Among all the talk about the major label deals struck-and not struck-for cloud music services from Apple, Amazon and Google, it's easy to forget where the indie labels stand in all this.
Typically, independent labels are the "easier" labels to deal with. They are less concerned about things like piracy and upfront advances than the major labels, and therefore less difficult to negotiate with. And, because they commanded less of a market share in music sales, were cheaper too.
More recently, however, certain voices representing the independent label community are trying to take a harder line. Merlin, the independent rights agency based in the UK, is typically the loudest. It aims to take a strength-in-numbers approach to demand better terms from new service providers by providing an easier path to licensing the thousands of indie labels out there.
Merlin last week released the results of a member survey illustrating how music from independent artists is faring on various digital platforms. More than 50 artists from Merlin-represented independent labels released albums that reached the top 5 positions in albums sales among various charts worldwide, 18 of which reached No. 1 from January of last year through this past March. The Arcade Fire and Adele are the poster children here. And independent artists' market share for U.S. sales is 57% higher in digital formats that it is for physical formats.
The group reports similar success in streaming formats. While indie-artists make up 10.5% of the streaming traffic among users of free tiers from streaming music services like Spotify, it jumps to 12.25% for premium tier users (and as much as 27% in "some territories.")
Merlin likes to call itself the "fifth major," and uses stats like this to rightfully argue that music produced by independent labels is just as valuable and necessary to digital music services as major label content is.
"The chart success of our members in these major markets underlines the fact that independent repertoire is absolutely as valuable to consumers as that of our major label competitors," Charles Caldas, CEO of Merlin, said in a written statement divulging the stats.
It's a smart strategy, but one not without challenges. The reason digital music services tend to offer independent labels and aggregators less favorable financial deals than it does major labels has nothing to do with the quality or popularity of the music they release. The reality is that Google, Amazon, Apple and any other digital music service doesn't need to strike deals with Merlin or negotiate with A2IM to license music from independent labels. They can simply go to the independent labels directly.
YouTube, for instance, is going directly to independent labels to negotiate terms for sharing ad revenue for both music videos and user-generated content containing music in the background, just like it did earlier with the major labels. While YouTube remains in negotiations with Merlin, it has on its own secured deals with almost all of the larger indie labels commanding the bulk of the indie market share. This includes the likes of Merge and Beggars Group. In fact, Beggars founder Martin Mills is the Chairman of Merlin's board.
Now it would certainly be easier to go through Merlin, as it would allow a digital music service provider to strike one deal to get licenses for hundreds of independent labels (who simply opt in or out of any deal it brokers). But when the terms prove too onerous or the licensing process to difficult, companies like YouTube are showing an increased willingness to do things the harder way.
Update: Merge Records offered the following statement on its YouTube deal:
"Merge Records fully supports Merlin's licensing approach, and we feel it adds value to indie deals that member labels could not get individually. We fundamentally believe that indie content should not be valued differently than major label content. Simply put, YouTube did not get a cheaper deal by going directly to Merge opposed to negotiating with Merlin--Merge is fortunate enough to be in a position to work out a deal corresponding to our principles."