A2IM at 10 gives a voice to indie labels

[This story was originally published by Music Week in February 2015]

by Emmanuel Legrand

 

Rich Bengloff is in Washington, DC for meetings with policy-makers. That's not his usual turf – he is based in New York – but paying visits to the country's capital has become a major part of his duties as President of A2IM, the not-for-profit trade body representing the independent music label's community in the United States.

For indie labels, as for the rest of the industry, spending time in DC has become part of the job description. A lot of issues central to the music business are being discussed there, but in addition to getting the voice of indies heard in the big copyright debate taking place at the moment, Bengloff is also in DC to knock on a few doors that can be useful to indies, such as the Department of Commerce and others.

A2IM's Rich Bengloff

“More and more gets done in Washington,” says Bengloff, who took the time to talk to Music Week in between two meetings on the Hill and a hearing on global international trade at the U.S. International Trade Commission agency. “In the last two years, the Copyright Office with Maria Pallante and Congressman Bob Goodlatte [see the past two issues of MW], have been instrumental in launching a revision of our copyright laws. We have been involved in it.”

Two label executives linked to A2IM – Darius van Arman from Secretly Group in Bloomington, Indiana and Tor Hansen of YepRoc/RedEye in Raleigh, NC – testified during the hearings organised by Goodlatte last June. “It was important that the voices of independent labels were heard because we have our own agenda,” asserts Bengloff.

Having its own agenda is indeed the whole point of A2IM. The organisation was created ten years ago by a handful of indie labels, echoing similar moves in other countries like the UK with AIM or France with UPFI. At the time it was felt that indies were not represented properly by the existing record labels' trade body the RIAA, whose agenda was in their eyes too close to the majors, especially in the context of market contraction.

“There's a misrepresentation as to who represents the music industry,” says Bengloff. “If you ask in DC, people will say it is the RIAA, so the reason I am spending more time here is to make sure that when RIAA speaks, it speaks on behalf of its constituents, but that they do not speak for the whole constituency. We have all our own agendas and we are respectful of our creative colleagues, and we respect the fact they represent their members. However, we feel very strongly that we need a bigger profile in DC.”

As a result, A2IM hired for the first time in 2014 a lobbyist, Seth Bloom, of Bloom Strategic Counsel. He is the former General Counsel of the U.S. Senate Antitrust Subcommittee, and has a vast experience on competition issues. “We got him on board last June,” explains Bengloff. “He helped us with the Copyright Office filings, and much more. On issues involving anti-trust and completion like the Universal-EMI transaction or YouTube issues, we deal with the Department of Justice and Federal Trade Commission. On issues like net neutrality, orphan works, radio access, etc we talk to and file comments with the FCC, FTC, CRB, etc.”

Bengloff adds that this is just the start of the organisation's presence in DC, as he plans to hire another lobbyist to focus more directly on members of Congress and to hire a lawyer to set up an office in town. “We want to make that members of Congress are educated as to who we are and what our needs are,” he says.This development would be financed through funds allocated to indies by Warner Music in the wake of the EMI acquisition. “We are optimistic that will get monies from these funds,” says Bengloff.

In terms of lobbying, Bengloff is convinced that A2IM has a trump card to play in that its members are scattered all over the country and not just based in New York, Los Angeles or Nashville. “We have 350 label members across the country, from Hawaii to Florida,” he says. A2IM strategy is to reach out to local and national representatives in the cities and states where its members are based, such as Merge Records in North Carolina, Kill Rock Stars in Portland, Oregon or Saddle Creek in Omaha, Nebraska. “Our message is that our members are all around the country and create local jobs,” says Bengloff. 

Another aspect that A2IM is starting to mine in DC is accessing different sources to fund export initiatives. Unlike many countries in Europe and elsewhere, the US music business does not have a dedicated export structure, and Bengloff took it as a main goal to find funding for his members.

“When I took the job in 2007,” recalls Bengloff, “I went to MIDEM and I saw all these national stands, representing countries, but there was no such thing in the US, but now we received funding to support our export trade initiatives from the U.S. [Department of] Commerce via the MDCP program run by Brad Hess, and they help us with trade mission coordination, and advise on IPR protection in markets like China. It helps our members pay up to half of their costs, and receive in return hundreds of thousands of dollars in export business. To have a viable business plan today, you have to have a viable export business plan.” A2IM also receives export initiatives funding from the Small Business Administration working with NY State and Tennessee.

Founded on July 4, 2005, A2IM is preparing for the celebrations of its tenth year, with a packed week of action in New York in May, during the Indie Week (June 22-26). In ten years, the market has changed dramatically. The recorded music business has consolidated with the merger of Sony and BMG and by the acquisition of EMI by Universal and Warner. Digital downloads that were once dominant have given way to streaming, while traditional retailers are disappearing. Radio is less dominant in breaking artists, and a lot of listeners have switched to digital services such as Pandora, Sirius/XM or Spotify.

Bengloff looks back at the past 10 years as a decade during which the indie community has made a difference. “Our organisation was founded to promote access, monetisation and equal treatment, and give as many services to our members as possible, via WIN or Merlin,” he says, referring to the Worldwide Independent Network, which is the global trade body for indies, and the global rights organization for the independent sector, respectively.

Bengloff says a lot of A2IM's inspiration comes from the work done in the UK, Europe and globally by Alison Wenham, the chief executive of AIM, and Martin Mills, founder of the Beggars Group and one of the most influential personality from the indie sector. “Full credit to Allison and Martin for making things happen,” Bengloff.

Similarly, he believes that the creation of Merlin to negotiate framework agreements with digital services on behalf of indies has been a major weapon at the service of indies. He praises Merlin CEO Charles Caldas and his team for making deals such as the one with YouTube for its Music Key subscription service, licensing hundreds of US independent labels in the process. The terms of the deal are confidential and have been marred with controversy, as YouTube threatened to remove indie videos from the service, while Merlin asked for better terms. Indies, says Bengloff, showed their strength during the negotiations, taking YouTube to task before the public and the media.

“All credit to Charles Caldas,” says Bengloff. “Merlin did the deal, negotiated the advances and the rates. For anti trust reasons, I cannot look at the contracts but I am happy with the deal. All I know is that when Charles and his team negotiate with services, they are treated as serious partners.” He discloses that in the wake of the YouTube battle, another service that Merlin was negotiating with and was being difficult, eventually backed down. “They did not want the bad press YouTube had,” he smiles.

Bengloff admits that indies have not been able to change the course of history and that the market has concentrated, from five to four and now three majors. “Having only three majors has worsened the market situation,” he says. “Concentration is bad in general, but it gives us more space.” Indeed, he points out that one of the side effects of having three majors rather than four or five is that the overall market share of indies has been at an all time high in 2014, with a 35,1% market share, the largest segment in the USA. “Our market share has increase by 10% since we existed, which means that the majors' share decreased from 75% to 65%,” he enthuses.

Part of the growth in market share is linked to the way trade magazine Billboard defines what is an indie label. In the past, the share of an indie label licensed to a major or distributed by a major would be added to the major's share. This is not longer the case, states Bengloff, so the real weigh of indies appears clearly. “Taylor Swift is on one of our members [Big Machine], and so are Mumford & Sons [Glassnote], Paul McCartney [Hear Music], or Arctic Monkeys [Domino],” he says.

The rise of indies can be witnessed in the number of nominations for this year's Grammy Awards. Independent music labels and artists secured 219 nominations out of 404 non-producer category nominations. In 15 of the categories, including Best Bluegrass Album, Best Blues Album, Best Folk Album and Best Historical Album, indies claimed 100% of the nominations.

For his members, Bengloff foresees a better but more complex future. “Consumers will decide how they will consume music and how they will pay for it,” he says. “People need to adjust. They now have to get revenues from 12 or 15 streams rather than selling CDs. By the way, some of my members who cater to more mature markets still sell a LOT of CDs. We want to be in touch with new media, old media, and make sure our members get a fair share from these businesses.”

For Bengloff, music licensing is the challenge of the next years, alongside copyright revision. He says he fully backs the 10-point “Digital Action Plan” launched by European indies' body Impala, the initiative aiming a improving the relationship between labels and services. “Some of the fundamentals are good,” he says, “and we would like to work with all the services that adopt those guidelines.”

As the discussions comes to an end, Bengloff is asked what were, according to him, A2IM's greatest achievements of the past decade. He responds, “We supplied our members with value, we provided a voice for our community with the feeling that it is a distinct entity, and we changed the perception of what independent companies stand for.” Bengloff makes a move to leave, then turns back and says with delight, “Oh, and we now have influence.”

A2IM Board Members:

The A2IM Board of Directors (as of July 4th, 2014 through July 3rd 2015)
Craig Balsam – Razor & Tie (Managing Director)
Glen Barros – Concord Music Group (President)
Cathy Bauer – SC Distribution (Head of Domestic Sales & Marketing)
Richard Burgess – Smithsonian Folkways Recordings (Director of Marketing)
Dave Hansen- Epitaph/Anti- (General Manager)
Louis Posen – Hopeless Records (Owner)
Scott Robinson – Dualtone Music Group (CEO/Co-Founder)
Portia Sabin – Kill Rock Stars (Owner/President)
Chris Scully – Glassnote Entertainment (GM/CFO)
Jim Selby – Ole (SVP, Digital)
Tom Silverman – Tommy Boy (Owner/CEO)

A2IM Advisory Committee:
Josh Berman – Warp Records (US Label Manager)
Denny Stilwell – Mack Avenue (President)
Garry West – Compass Records (Co-Founder)

WIN Representative:
Alan Galbraith – Wind-Up Records (General Manager)

Grooveshark grooves no more

By Emmanuel Legrand

This is the end of the road for infringing music service Grooveshark.

Parent company Escape Media, which had been found guilty of copyright infringement by a US court, entered into a consent judgment with a permanent injunction with Universal Music Group, Sony Music Entertainment and Warner Music Group.

As part of a legal settlement with the major record companies, Escape Media has agreed to terminate all operations at the infringing platform. Escape Media has also agreed to wipe its computer servers of all the record companies’ music, and surrendering ownership of its website, mobile apps and intellectual property.

Grooveshark's web site has been shut down and a notice to its users said: "Dear music fans. Today we are shutting down Grooveshark. We started out nearly ten years ago with the goal of helping fans share and discover music. But despite best of intentions, we made very serious mistakes. We failed to secure licenses from rights holders for the vast amount of music on the service. That was wrong. We apologize. Without reservation." 

It added, "If you love music and respect the artists, songwriters and everyone else who makes great music possible, use a licensed service that compensates artists and other rights holders." 

The statement also states that at the time of Grooveshark's launch, in 2006, "few music services provided the experience we wanted to offer ­and think you deserve." Tech news service Re/code argued instead that Grooveshark was never interested in licensing music from rights owners: "Contrary to the founders’ statement, paid streaming services were around for most of the company’s life, though until the last couple years they weren’t very popular. And Grooveshark wasn’t interested in a model where it licensed music and charged consumers to listen to it; instead, the company argued that it was operating something similar to YouTube, where users uploaded songs to their servers, without prompting from the company itself, which meant it could be protected by the Digital Millennium Copyright Act." 

Under terms of the settlement, Grooveshark founders Josh Greenberg and Sam Tarantino admitted to creating and operating an infringing music service and Escape Media agreed to significant financial penalties if the terms of the settlement are not followed.  In April, a US District Court judge ruled that Grooveshark could be liable to the maximum damage fine for copyright infringement.

In a statement, the Recording Industry Association of America (RIAA) said, “This is an important victory for artists and the entire music industry. For too long, Grooveshark built its business without properly compensating the artists, songwriters and everyone else who makes great music possible. This settlement ends a major source of infringing activity.”

Speaking to Music Week in March, RIAA Chairman and CEO Cary Sherman, said that record labels always questioned Grooveshark's willingness to secure licensing deals. "I don't have the impression that they ever were very serious about negotiating deals because our companies have been interested in monetising streaming services any way they could, so if they could not come to terms [with Grooveshark] there is a serious question as to whether they were serious in the first place," said Sherman, who noted that since the court decision in favour of record labels the site had experienced "a tremendous fall in traffic."