While the skirmish between independent labels and major label-owned distribution companies often seems like a case of two steps forward, one step back, a powerful collective of five independent labels have secured a victory over the majors in a battle concerning digital distribution rights.
As Billboard reports, the Independent Distribution Cooperative — consisting of indies Beggars Group, Secretly Label Group, Domino, Merge, and Saddle Creek — have reached an agreement with Warner Music Group’s Alternative Distribution Alliance to keep their digital distribution rights.
The unique arrangement that the group — whose roster of acts like Arctic Monkeys, Bon Iver, and Arcade Fire Billboard estimate were worth approximately US$45 million in sales in 2013 — struck with the ADA is a considerable blow to the current business model of major label-owned distributors.
In fact, one senior executive at an ADA rival has called the arrangement his “biggest nightmare,” and the IDC’s deal is poised to set a precedent that other indies may follow. The arrangement, as Billboard explains, has to do with the a separation of digital rights from physical copy rights.
The major labels’ distribution companies like ADA and Sony-owned RED typically demand exclusive rights to sell a label’s artists in both physical and digital outlets because, they argue, combining the efforts creates a more efficient market, and the fact that it’s highly lucrative doesn’t hurt either.
In exchange for their services, the majors typically claim fees of 10 to 12 percent of digital sales and 12 to 24 percent of physical. The IDC’s new ownership of digital rights will mean a loss of millions to the ADA, who say that the “short-term win” means compromising how records are delivered.
But independent label heads are adamant that the benefits of keeping physical and digital sales packaged are overestimated, while acknowledging that services provided by the major label distributors, such as marketing, radio promotion, and retail account management, are valuable.