Original URL: http://www.theregister.co.uk/2008/01/18/ioda_letter/
Digital deals screwing the indie labels?
Stick together, advises IODA chief
Must the digital music revolution screw the little guy? Kevin Arnold, founder of major digital distributor IODA, thinks not. Arnold issued a warning for labels not to do direct deals with internet companies that can't or won't pay them - or only pay them peanuts.
IODA supplies iTunes and Rhapsody with a catalog of thousands of small labels - but it's the streaming upstarts such as Imeem and LaLa that are causing concern.
Arnold says indies only get 25 per cent of the revenue a major may get, and to get a fairer rate means sticking together and negotiating as one.
LaLa began life as a CD exchange, while Imeem started out as a web-based chat service. But both have recently announced their intention to stream full MP3s. LaLa says it will pay for the music through advertising, but has set a ceiling on how much the labels get paid.
"Please remember that it is the collective bargaining power of the entire IODA catalog that gives us the ability to negotiate better deals that benefit all of us. A single label, even one with thousands of titles, cannot match what we can accomplish together, representing more than a million tracks of independent music," he wrote in a letter to labels this week.
"Additionally, remember that IODA's success correlates directly with that of our labels - we do well only when you do well. Retailers like these will not have your financial best interests at heart in the same way."
With the closure of Pandora UK, it's a red hot topic. Pandora founder Tim Westergren blamed the decision on high rates set by the recordings and publishing rights owners.
But Paul Sanders pointed out that Pandora had refused to sign more favourable deals.
And some Reg readers describe the Pandora stance as corporate welfare: the company gave up subscription revenue and doesn't try hard enough to make a go of the business, they reckon. ®