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Drama Hits MySpace Music: Why Are Indies So Mad?

Thursday, September 25, 2008
by  presnikoff

As MySpace unwraps its ambitious music initiative, a number of independents are rattling the cage.  That includes consortia Merlin and A2IM, both vocal opponents of a joint venture partnership structure that excludes independent labels.

MySpace is actively negotiating with the independents, and planning catalog additions as part of an iterative launch structure.  But equity stakes are not part of the bargain, a serious sticking point for the groups.  "All we are looking for is fair and equitable treatment for the independent label constituencies and the artists they invest in," A2IM president Rich Bengloff told Digital Music News on Thursday.  A2IM, or the American Association of Independent Music, includes independent labels Tommy Boy, Concord Music Group, Alligator Records, and Definitive Jux.

But why all the noise for equity, especially for less mainstream acts?  The counterargument is that MySpace appeals to a more pop-oriented audience, evidenced by marquee launch placements for the Jonas Brothers and Lil Wayne.  On that point, Bengloff pointed to a more nuanced terrain, and noted that many independent artists have broader appeal.  "When you go down the charts, there are still a lot of independent artists represented," Bengloff said.  That is part of a broader independent community that accounts for more than 30 percent of total sales, according to calculations offered by Bengloff. 

But what happens if MySpace simply says no to an equity deal?  Merlin is certainly toeing the line.  "What is absolutely clear is that any independent deal struck without an equity component... will see independent labels face a situation whereby their major competitors will profit from the use of their repertoire without an appropriate upside opportunity," Merlin chief executive Charles Caldas explained.  "Without an equitable participation by independents, that creates a situation that is both unhealthy and dangerous."

Is that approach too extreme?  The Orchard chief Greg Scholl has already licensed a catalog of 1.3 million to the venture, despite the lack of an equity stake.  " It's a little bit of a red herring when compared to getting fair rates on advertising," Scholl told Digital Music News earlier this week.  Scholl may have negotiated stronger advertising percentages in light of the equity issue, though dealmakers have not revealed specific rates.  Additionally, Scholl indicated that greater emphasis should be placed upon liquidation events like a dividend payout, sale, or IPO. 

Others are also approaching the matter with greater flexibility, including Kevin Arnold, founder and chief executive of IODA (Independent Online Distribution Alliance).  Arnold noted that MySpace negotiations are currently ongoing, but seemed less attached to an equity stake.  "We're hoping to make a deal that will make money for our clients," Arnold flatly stated.  "Equity is not out of the question for us, but there are other things like real potential for short-term revenue that are more attractive."

Meanwhile, MySpace offered a rather vague statement that seemed to sidestep the equity concern.  "We have offered a relationship with Merlin that provides equal opportunities to Merlin's labels and Merlin's artists that we have provided to ALL labels and artists whether they are indie artists, major artists or unsigned artists," the company stated in an email. 

And so the debate continues.



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