Merlin CEO: major labels are setting new music services up to fail

Merlin CEO Charles Caldas loves subscription music. But he is not so sure about some of the services slated to come to market early next year.

Merlin, a UK-based organization that represents the global digital rights of indie labels from more than 35 countries, is currently talking to Beats Music, Samsung and others about licensing its repertoire to their subscription services. However, Caldas told me that he may not be able to reach a deal with every new service. “There is a possibility that we will have to say no,” he said.

The dispute turns on much the new services are going to pay independent labels — and that’s something that largely depends on the deals music services strike with the majors. Caldas alleged during our conversation that major labels artificially inflate their digital market share by equating it with what they sell in the physical world.

That’s a misguided analogy, he argued, because shelf space at major retailers is limited, and dominated by major label releases. On music subscription services, those problems don’t exist, because shelf space is virtually unlimited. “It’s like a megastore of a 1000 doors,” Caldas said. Because of that, independent music does far better on Spotify than at Target. (s T)

However, Caldas alleged that major labels try to obfuscate this reality, demanding that new services pay them huge minimum guarantees — advances on royalties that have to be spent regardless of whether the music is actually consumed, or whether the service is even able to go to market. These demands are based on their physical goods market share, in turn not leaving enough money on the table for independent artists, he alleged.

Majors wouldn’t just harm independent labels with those tactics, but subscription music in general, because the result would be inferior services, set up to frustrate consumers and eventually fail. That’s not what Merlin has in mind, Caldas told me: “We want them to get it right.”

Image courtesy of Flickr user Abe Novy.