Saturday, May 26, 2007

And then there were three.

EMI was bought by Terra Firma, an investment firm. Surprisingly, the story was buried in the business sections of most papers. One would think that when the number of companies that control an industry are reduced from four to three it would be major news.

Look for consolidation in the near future with Warner Music, which may use the "back door" approach to purchase EMI. When it was one record company buying another, anti-trust regulations kicked in. But a record label purchasing from an unrelated business is something else again.

The real story here, though, is the loss of even more music. Warner, EMI, Universal and Sony/BMG got to where they are by buying up smaller independent labels. And the same scenario was played out time and again. The major label bought the indie primarily for their top artists. Once the deal was done, most of the roster was dropped, and the bottom two-thirds of the catalog was allowed to go out of print.

As the majors continued to gobble up labels, this trash compacter effect grew. There are many albums and artists that were on Columbia, Asylum, Angel and Bluenote that have never been reissued.

The reason has to do with the economies of scale. An independent label's reissue can turn a profit even if it only sells 1,000 units if its marketed properly. Indie labels usually have close connections with their specialty markets, and can effectively get the word out.

For a major label, reissue of less than 10,000 units is simply not cost-effective. Majors are happy for third-party reissue labels to license their material for re-release, as long as they pony up the cash for that minimum run of 10,000 units (I'm speaking from personal experience here).

Every buyout prompts a round of artists being dropped and titles disappearing. Should Warner buy EMI, expect not only some EMI artists to get the ax, but some Warner artists as well. And even more music from both giants will disappear. And the sad thing is, nothing about this has to do with the music itself -- its all economics.

- Ralph

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