Indies, Major Labels Tune In to a New Act

Chris Lombardi started Matador Records in 1989 with dreams of revolution.

He and partner Gerard Cosloy were galvanized by a belief that large record companies were destroying the industry with uninspired music. So the two men set out to spark a guerrilla war by launching independent bands that blended artistic freedom with sales numbers that the big labels would envy.

But today not only has Matador declared a truce with its onetime foes, it also is in business with one of the largest: Warner Music Group. Last year, the New York label scored its biggest debut when Interpol’s “Antics” exploded onto the charts thanks to a distribution deal with a Warner unit.

“I still think the major labels will betray a band for a dollar,” Lombardi said. “But today everything is changed. Matador needs the major labels. We’d never have a bestselling album if we didn’t have this partnership.”

Warner’s involvement goes beyond getting Interpol’s CD onto store racks. The recording industry’s third-largest company helped implement Interpol’s promotional campaign, schedule the band’s in-store performances and plan where the album was sold. For its efforts, Warner gets almost $2 for every CD sold.

Relations between major music companies and the independent labels that often launch careers have been tense since the earliest days of rock.

When Elvis Presley abandoned Sun Records for RCA in 1955, the industry giant tried to hide the singer’s raw musical roots to avoid the stigma associated with independent labels. After the punk band Green Day left Berkeley-based Lookout Records for Warner-owned Reprise Records in 1994, fans burned the group’s records in protest and accused its members of selling out.

But beginning a decade ago, economic necessity began patching up old rifts as music migrated from the corner record store to mass merchandisers such as Best Buy Co., Target Corp. and Wal-Mart Stores Inc. Accustomed to dealing only with large distributors, the big retailers were reluctant to negotiate with the thousands of independent labels hoping for shelf space.

The result is that today partnerships between independent and major labels are almost mandatory. Warner Music created a unit called the Alternative Distribution Alliance in the mid-1990s to distribute cassette tapes and CDs. The unit, which has the connections to negotiate with retailers that otherwise might not even take an independent’s calls, charges a distribution fee of as much as 25% of an album’s wholesale price for the service. That opportunity for new revenue has enticed the three other major record companies -- Universal Music Group, EMI Group and Sony BMG Music Entertainment -- to start similar units.

For the major labels, hooking up with an independent provides not only money but also a scouting system to discover tomorrow’s stars.

“There was a time, not too long ago, that making a great record required a studio and a team of professionals,” said Monte Lipman, president of Universal Records, one of the nation’s largest music labels. “Now one guy can go into someone’s bedroom with a computer and produce a bestseller. Indies are the research and development laboratories of the music industry.”

To keep its independent aura, the Alternative Distribution Alliance, also known as ADA, doesn’t mention Warner Music anywhere on its website and promotes itself as a one-stop shop for independent labels.

However, behind the scenes, the leverage of a big label is at work. When Matador began planning the release of “Antics,” the label’s staff contacted the Warner unit’s 25 national sales representatives to discuss how to advertise the band.

“ADA knows places like Kansas City in ways we never could,” said Matador General Manager Patrick Amory. “We don’t have the manpower to maintain relationships in every market. When Interpol did in-store performances, we needed ADA’s people to make sure the advertisements were running, the posters were up and there were enough records in the racks.”

The efforts worked: “Antics” has sold about 354,000 copies domestically, debuting at No. 15 on the Billboard bestseller chart. Other recent top-selling independent releases include albums from Arcade Fire and Bright Eyes, both distributed by the Warner unit, and Taking Back Sunday, affiliated with Sony BMG’s Red Distribution.

The alliance’s executives said independent labels could never achieve those levels of exposure and sales without the knowledge and relationships a major label brings.

“We know how different stores catalog different genres, we know which Best Buy executive likes what kinds of music,” said alliance President Andy Allen. “Having a lot of employees only makes sense if you release a lot of albums. So we amalgamate independents under one roof and give them relationships they could never afford on their own.”

The alliance also can handle mass merchandiser demands that smaller independents can’t. Companies such as Best Buy, which accounts for 15% of the nation’s music sales, require distributors to deliver CDs packaged according to specific guidelines and to stock large amounts of inventory in case an album is a fast seller.

“Before ADA, distribution was the Wild West,” Allen said. “Companies would delay each other’s shipments, people got into fistfights over who supplied particular stores. It could take months just to send out a bill. Warner Music had a working infrastructure, and we built around that.”

But the partnerships, though they benefit both independent and major labels, exacerbate old tensions, notably those stemming from big companies’ poaching suddenly hot bands.

“We rely on the indies to be the minor leagues for our major league teams,” said Lipman of Universal Records. “The indies find markets we didn’t even know existed, and then we can take the bands and make them huge.”

For a company such as Matador, that means doing business with a partner that might steal its best acts. Matador developed singer Liz Phair in the early 1990s, only to see her move on to music’s big leagues after she became a bestselling artist.

Interpol’s contract with Matador expired with “Antics.” Major labels affiliated with every company, including Warner and Universal, are wooing the band. Matador’s payroll of 25 employees is paltry compared with the 4,000 at Warner, whose revenue in two days exceeds the $10 million Matador collects annually. Interpol’s members and its manager declined to comment on the band’s plans.

But Matador isn’t admitting defeat; it’s already plotting how to sell Interpol’s next album. Lombardi bristles when majors portray independents as farm teams. Despite being the underdog, he hopes to convince Interpol that a major label won’t give it the personal touch and creative freedom that he can provide.

“Calling us a minor league team is infuriating,” Lombardi said. “That’s the attitude that is ruining music. We’re the ones who break the band, who actually care about them and their music and make their vision become real. We’re the only ones who won’t betray them for a dollar. If we’re the minor league, then the majors should be torn apart.”