(Following is an op-ed article from American Association of Independent Music President Rich Bengloff, in which he outlines the organization's disagreement with the methodology that Billboard and Nielsen SoundScan use to calculate label market share. Please share your opinions on this issue in the comments section.)
Members of the American Association of Independent Music (AAIM or A2IM) have a fundamental disagreement with the methodology that Billboard and Nielsen SoundScan use to calculate label market share.
Ownership of master recordings, not distribution, should be used to calculate market share. We understand that this is a complicated issue. But we respectfully request that Billboard and SoundScan re-evaluate their current criteria and work with the label community to update the methodology so that it properly represents the independent label community's place in the music economy.
Here's why. If you use ownership of master recordings to calculate label market share of both U.S. album sales and digital track sales in 2010, independent labels accounted for approximately 30% of each, while they accounted for approximately 37% of digital album sales. This puts the indies ahead of all the individual majors in market share.
But Billboard reports market share based on distributor and as a result, sales from such independently owned music labels as Curb, Concord/Rounder, Razor & Tie, VP and Wind-up are embedded within the major-label market share totals.
We think this is an unfair way of reporting. In SoundScan's 2010 album sales market-share report, embedded labels alone amounted, in aggregate, to more than 15% of the market. We believe they should have been tallied as part of the independent music labels' sales based on ownership of masters.
This isn't a vanity issue. Although access has improved for the entire creator community, the economic rewards have lagged. The music creator community has evolved into three tiers: the four major labels, DIY artists and independent labels. Indie labels provide artists their services, experience and contacts and, as a group, have assumed the music working-middle-class tier of the industry, bringing their artists to market for all to hear.
Viewing market share by distributor diminishes the success stories of our members and their artists and costs our community on many levels. When independents go to new digital music services to negotiate deals, the services point to Billboard and SoundScan's market share calculations and say our independent community isn't a big enough market segment to deserve equitable treatment.
Artist signings and promotion have become equally problematic as our potential business partners believe that the four majors control 90% of the U.S. music market and deserve preferential treatment and better terms than our members do.
Market share data based on distribution deals of limited duration with a major-label-owned distributor isn't reflective of the current music marketplace. If a label hires a promotion company to work radio, does it still not own its music's copyrights? Why should distribution be considered differently than any other third-party services? The fact that independents choose major labels to handle their distribution shouldn't affect how the indie labels' market share is categorized.
A2IM was established six years ago to protect the rights of the American independent music label community with a core mission statement of obtaining access and tangible economic gains for its label members and their artists through advocacy, commerce opportunities, education and other member services. The importance of our independent label members to the creativity and cultural diversity of our society can't be underestimated, nor should their commercial contribution be underestimated.
The independent music label community that makes up A2IM's membership comprises a geographically and musically diverse collection of indie labels -- labels of all sizes throughout the United States, representing musical genres as diverse as our membership, many of which are genre brands in their own right.
All of our independent label members have one thing in common: They are small-business people who invest in their love of music to bring it to fans and at the same time try to make a living during this transformative period in the music industry. Let's not shortchange them for the economic recognition that they collectively merit and deserve. Please shift market share calculations to ownership-based criteria.
Rich Bengloff is president of the American Assn. of Independent Music (A2IM.org).