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CONSOLIDATION & FRAGMENTATION:
WILL MONOPOLY IN THE MUSIC BUSINESS
MEAN BOOM TIME FOR THE INDEPENDENTS?

da Flower Punk - Feb. 10, 1999
<flowerpunk@pauserecord.com>

They called it Black Thursday in Los Angeles. One day last month some 500 employees of labels like A&M and Geffen were given to the end of the day to pack their offices and get out. Fired. Unemployed. See you later. It was the first wave of 1200 jobs that would be cut in the music industry in the U.S., and over 3000 worldwide, this year.

Hundreds of artists were similarly affected when they were either dropped from their labels or had their labels decline to renew their options.

It happened when Seagrams bought Polygram.

Seagrams already owned the Universal Music Group, and by adding Polygram and its subsidiaries (Mercury and Capricorn, for example) to the labels already under its corporate umbrella, Seagrams now controls about 25% of all US CD sales. Considering this is a $12 billion industry, that is no small piece of change.

But the profits comes at a price. By consolidating the two mega- corporations, Seagrams hopes to save some $300 million this year. To do so without lawsuits, however, they will be paying out $150- $200 million dollars. Does this really make sense? The Wall Street financiers of the merger seem to think so.

In the 1940s Teodoro Adorno warned of the dangers of monopoly in the music industry. Given the industry's ties to the radio business, everything starts to sound the same, Adorno argued. At the time he wrote, there were something like 48 major record labels in the U.S. Today, following the absorption of Polygram and Universal by Seagrams, there are only five major record labels in the world.

With all of those artists and other record industry types suddenly out of work, it might seem like a bad time for anyone to be in the music business except those few people who actually sell over 250,000 units at a time. The major labels love them. With all that pressure from the Wall Street financiers demanding short-term profits every quarter, there is little incentive for major labels to take on acts they would have to nurture for a few albums before they have a chance of reaching those kinds of numbers.

But the flip side of consolidation is always fragmentation. With less opportunity in the major labels, it may well be a boom time for independent record labels to flourish again.

The music business seems to go through these phases quite regularly, especially when musical innovation outstrips corporate vision. The larger the corporation, the more conservative it tends to become. The more conservative they become, the greater the openings for start-ups and independents to thrive.

So it is easy to believe that with all those artists who are aware of just how out of reach a major label contract is becoming -- and how constricting such contracts can be when for those who actually get them -- that they will look to independent labels rather than the majors. And with all those music industry professionals suddenly out of work, it is easy to imagine that some of them will found labels, and bring strength and experience to already extant ones.

Consolidation and monopolization of the five majors -- which might actually soon be four if Sony or Time-Warner buys BMG, as many have suggested is next -- might actually be a good thing for the independents.

With the ever increasing ease and quality which CDs can be created for little money, and with internet music forums and technologies like MP3 becoming ever more popular, the majors themselves might just be becoming increasingly irrelevant. We might see more quality acts joining and/or forming independent labels while the majors consolidate themselves right into their weakest position ever.

_________________________flowerpunkprods________________________ da Flower Punk is a freek, a historian, and a music journalist based in Berkeley, Ca. For more his musings on music and the world, check out PauseRecord.Com by clicking on <http://pauserecord.com>.