs on the radio. The flood of corporate mergers in the wake of the legislation resulted in the majority of radio stations across the country being bought up by a handful of companies such as Clear Channel Communications and Infinity Broadcasting. With play-lists across the country in the hands of a few corporate programmers it’s no surprise that the same 20 songs are in rotation from coast to coast.
In addition to this problem, with deregulation came a new and legal form of payola (the practice of bribing disc jockeys) that took the form of independent radio promoters. Acting as liaisons between the record labels and broadcasters, independent radio promoters are paid thousands of dollars per song per market that they can arrange to be placed in rotation on the radio. These promoters in turn funnel record label cash to the radio stations, usually in the form of concert tickets, vacations, advertising, and less often and not legally, currency. When the music industry gathered with lawmakers for the second annual Future of Music Policy Summit held in Washington, DC on January 7 and 8 of this year, Representative John Conyers, Jr. of Michigan proposed to hold Judiciary Committee hearings this year addressing the legality of this situation.

Indie Distribution Woes

Peter Martin and Debbie DiMisa run their label Niki Records out of their home in Kingston. Commenting on how he tracks the success of his female blues group Ivory Rose, Peter said, “You gotta understand, as an independent label we can’t just go after Billboard. We go after Gavin, Friday Morning Quarterback, and the smaller trade magazines that work with the radio stations to chart your acts. Billboard and R&R [Radio and Records] only chart in the largest markets. So we have to go after what are called secondary stations, where we try to break an artist in the hopes that a major might come along and offer to pick them up.”

A couple of years ago Niki Records faced a typical problem for an indie label. Their distributor went bankrupt, an incident which ended up costing them thousands of dollars as their product was tied up without distribution. They were lucky though, because the demise of the distributor can often spell the demise of the labels it carries. Niki Records is temporarily going with The Orchard, an online distribution company specializing in independent labels that deals exclusively in consignment contracts. Martin commented “I don’t want to get tied up with any small distribution company because they are going out of business like hotcakes. The cost crunch is on and business is tight. We have to be very efficient in order to survive.”
Bob Hauver operates Hudson Valley Records, an Adult Contemporary/New Age label out of his house—the most common base for an indie—in Carmel. I spoke to him over the phone and he related a similar story with regards to distribution. “I don’t know how depressing you want to make your article but the old thing they say about wineries applies equally to the music business. The best way to make a small fortune is to start with a large one. It’s not for the faint of heart. You need staying power and deep pockets.” When his first distributor went under he got creative with his marketing strategy and made arrangements with alternative lifestyle distributors rather than music distributors. He related, “Instead of trying to get into Sam Goody, now our CDs get placed in aromatherapy shops, crystal shops, museum gift shops and such, in the New Age market.”
Talking about his best-selling act, alternative rockers, 3, Tom Benton told me, “We can’t survive the way the distribution network is set up right now, because it’s too big money-driven to even get your foot in the door. If you go to the Hudson Valley Mall right now, there’s a placard for 3, but it’s empty. They get two or three copies every six weeks and sell out immediately because there is a demand for that record in this area, and then it sits there empty. I’ve complained incessantly, because it’s my business. But for them to sell a couple of copies a week, it’s not enough for them to get excited about restocking it.”

Then there is the collaboration between the big record labels and the big retailers. In August of 2000, 30 states filed suit against the “Big Five” major labels, charging that Capitol Records, Sony Music, BMG Music, Universal Music and Warner Music had conspired with retail chains Sam Goody, Musicland, Camelot, Planet Music, Record Town, and Tower Records and Virgin Records in a price fixing agreement. The states charge that this ended up costing consumers over $500 million. The Big Five readily admit that this was occurring, but defend it as a legal business practice. How can an indie even begin to compete with such insider access?

The Internet Solution

Everybody knows the Internet has changed the entire game for the music industry. What is still very much in question is how. One thing is certain—the standard business model, where a major label has to sell 500,000 copies of an artist just to break even and 90 percent of their investments lose money, is no longer valid. Artists now have direct access to their listeners through sites such as Mp3.com and CDBaby.com, which make it possible for unsigned bands and independent labels to be heard by the public and sell their own products directly to consumers. For example, through Mp3.com I was able to purchase two bedroom-produced electronica CDs from a pair of Swedish teenagers who call themselves Raveing Lunatics. The majority of the money I spent went to the artists with Mp3.com taking a cut for their services. CD Baby just passed $1 million in commissions paid directly to artists, and company founder Derek Sivers proudly proclaims at his site: “In a regular record deal or distribution deal, musicians only make $1-$2 per CD, if they ever get paid by their label. When selling through CD Baby, musicians make $6-$12 per CD, and get paid weekly.”

The Net has solved a lot of distribution problems that face many small labels. Chris Teskey is the Chief Operating Officer of Green Linnet, a successful independent label dedicated to Celtic Music that has grown from founder Wendy Newton’s home in 1976 to an 11-person organization based in Danbury, Connecticut. “We’re doing really well selling records over the Internet and we’ve managed to get our direct consumer sales up to about 70 percent Internet as opposed to mail order and our toll-free number,” Teskey told me. “But it’s not because we’re Internet geniuses. It’s because we already had a very successful mail-order business and it’s really just another version of mail order.”

Unlicensed file sharing made (in)famous first by Napster in 1999 has thrown a nasty curve at the music industry which is still being sorted out in the courts. Why should people pay $20 for a CD when they can download it for free and burn it onto a disk at their own computer? Napster ended up shut down by the courts for copyright infractions and hopped into bed with the enemy. Dormant since July of 2001, they are still struggling to reopen a legit fee-based operation in conjunction with Bertelsmann/BMG. In an attempt to distribute licensed songs over the Net, the Big Five labels have broken into two teams offering the paid subscription services—MusicNet formed by AOL/Time Warner, BMG, and EMI; and Pressplay by Universal and Sony. Yet the first versions of those programs which are just being unveiled seem unwieldy, burdened with limitations (such as encrypted songs that self-destruct after 30 days) and unlikely to satiate a generation reared on free downloads. In addition, the Justice Department has launched an antitrust suit to determine if the Big Five were colluding (again, gasp!) to set rates and terms for the use of their music. And in Napster’s place file sharing programs such as Audiogalaxy, Kazaa, Morpheus and Grokster have sprung up. These programs are the targets of lawsuits, yet their peer to peer connections with the lack of a central server will be much harder for the courts to shut down.
Feeling guilty about your huge collection of mp3s? Listeners are encouraged to become true patrons of the arts in the most direct sense as Fairtunes.com cuts the corporate middleman out of the equation. Pay the artist a voluntary gratuity for downloading their album, whether it’s $1 or $100, through Fairtunes.com. They will track down and forward your payment directly to the artist you’ve robbed. The effect this will have on your karma is still being studied by independent researchers.

Creative Marketing: One Part Cockatiel

So what’s an independent label to do to survive? Stake out a niche. Leslie Gerber of Parnassus Records in Saugerties specializes in classical music and has been operating a used and rare LP business for collectors since 1969. His expertise plus the quality of his releases have resulted in success for his label in one of the hardest genres of the music business to survive. He got a chance to purchase some rare early tape recordings of the Russian pianist Sviatoslav Richter a few years back and decided to begin releasing CDs under the Parnassus label. “I’m lucky enough to have some credibility in the classical critical market because I’ve been a music critic for over 30 years,” Gerber told me. “I’ve also been on the radio for a long time with my program ‘The Grand Piano’ on WMHT and before that Sundays on WDST. So my name is known out there a little bit, so when people see something I put out, they pay a little more attention then they might from another small label, so I get more reviews than most small labels.”

Another way for an indie to thrive is to find creative ways to reach an audience. Hudson Valley Record’s Bob Hauver said, “Some of the things that help with our stuff is that it’s very melodic listenable music so we end up getting our stuff played in airports and Home Depots, places where the artist can collect a royalty. We’re very big with the construction crowd,” he joked. And gimmicks never hurt. Hauver and his wife Patti have a cockatiel named Scooter who happens to have a talent for learning songs. One thing led to another and Scooter ended up a guest artist singing the song “Tequila” on Hauver’s first release by his band Full Moon Bay. “The pet bird enthusiast community is a funny little subculture where people are really into their pets. People began showing up at our gigs and asking us for merchandise so we started developing these funny T-shirts and stuff. It’s very tongue in cheek but we’ve developed a little sideline business out of it. He’s got his own Web site and his fans are called Scooter Rooters.”

Peter and Debbie of Niki Records built a recording studio into their garage so they could record their own artists, giving them another potential source of income. Peter told me, “One example of us doing a little bit of everything is this,” as he held up a copy of a short film entitled Fair Play. “We got a call out of the blue from LA to help with this movie with John Heard and Ed Asner. We recorded John Heard’s dialogue in our studio because he was in the area.” Fair Play ended up nominated for a student Academy Award. Niki also just recorded Simms Tayback talking about his best-selling children’s book, Joseph Had a Little Overcoat.

People seem to feel that if the record companies are ripping off the artists, there’s a poetic justice in ripping off the rich executive who’s ripping off the artist. But it’s still the artist that gets screwed in the end. Album sales fell three percent in the US over the past year, the worst year for music retailers in over a decade. The industry blames unlicensed file sharing on the Internet for the drop in sales while artist and consumer interest groups claim that the labels and retailers are eating their just desserts for illegal price collusion. As the entire music industry attempts to react to a radically shifting paradigm, the direct connection that the Net has forged between artists and listeners is one of the more promising scenarios that might prevent a future where bands have to subsist on T-shirt sales. As Tom Benton put it, “I think that most people who download a lot of music don’t think of themselves as thieves and would be willing to pay something for music they like if they were convinced it was a fair amount and going to the people who created it, not just the people who are passing it along.” Spoken like a true idealist who happens to love music and wants to share it with the world.

Local Indies on the Web:
(Ask your local record store to carry their products.)
Hudson Valley Records: hudsonvalleyrecords.com
Green Linnet: greenlinnet.com
Niki Records: nikirecords.com
ParnassusRecords: parnassusrecords.com
Planet Noise Records: planetnoiserecords.com

Related Web sites:
cdbaby.com
fairtunes.com
Futureofmusic.org
mp3.com
npgmusicclub.com
nytimes.com