Unity Over Uniformity: How Coordination Can Preserve the Indie Music Ethos

Coming off of last month’s A2IM Indie Week, I’ve been reflecting on the role of independent music companies in the global ecosystem. The latest industry news, including the majors' lawsuit against AI and acquisition plans from companies like Believe, underscores the dynamic landscape independents navigate.

There’s intense pressure to consolidate, yet a real awareness of the indie ethos and its beneficial influence on the industry as a whole, in part because of independent companies’ ability to nurture very different kinds of artist and community relationships. How can independent companies make the best of both?

When it comes to consolidation, music isn’t that different from other sectors, and the consolidation of independent companies into conglomerates is a significant trend across various industries. This phenomenon has been particularly notable in the media and technology sectors, driven by economic, regulatory, and competitive factors.

In the media industry, major conglomerates like Comcast, Disney, AT&T, Sony, Fox, and Paramount Global control 90% of what Americans watch, read, and listen to. Companies such as Google, Amazon, and Microsoft acquire smaller tech firms to expand their capabilities and market reach. This trend is driven by the need to innovate rapidly and the strategic importance of owning various technological assets and platforms.These acquisitions often involve cutting costs through centralized operations and downsizing, leading to increased market power for a few large entities that stifle competition and innovation, impacting quality and reducing diversity in media and information sources.

Of course, the music industry is not immune to this trend and has experienced significant consolidation over the years, resulting in the dominance of a few major conglomerates controlling over 70% of the music market. One of the drivers of this consolidation is how music is consumed. Traditional physical formats required significant capital investment for production and distribution, which smaller independent labels struggled to afford. Digital distribution disrupted this model, reducing the financial barrier for smaller, independent labels to expand their market share.

The global market share for independent music is substantial. According to MIDiA, “Non-majors grew revenues by 13.0% in 2023, compared to 9% for the major labels. This meant that non-major label market share was up for the fourth consecutive year, reaching 31.5%.” This sector is also responsible for 80% of the world's new releases, demonstrating its critical role in the industry's innovation and diversity. This growth is partly due to the increased use of independent distribution platforms that allow artists to maintain control over their music and earnings.

However, over the last several years, we have seen the consolidation of independent music companies under other independents. This increasingly prominent trend is driven by the desire to leverage collective resources and achieve greater market presence while maintaining the ethos and flexibility that come with being independent. Hunter Giles from Infinite Catalog calls these new institutions “inside-out Majors — companies aiming to operate at the same scale and culturally-relevant heights as traditional majors, but by taking a decidedly inverse approach.” Think Believe, Downtown Music, Concord, Proper Group (fka Utopia), gamma, SESAC’s recent acquisition of AudioSalad, and others.

The latest news in this arena is Believe’s plans to spend €200-300 million annually on acquisitions to accelerate growth, including the most recent 25% stake in Bucharest-headquartered Global Records. Additionally, they plan to focus on becoming a leading player in key markets like the US and UK. Ladegaillerie hints at a potential transformative acquisition imminently, aiming to position Believe as a credible alternative to major labels.

This consolidation can help Independents compete against the Major labels with increased market power. It strengthens their market position, improves operational efficiency, and capitalizes on growth opportunities in a competitive environment. However, it also shifts the independent approach. It can lead to deprioritizing the personalized, dedicated relationships provided by a bespoke team invested in mutual success. Additionally, companies who remain truly independent might struggle to match the comprehensive service of bigger independents or majors’ offerings without compromising their business models. For example, it’s hard for an independent label to justify large marketing teams in house, and they need the agility of hiring outside contractors and agencies for certain projects. For artists, while there are benefits, there could also be challenges in navigating a landscape with more service providers and determining the best partnerships for their careers.

The power of the collective

One way to avoid the dilemma of consolidation economic benefits vs. independent spirit is through collective action of smaller players via industry organizations. This approach has proven highly effective.

Organizations such as the Independent Music Companies Association (IMPALA and the Worldwide Independent Network (WIN) play pivotal roles in this consolidation. IMPALA, with over 4,000 members, helps independent labels unite to amplify their influence and market share. Similarly, WIN supports over 8,000 music companies worldwide, facilitating collaboration and promoting best practices to strengthen the independent sector.

Additionally, trade organizations, such as A2IM (American Association of Independent Music), play vital roles in advocating for independents, focusing on fair treatment in the marketplace, legislative lobbying, and fostering business opportunities. A few examples of lobbying power include A2IM’s crucial role in advocating for the passage of the Music Modernization Act (2018), which updated copyright law to ensure fair compensation for songwriters and artists in the digital age. IMPALA was instrumental in lobbying for the EU Copyright Directive (2019), which aimed to strengthen copyright protections and ensure fairer revenue distribution for creators across digital platforms.

The Merlin Network is a global digital rights agency that represents the world's leading independent music companies, amounting to approximately 15% industry market share. It negotiates licensing deals and partnerships with digital music services like Spotify, Apple Music, and YouTube, ensuring independent labels and artists receive fair compensation and access to these platforms. Merlin's importance lies in its ability to level the playing field for independent music entities, allowing them to compete more effectively with major labels and securing a more equitable share of revenue from digital platforms.

Of course, the Majors wield their power against Big Tech to define the rules of the game for the entire industry, most notably, the lawsuit against Napster in 2000. More recently, Universal’s battle with TikTok highlighted the complexities of music licensing in the digital era, where platforms play a significant role in music discovery and promotion but must navigate agreements with music rights holders to ensure legal and fair use of copyrighted content. The latest is the lawsuit where major record companies are suing AI music generators, specifically Suno AI and Udio, for alleged mass infringement of copyright. The outcome of this lawsuit could have significant implications for the use of AI in music creation and distribution and it may clarify legal boundaries and responsibilities concerning AI-generated content and copyright compliance.

Will the indies join this fight? Perhaps a joint collective of Majors, “Inside-Out Majors”, and Independents combining their collective power might actually influence the intersection of technology, creativity, and intellectual property rights in the digital age as well as future developments in how AI technologies are regulated and used within the music industry. Whereas the majors may have acted unilaterally with Napster, they increasingly need independent allies to pull off these industry-shaping endeavors.

The indie spirit is crucial to keeping music diverse and vibrant, and it is essential for independent companies to collaborate and unify to safeguard the value of music and their indispensable role in the industry. By continuing to innovate and support their artists, independents can ensure that music remains a dynamic and inclusive cultural force.