A2IM CEO Richard Burgess on the State of Indies: It Isn't Just the 'Skinny Kid With a Guitar Slung Low'
Following the success of the sixth annual Libera Awards, which marked the culmination of the American Association of Independent Music’s twelfth Indie Week (June 5-8), and brought a broad swath of the independent music industry to New York City, Billboard sat down with A2IM CEO Richard Burgess to get his take on the state of the independent music business.
Burgess, a musician, producer, author and educator and former head of business at Smithsonian Folkways Recordings, has only headed the non-profit independent music coalition for a year and a half; but he is positively bullish on the independent music market which Billboard put at 35.1 percent of the music industry's U.S. recorded music sales in 2016. This year, Indie Week attracted a number of high caliber music execs including Pandora's Tim Westergren and iHeartMedia's Tom Poleman, as well as reps from Spotify and Apple Music. This as the Libera Awards moved uptown to the swankier PlayStation Theater digs complete with red carpet, sit down dinner and performances by Ani DiFranco, Nick Lowe and Talib Kweli among others while drawing a thousand attendees.
Here, Burgess discussed the many issues facing the independent sector, including not being compensated fairly by ad-supported video and terrestrial radio; trying to get indie labels larger piece of the branding pie and how indie isn't just some "skinny kid with a guitar slung low."
Billboard: Congrats on the 6th Annual Libera Awards, how many is this for you as CEO?
Richard Burgess: This is my second. I started on Jan. 4 last year and only had about 5 months to get the first one together so that was a bit of a scramble. But we doubled the size last year of the previous year and introduced dinner and had four live acts—there was one live act the previous year. And this year it went up to five acts [Nick Lowe, Ani DiFranco, Talib Kweli, Nick Hakim, Twin Peaks] and more music. In the future we’re going to go to more acts. I really want to move this up to a full-blown awards show.
Do you want to get the Liberas on TV?
Well, I definitely want to get a media partner. I want it to be a platform for independent artists
Do the Libera Awards help A2IM’s budget and/or grow its membership?
Right now, we’re not doing it to make money. We do make money, but it’s not a huge amount that we pull out of it. We’re a not-for-profit. A2IM is about strengthening the independent sector, making more viable for every independent label to remain independent. And for other people to realize that being independent is a really good option.
How do you accomplish that?
We basically have four pillars: advocacy, education, networking and commerce and they all work together to help our labels do more business to be able to survive better. So the Libera Awards are a platform to trumpet the fact that independents are important. A lot of people think, "Oh, independent means small.’ Well, Adele is independent and she’s not so small. Taylor Swift’s not so small. The Lumineers are not so small. You could go on and on, Mumford and Sons.
It seemed like there was a bit of a hush at the Liberas when Florida-Georgia Line won the Nielsen Award
They’re not what some people think of as independent. But the fact of the matter is, indie isn’t the skinny kid with the guitar slung low. It might be, but it can also be a hip-hop artist, it can be a country artist, a world artist, it can be anything at all. That’s exactly the reason why we need Libera Awards and Indie Week because they sends a message that, you know what? Florida-Georgia Line are independent. They might sound to some like a major because you might hear something like them on a major, but they are independent.
Maybe they should have been embraced more?
That award wasn’t a voted upon award, that was an award based on pure consumption by Nielsen's numbers. I didn’t know who was going to win, whether it was the Lumineers or Florida-Georgia Line.
Which begs the question, what is an indie? The definition can vary depending on distribution or masters.
We have a pretty strict definition. You have to own or control the masters, so you have to have 50% or more of your masters and less than a 5% global market share. There aren’t any indies at the global 5% level yet, but maybe one day.
What about Sony putting the Orchard and RED together, they now have a 6% market share and that market share is mostly independent labels.
Well, that’s distributed market share. We’re not talking about distribution, we’re talking about ownership.
What were your attendance numbers like for indie week.
Just under a thousand.
Was that the biggest ever?
I believe so. Here’s the thing with Indie week, we’re not trying to blow it out. We’re not trying to make make it SXSW because our unique selling proposition with Indie Week is that it’s business-to-business, we’re not trying to do business-to-consumers. We’re not looking for every kid with a demo to come through Indie Week because that would destroy it.
What we have at Indie week is the very top people in the industry. So we’ve got people like Martin Mills [Beggars Group] and Glenn Barros [Concord], and the heads of all the independent labels. It’s really about having these very high level conversations and people being able to network with their peers and learn. We have panels with people like Tom Poleman or Tim Westergren or Apple. We want to put the very top people on the panels so people can hear it from the horse’s mouth as to how to get things done.
There were some meetings, that were members-only, right what were they about?
There were some Merlin only meetings. And Spotify and Apple meetings. Most of those meetings are restricted because there’s a limited amount of space. The Apple meeting was at total capacity. It was a great meeting. Apple does’t do those kinds of presentations. So, the fact that Apple was prepared to come and present to our members was extremely exciting to us and our members.
Some members said of the Apple Meeting that there wasn’t much of a giveaway but said next time there will be.
I think they’re loosening up a bit. But what’s helpful to our members is understanding how these systems work, how playlists works and how radio works. That’s really largely what indie week’s about.
How was the playlistpanel?
It was jam packed because that’s a hot topic now—how do you get on the various playlists on Apple and Spotify and the other various platforms.
Someone on a panel said playlists only account for 10% of their streams, which makes you wonder about their importance.
But it's how people break records. And it can be how catalog gets played.
What other issues are facing the indie community this year?
The biggest single issue, if you look in the most general terms is, not getting paid a fair market rate for music. The two primary issues within that are the value gap with these ad-supported video type plays that pay a very, very low rate and radio.
The fact of the matter is that radio pays nothing. And that’s the biggest value gap of all. If you think about it radio is just a stream. For 97 years they haven’t paid a royalty to artists and labels and that puts America in the company of Iran, China and North Korea—that’s just absurd.
Frank Sinatra was fighting this in the ‘50s
Actually, the campaigns for radio to pay a royalty to recording artists started in the ‘20s, there have been 26 attempts since 1920 to get a terrestrial right for music being played on the radio and the National Association of Broadcasters has always managed to shoot them down. It’s simply unfair.
Isn't terrestrial radio hurting financially these days?
The only reason they’re hurting is because they have too big a debt load from consolidation from the roll-ups and the leveraged buy-outs.
But they’re not getting the ad rates they used to with all the competing media.
I think their ad numbers are up, they’re doing fine. An interesting statistic is they bring in $18 billion a year. But if you just look at the music stations they bring in $11 billion a year. The music industry is worth $7.5 billion a year. So, you have a situation where terrestrial radio is making more money from music than the entire music industry is making from music—if that’s not wrong than I don’t know what is. These people need to fess up and start paying musicians.
What’s your course of action?
Right now we’re in negotiations with the NAB and we’ll see how that goes. We’re talking to the legislature. And we’re working with the majors on this too. We have the Music First Coalition with A2IM, RIAA, AFM, SAG-AFTRA, SoundExchange and the Recording Academy .
Wasn't this issue on Capitol Hill just a few years ago.
In 2010 we got very close to a deal, but the rate wasn’t high enough so it fell apart. We’re back with the Fair Play Fair Pay Act again which was just filed with six co-signers.
Maybe you should have taken the deal they offered and gotten a higher percentage later.
Here’s the problem, I think it was at 1% or thereabouts but in the rest of the world the rate is more like 3%. If we settled for that it would have ultimately affected all the rates around the world.
But they’re not getting anything now
We don’t in the U.S., but other countries do and we don’t want to screw it up for them. What we don’t want to do is devalue music further because what’s happening is that tech companies and radio are extracting money from music and putting it into their own bottom line instead of returning it to the labels and the artists who make the records and there in lies the problem. So when people say the value of music has dropped, that’s not true, it’s exactly what it is: it’s built an $11 billion industry for radio, it built YouTube, it built Spotify, but Spotify does the right thing and pays a decent rate.
Do your members feel like they’re being compensated fairly by Spotify?
What about ad-supported part of it?
They don’t love the ad-supported part of it but they do accept that Spotify works very hard to make the ad-supported an acquisition funnel for subscriptions. They don’t accept that about YouTube even though YouTube keeps saying it’s true because of YouTube Red, but YouTube Red’s not growing at a rate that supports that contention.
What are other takeaways from this year?
We had a couple of panels on future type things like VR, MR [mixed reality] and AR, that are coming down the pike. It was a great panel. It’s a little bit futuristic but it’s going to be a disruptive technology one way or another. We don’t know exactly which way it’s going to go but I want the members to be aware of all the new technologies. We don’t want to again be blindsided in the way the industry was in 1999 with Napster.
We did another panel on brands, that’s very important. A2IM just hired a brand partnership person because the Indies don’t have a very solid foothold in the market.
How will that position help indies?
What we can do is become a funnel for our labels with synchs and brand partnerships. So what happens is Universal Music has more than 50% of the brand partnership market and they’ve recently had that because they’re very good at it. They have a very good team. We need to get better at it. We’re bigger than Universal, but there’s not central place to go to if you’re a brand and you want to partner with an indie label. We have 450 labels, where do they start? They can come to us and we can disseminate out to the labels.
How many labels did you have last year?
371 I think when I started and now we have more than 450.
So that is about 80 more, is that the biggest jump you’ve had?
I think so. And we now have 188 associate members. When I started we had 174 so we’re growing.
What were some of the other Indie Week highlights?
We did "International Go Bag," we had Ed Peto from China, Matthew Rogers from Australia, Desiree Jaqueline Vach from INgrooves and Eric Tobin from Hopeless, they’ve built a phenomenal International label team.
We also had a panel on next generation indie leaders because we feel like we need to be developing the next wave of leaders.
Oh, and one I thought was very important was "Anatomy of an Indie #1." Many indie labels don’t feel like they can have number one records, it feels like it’s out of their reach. So we brought in Paul Roper from Dualtone to talk about the Lumineers album, we brought in John Salter from ATO talking about the number one record they had with Alabama Shakes. They were interviewed by Tom Silverman of Tommy Boy’s who’s obviously had many hits in the course of his career. And that was a really interesting panel because it is possible to do even with a relatively small staff.
The other panel that was interesting was "Connected Devices: Opportunities in your Home and Car." There are things happening now like the active speakers with Alexa and Google Home but we’re also talking about autonomous cars and how the connected dashboard is going to change things. Right now radio dominates those five buttons on the dash board but that’s not gong to be the case in the future. Pandora’s vying for that space and we had [Geoff Snyder] from Pandora and we had Fred Jacobs from Jacobs media and others.
That’s an interesting subject because I think 80% of radio listening is done in the car. Radio says they're confident that that’s going to continue bit there’s going to be a lot of challenges because you’re going to wind up with all the digital services equally available on the dashboard as much as FM radio.
How are A2IM’s finances as a non-profit?
We’re in good shape. My predecessor Rich Bengloff did an amazing job building the organization up. So we had a pretty good war chest and we have a very stable cash flow/revenue. I managed to grow it because we’ve added members so that brings up revenue. We make more money from Libera Awards and Indie week and we are opening up new revenue streams.
With people like Pandora CEO Tim Westegren and reps from Apple and Spotify showing up to Indie week, do you feel like A2IM has more power than you’ve ever had?
I don’t think of it as power in the sense of wielding power, we’re very attractive to these services. The truth of the matter is being more than a third of the market place at this point, it makes sense for the services to want to deal with us. The truth of the matter is we over index on streaming. According to some numbers, we’re as high as 38% on streaming. We’re growing like crazy.
The Indies were pretty much shut out of radio because back in the day when it cost like $500,000 to have a CHR [contemporary hit radio] or $100,000 to have an alternative hit, not many Indies could compete at that level. And even now, when you don’t have to pay that kind of money to get on radio, there’s still a very limited number of records that get on FM radio. But on Spotify any record can start out on a tiny little playlist and they can percolate up through that playlist until it ends up on the top and eventually gets on the radio which is what happens. So Indies over index because everything’s there now.
I worked at Smithsonian Folkways. We had 3,500 albums there’s no way we could get all of them into Tower Records even through Tower was huge. But now you can get everything on Apple or Spotify of all the digital services. That really changes things. Now some kid or an adult or some 65 year old can find things on Spotify and if they like it they’ll keep playing it and if they keep playing it you get paid. That’s a large part of the reason why catalogs have become such a large part of streaming.
What do you think the state of Indies is right now?
I think the state of Indies is very, very strong right now. I think labels and artists are feeling more and more empowered. There are more options for Indies. We have dozens of distributors with all kind of variegated business models that you can choose from. From being a sole proprietor indie label all the way to being a label like Beggars with 150 employees or more, the options are there. And the options are there to hang on to more of the money you make.