by Peter Spellman, Director, Music Business Solutions

(Note: this article also apeared in the June '99 issue of Berklee Today Magazine).

The largest merger in recording industry history occurred late last year when the Dutch-owned Polygram Label Group was bought by Seagram's of Canada for a whopping $10.6 billion. Already an owner of Universal Music (Geffen, Dreamworks, Interscope), the acquired Polygram cachet included the labels A & M, Island, Motown, and Mercury among others.

As a result, the core record industry now boils down to five major conglomerates (BMG, EMI, SONY, WEA, and Universal Music Group), and that could be reduced to four if rumors of a buyout of EMI by BMG are substantiated. These five supply about 80% of all the music heard on the radio.

The shifting of tectonic plates caused by giant mergers inevitably results in upheaval and dislocation. Record companies A&M and Geffen have been folded into Interscope Records, a successful former indie operation in its own right, responsible for the rap stars Dr. Dre and Tupac Shakur, among others. Mercury and Motown (down from over 200 employees to 7) have virtually ceased to exist with any former autonomy gone. Numerous smaller labels are also on the chopping block on both coasts. When all is said and done Seagram will issue pinks slips to over 3,000 employees worldwide (including many middle managers and a number of executives) and let go of 300 artists by the end of this year.

What people fear most is that what remaining diversity and originality there is in popular music will be snuffed out for the sake of making easy, unchallenging money-spinners: in other words, more Take That and Spice Girls clones. Serious artists, some say, have already found it difficult over the past decade or so to hold on to their integrity and resist the pressure to over-commercialize. Others feel that in its drive for efficiencies and global markets, the music business is drifting away from its home base constituency of disaffected, affluent Western youth. Rock, they say, is endangered in corporate hands.

But before we start cursing the music-biz execs and their evil bean-counting accountants, consider this: The Universal/Polygram merger could actually turn out to be a good thing for contemporary music. "The good news is that it'll be like 1952 all over again," commented Billboard editor Timothy White in the wake of the merger. "People will take their severance packages and start little labels, just like when Ahmet Ertgun started Atlantic Records with a bunch of artists nobody else wanted."

Indeed, the indie sector of the music business is its fastest rising star. Empowered by affordable recording technologies and a hyperabundance of entrepreneurial resources, independent music companies are springing up like mushrooms in a moist field. Many of the most important developments in contemporary music, starting with the launch of rock 'n' roll, were the result of entrepreneurs at independent record companies taking chances on talents that were often thought of as being too far outside of the mainstream for the major labels to sign.

The fact that Seagram's Universal Music Group wants to sever ties with so many acts is a condemnation of the industry's tendency to sign talent so indiscriminately. The statistics on record sales are dismal. According to the Recording Industry Association of America, 9 out of 10 new record releases fail to recoup their production costs. Nine out of ten &endash; that's a mortality rate that would easily sink any other business. But because of the music's profit-to-cost ratios it's been allowed to exist. One hit fills the coffers fast.

Based on personal observations of Warner Bros. releases over a four month period, I noticed that the label averages 25-30 new releases per month. That's more than one per working day. There's little chance record company marketing departments can give more than scant attention to most of these records. There is simply not enough time nor people on staff to form a strategic plan and then effectively work that plan. Most new artist releases are given a generic marketing plan and thrown against the wall, while the label crosses its fingers hoping they stick.

Faced with this tough reality, the music industry is now downsizing into a more compact, cost-effective version of its former obese self. Big Mac-sized marketing campaigns are out (or, at least, not quite the priority they were) and "we-care-because-you-do" artist development is coming back in as the music industry wakes up to the fact that bands cannot live on hype alone. Perhaps the new Seagram regime will set an example of this new corporate attitude.

Most are unaware that Seagram chief Edgar Bronfman is an armchair songwriter who co-authored Celine Dion's , "To Love You More." It's hard to imagine Time Warner chief Gerald Levin or the head of Bertelsmann or Sony writing a song that would be played on the radio. "The music business is now going to be the most important business to us &endash; which it's not to most of the other companies that are running large entertainment businesses," said Bronfman to the Los Angeles Times earlier this year. "Seagram has corporate management that loves music, loves the music business and loves the creativity of the music business. I think that's a good place for a music company to be." We all hope so.

by Peter Spellman

Director of Career Development at Berklee College of Music, Boston, and author of The Self-Promoting Musician: Do-it-Yourself Strategies for Independent Music Success (Berklee Press). You can find him at Music Business Solutions.

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