Piracy boosts smaller labels in competition for music stars

Piracy boosts smaller labels in competition for music stars

Holly Miller

As the music industry changes beats, independent and major record labels are struggling to redefine themselves so they don’t hit a flat note with consumers.

Digital downloads, online music sales and innovations in home studio technologies are leveling the playing field between large and small record labels and changing the way music is being created, marketed and sold.

Despite a three-year, industrywide decline in CD sales, Basin Street Records, a 7-year-old New Orleans label, has more than doubled its number of artists and more than tripled its number of titles since 2001, said President Mark Samuels.

We’re growing, probably not as strong as if 9/11 hadn’t happened and if downloading and stealing music hadn’t happened, but on the positive side, major labels are not any better equipped to deal with this than smaller labels, Samuels said.

Online stores such as Amazon.com and TowerRecords.com post releases from independent labels side-by-side with top hits from the big five labels – Universal Music, BMG, EMI, Sony Music and Warner Music. This newfound consumer access is eroding advantages major labels have long had in distribution.

We’re closer to equal footing with them now, Samuels said.

As big labels cut costs by dropping artists and signing fewer new musicians the talent pool grows for independent labels, said Harris Rea, president of Louisiana Red Hot Records in New Orleans.

We may have lost market share but we can now look at bigger artists and take back some of the sales, Rea said.

The future of big record labels is rocky, industry insiders say.

In October, Universal Music Group, the world’s largest record label, slashed CD prices by 25 percent.

Warner Music cut 1,000 jobs last week.

Lagging sales pushed Sony and BMG to seek a merger, now awaiting regulatory approval, to create the world’s second-largest music label, accounting for 25 percent of the $30 billion global market.

Representatives from Sony could not be reached for comment.

To combat this slide, the Recording Industry Association of America began suing music pirates. It won lawsuits against Napster and other file-sharing software companies although Kazaa, Grokster and LimeWire remain in operation.

In September 2003, RIAA filed copyright infringement suits against more than 250 individual file swappers. Since then, the organization has sued nearly 2,000 people and reached out-of-court settlements in about 400 cases.

Many record labels sense the downloading movement is too large to curb. One option growing in popularity is to sell tracks through online music stores such as Apple Computer Inc.’s iTunes and Roxio Inc.’s Napster, the new licensed version of the renegade peer-to- peer file sharing system that started the music downloading revolution in 1999.

Since its April 2003 launch, iTunes has sold 50 million downloads at 99 cents apiece. Last Tuesday, Wal-Mart Stores Inc. officially launched its online music store after a three-month trial. Wal-Mart will sell songs for 88 cents apiece. From each sale, record labels receive a percentage that varies depending on the contract.

Approximately 1 percent to 2 percent of all music tracks are sold through downloading, Samuels said.

That’s a significant number, and downloading is just in its infancy, he said. That’s why I’m not going to fight it.

Samuels said he hopes to have iTunes and Napster offer songs from Basin Street artists. Eventually Basin Street’s Web site will offer downloads as well.

Declining prices and improving technology in home studio equipment, combined with the Internet as a new distribution channel, allows unsigned musicians to market homemade CDs.

Our concern was not so much piracy but setting ourselves apart in such an overcrowded marketplace, said Ben Jaffe, president of Preservation Hall Recordings, another New Orleans-based label.

As consumers gain access to an increasing number of new artists, record labels say their role as gatekeeper will continue.

With so much bad music, you still have to figure out a way to be seen through all that mess, Samuels said.

The record label of the future is more about marketing and less about production and distribution, Rea said.

We may not be manufacturing records 10 years from now but the role that won’t go away is marketing, he said.

Copyright 2004 Dolan Media Newswires

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