Carving out their niche
By Ross Rinehart
Aug. 10, 2008 9:02 p.m.
It’s hardly a secret that the music industry is struggling.
The horse on which record labels have saddled their business has begun to buckle under the weight of lofty expectations and an outmoded business model. According to Nielsen SoundScan figures, about 500 million albums were purchased in 2007, and despite a 45 percent increase in digital sales, this represented a 15 percent drop in overall sales from 2006.
When any semicomputer-savvy individual with Internet can obtain an artist’s entire discography gratis in a matter of hours, music fans are becoming increasingly estranged from the seemingly outdated process of paying money for a disc that takes only pennies to manufacture.
Herein lies the quandary for contemporary record labels: What do you do when your business model necessitates a process that can be bypassed by almost anybody?
This filesharing phenomenon has had a totalizing effect on the industry. Every record label ““ from the “big four” conglomerate labels (Sony BMG, EMI, Universal and Warner) to the smallest independent imprints ““ has been forced to reconfigure its business models and expectations.
Jake Friedman is the co-founder of New York’s avant-rock independent label Lovepump United, which is home to discordant acts such as Los Angeles-based fractured noise-rock ruffians HEALTH. Friedman attributed this downturn to shifting consumer habits and priorities.
“The way the label model used to work was that it was in the favor of labels,” he said. “But it’s shifted. The ways that bands make money now is from everything from show revenues to merchandising to touring: Everything they do is revenue for the band. The only way that labels can make money is through selling records.
“I see in the current climate of music, buying records is less of a priority for music enthusiasts,” Friedman added. “I think people are more excited about more diverse music than they ever have, but the actual act of buying a CD or a record is not necessarily a top priority to them.”
Whether this change in consumer behavior extends from illegal downloading, a change in music-purchasing habits in the digital age, or a collective backlash against the record industry, it is certain that no music label is immune.
However, despite the industry’s overall downward trajectory, independent labels have proven slightly more resilient than their major conglomerate counterparts. Independents have managed to carve out their own space among major labels’ dominance, increasing their market share in the process.
“In terms of market share, independent labels do have a larger stake now than they had before,” said Geoff Mayfield, senior analyst and director of charts for Billboard. “A lot of people thought that might (signal) a renaissance of the earlier days when you had labels like Arista, A&M and Motown as part of a very active independent scene. No one really saw that renaissance happen, but there have been success stories across the board.”
The independent labels’ increased presence in the music industry is a multifaceted phenomenon that remains somewhat unknowable even for the heads of labels.
“Most of the labels around are still adjusting to the new climate,” Friedman said. “And the new climate is … things are complicated.”
Yet one feature peculiar to the independent labels that may explain their growing market share is their ability to cater to a certain stylistic niche. Independents may be able to cultivate a listener loyalty by creating an aesthetic identity associated with the label.
“I think a lot of smaller labels start out representing a certain scene, whether geographically or stylistically,” said Mike Kaufmann, head of A&R and development for Michigan indie Asthmatic Kitty. “Major labels don’t do that at all ““ I guess major labels’ style is radio pop. I think smaller labels, whether it’s an electronic label or underground hip-hop labels or indie-pop labels, some labels can very effectively build a certain audience.”
Friedman ascribed his label’s recent successes to a collective sentiment among a faction of music fans.
“People are getting really frustrated with the benign direction pop culture wants to send things,” he said. “I think kids are getting frustrated and they want something a little more messed up and confused. If our label can be any part of that collective, youthful frustration, that would be totally awesome.”
Niche marketing is hardly a new method for independents. Whether it’s SST Records furnishing the flames of American underground rock music in the 1980s or Sub Pop, Kill Rock Stars and K Records representing the various strands of anticommercial rock in the 1990s, independent labels have long ensconced themselves in fledgling genres.
“Brand loyalty can happen with some independents, not with all,” Mayfield said. “It’s true that there isn’t a Columbia sound; there isn’t a sound necessarily associated with RCA Music Group. There can be a sound associated with some of the independents. … Certainly I think that’s helped some companies like Sub Pop along the way.”
However, as the Internet makes diverse music more available than ever to listeners, inundating the marketplace with artists vying for attention, this concept of niche marketing may not be enough for independents to continue their growth.
“I think that, unfortunately, this idea of niche marketing is maybe not the best business model,” Friedman said. “Although it’s really easy for us to put out records for the people who we know will like them, and to constantly service that same audience and it’s very comfortable to do it, we still need to be doing a better job marketing our music to a larger demographic.”
But independents are approaching the new music climate aware of the need for creativity and innovation to survive in the modern age of MP3 culture. Eager to adapt to the shifting industry environment, independent labels work within a smaller, less encumbered framework than the majors, which allows them to experiment with new business plans, such as offering incentives for purchasing digital presales.
“Maybe a big difference between independent labels and major labels is that major labels are looking at all this with a certain amount of trepidation and fear,” Kaufmann said, “while independent labels are looking at it with more curiosity and, if not enthusiasm, excitement in figuring out what to do in response.”
“Because although the music climate is changing drastically,” Friedman said, “… I honestly feel that the best thing you can do is to be flexible, to be creative and most importantly, invest in good bands. Because it doesn’t matter if we’re listening to music off of tinfoil or we go back to 8-tracks. It doesn’t matter as long as you have great bands that you’re working with. That’s what matters.”
