Defining the independent music sector by label ownership rather than distribution.

Don Rose is acting president of the American Assn. of Independent Music.

Independence is about spirit. The spirit of entrepreneurship. The spirit of innovation. And it's about passion for music.

The independent music sector has introduced, developed and nurtured nearly every new musical form that has affected our society since the beginnings of the recording industry. In the present day -- perhaps more than ever -- the independents are essential to the continuing progression of cultural diversity and innovation in music.

The American Assn. of Independent Music (AAIM) was formed in June to address the concerns of indie labels and provide advancement opportunities for its member companies. AAIM represents a broad coalition of labels that support principles of fair trade and equal access to media and the marketplace. We believe strongly that a healthy independent sector is vital for the music industry at large.

The first exercise at hand as we define our strategy is to "do the math," because an accurate reflection of the size and scope of the indie label sector is fundamental to pursuing the AAIM objectives.

If one defines the independent music sector by label ownership rather than distribution -- all those who control their own destinies -- the Nielsen SoundScan market share for independents would be 27.25% (year-to-date, through the week ending July 3).

However, because the current definition, as adopted by Nielsen SoundScan and Billboard, identifies indie labels according to their distribution partners, the indie share is shown as only 18.3%. This is because many indie labels are distributed by one of the four majors, in whose market share their sales are embedded.

We believe that this is an old, obsolete paradigm.

To further confuse matters: Each of the major companies (Universal Music Group, Sony BMG, Warner Music Group and EMI) has an alternative distribution channel that caters to indie labels (Fontana, RED, Alternative Distribution Alliance and Caroline, respectively). The "FRAC" distributors provide a valuable service to the independent music community, but their existence is only one of many anomalies under the current system.

Indie labels are considered indies for the purposes of SoundScan data and Billboard charts only if they are marketed by a FRAC distributor, an unaffiliated distributor or no distributor at all. An indie label distributed by any of the majors' primary distribution arms will have its market share included in that major's share -- regardless of the indie's preference. ATO, Concord, Curb, Disney, Razor & Tie, Wind-up, Roadrunner, Rounder, Sanctuary and Univision Music Group are examples of such embedded indies.

This status quo represents an institutional bias against the indie sector, distorting its scope and impact for all who depend on accurate information.

In an ideal world, of course, there would be no need to distinguish between majors and indies in the first place. Record companies would compete in an environment where all great music would have equal opportunity to rise to the top of the charts.

But indies are pragmatic as well as idealistic. So, since the marketplace tends to segregate on the basis of size, let's allow the market share report to reflect truthfully the considerable size and impact of the indie sector.

It is time to update the definition of "indie label." It simply no longer works to be identified by the method of (physical) distribution, particularly since the constitutions of the FRAC entities have long since blurred any distinction based on distribution ownership. Command over one's destiny should be the key to independence, after all.

Open the definition to every record label in America that is not wholly owned or controlled by a major. The independent chart will then be available to and representative of the total community.

AAIM is developing an ambitious agenda for the independent sector, and we invite input and support from the industry at large.

Independence is the mother of innovation!

Billboard Responds:

We agree that there is more than one way to define "independent," and we have heard opinions similar to Don Rose's from some of the labels he mentions. But there other consequences to the suggested changes.

The decision to determine a title's independent status by distribution route dates to December 1985, when the Warner Music Group bought a stake in Tommy Boy Records. Despite the change in ownership, most of the label's albums continued to be distributed by independents. Thus, Billboard continued to define Tommy Boy as an independent label.

Billboard and Nielsen SoundScan could change this approach and provide a new perspective on independent market share. We also could alter the rules governing the Top Independent Albums chart.

But that would not change the reality of today's market. A fact of retail life is that albums included in a major distributor's catalog have a distinct advantage over indie-distributed titles in terms of gaining shelf space and ad programs from large chains.

Rose's suggested parameters would yield a larger indie market share, but that same criteria would make it harder for pure independents -- including those sold through FRAC wholesalers -- to compete on a chart that includes Curb, Razor & Tie, Univision and the like.

Under AAIM's proposal, Buena Vista Music Group -- which is distributed by Universal Music & Video Distribution -- would be deemed independent, even though its labels are owned by Walt Disney, a major entertainment corporation. Should such a large player be considered independent simply because it is not owned by one of the four major labels?

None of this is to suggest that AAIM's proposal is without merit, nor that Billboard and its data partners at Nielsen Music are unwilling to consider new ways to measure the independent landscape. It is just that the approach to a busy intersection requires a careful look in all directions before one crosses the street.