The digitalization of the music industry plays well in the indie label sector, according to a panelist at the Billboard Music & Money Symposium.

Richard Bengloff, president of A2IM trade association for independent labels and distributors, said the digital world is a wonderful world for the indies, with infinite shelf space. At radio, "indies get 10% of play at terrestrial radio but in non-terrestrial we get 39%," Bengloff said. "Last year, as we define indie, we had 31% market share of physical sales and 37% of digital."

Digital has benefits that pay off to all labels, if taken advantage of. For example, in the pre-digital era, labels might have signed an act, made videos and tried to get radio support to see if they had something. Now, Daniel Klaus, the co-founder/CEO of Music Nation and Original Recordings, "the digital world is driving dramatic changes." His label can take an act to the MusicNation social network, which "can tell us what is good. We let the artist resonate with the community" before making an expensive commitment.

The independents also have advantages in the traditional record business too. In 1990, when Sony bought Red, the plan was to keep the distribution company and close down the Relativity label, Bengloff reported that what they learned quickly was that the label had a value as a much less expensive route to market. Epic was planning to spend $450,000 to market a Vinnie Moore album while Relativity could launch it for $80,000.

Also, unlike most major labels, many of the indie labels are a brand. If you look at Century Media or Relapse, who are known for metal, they have fans who might buy an album on the label even though they don't know the artist. Same thing with Alligator and the blues, he explained.

The disruptive transition to digital creates opportunities for an indie label like Wind-Up Records, said the label COO Jim Cooperman. "We see the contraction of the majors are freeing up artists" and executives.

Even the majors see opportunities in the independent sector. WMG VP of business development Nat Pastor pointed out that from 1998-2001 every album in the top 10 each year sold at least 3 million units, while last year one album reached that number, making niche more important. Consequently, Warner has been targeting opportunities in the indie sector, but in doing so it looks to create quid pro quo situations.

When looking for partners in the indie sect, WMG looks at track record, he said.
Roadrunner founder Cees Wessels is a "winner" so WMG acquired 72% of the label, but left the label alone and the culture intact. WMG also "looks for clarity of vision," as well as the ability to adjust to changes in the weather.

Consequently, WMG partnerships with indies take different forms: from plain distribution deals to outright acquisitions and hybrid deals -- like those offered by WMG's Independent Label Group, which provides services to indie labels.