Darius Van Arman: Majors ‘too often abuse their scale advantage’

Darius Van Arman, co-owner and co-founder of Secretly Group, has warned that true competition cannot exist in the world of record labels when the major companies unjustly leverage scale to their advantage.

The exec’s comments came at the pre-Grammy Entertainment Law Initiative lunch in Los Angeles on Friday (February 12) and echoed much of a speech from his peer, Beggars Group boss Martin Mills.

Like Mills, Van Arman called for majors (and other indies) to offer artists “fair and equitable trading terms and transparent accounting” in order to create a healthily competitive music business.

He also lambasted recent attempts by Universal and Sony to win a preferable webcasting royalty rate in the US.

Van Arman founded Jagjaguwar in Charlottesville, Virginia in 1996. Since then, he has become co-owner of Secretly Group, which includes the Secretly Canadian and Jagjaguwar labels plus Dead Oceans and The Numero Group – which between them have broken artists such as Bon Iver, The War On Drugs, ANOHNI, Major Lazer, Dinosaur Jr. and Syl Johnson.

Van Arman currently serves as chairman of the board of directors of A2IM (the U.S. independent label trade organization), on the board of directors of SoundExchange, on the board of directors of Merlin (the international digital licensing agency serving the independent sector), and as founding council member of the Worldwide Independent Network.

You can read his full speech from the Law Initiative Lunch below…

Thank you, Entertainment Law Initiative, for this opportunity to share my independent perspective.

So what makes an “independent”? Is there a definition of “independent” that not only works within the music industry context, but which can be more generally applied to all industries?

I will start off by sharing with you some of the many ways that I have heard others describe indies. So I am not misunderstood, I don’t believe these are good or adequate descriptions. They are just the stereotypes I hear often.

  • Indies are “cool”, “underground”, “experimental” or “arty”.
  • Indies are not commercially ambitious, and they prefer to remain small or “craft” in size or approach.
  • Indies are focused on niche products or genres, and they would much rather challenge the mainstream than bask within it.
  • Indies are local, self-owned and have limited finances.
  • Indies reject corporate approaches in favor of being on the cutting edge of market tastes and trends.
  • Indies are anyone and anything that are not “major” and that have small market share.

I believe these descriptions fall short. All together, they don’t come close to painting a full or accurate picture of our community. For example, there are many independents who are commercially ambitious, who operate on a large scale, and who are making significant waves within mainstream markets.

There are also independent companies like my own, that started off locally-oriented and small in size, but that are now working with international artists and releasing gold and platinum records around the world. A company cannot be independent one moment, then — merely because they find success in the marketplace — lose that independent designation, if the principles guiding them have not changed.

So, in the end, these descriptions are just stereotypes, and they are not very helpful towards defining us as independents.

There is, however, an alternative approach to defining us, and it starts by looking at how independents approach the marketplace. And when you examine that, a very simple definition emerges, which I believe applies to all independents. It is as follows:

You are independent if you are pro-competitive.

I’ll repeat: You are independent if you promote competition in the marketplace.

Everything else that the indies are about flows from this simple definition. If you are comfortable with competition, then you support open systems and transparency. You also support the idea that all of us should be competing on a level playing field.

And you support the independence of others —even the independence of your direct competitors — because their independence protects and sustains your independence. Their independence also makes you richer. A diversity of competitors in the marketplace leads to better products for consumers, which leads to the growth of our industry, which breeds more opportunities for all of us.

And if you are comfortable with competition, you embrace the free market, and all of its risks and rewards.

But when I say the free market, I mean the pro-competitive free market. Not the one we find ourselves in now, saddled by market concentration, where the biggest companies too often abuse their scale advantage.

The pro-competitive free market is not rigged and doesn’t play favorites, nor does it promise an equality of outcomes. It only provides an equality of opportunity.

So independents are pro-competitive. Simple as that.

What is useful about this definition is that it transcends the music industry. Think about how craft beer companies are a thriving, independent force within the beverage industry. It is also an inclusive definition. Any entity — even the biggest players such as the major recording companies — can choose to behave in the right way and become part of the independent movement, strange as that might sound.

And, in the music industry context, why would anyone not want to embrace the independent approach? If you look at how the indies are doing right now in the marketplace, we’re flourishing. We’re creating jobs and innovating. We are the very enterprises behind the biggest records in the world right now.

Our pro-competitive approach to the market, and our commitment to open systems and transparency that comes with it, is a mighty engine of value. Please, music industry, follow our lead!

And if you are willing to follow us, I will leave for you a friendly breadcrumb trail to our independent campfire.

  • First, embrace that the end goal of healthy competition in the marketplace is bringing better products and better services — more brilliant music, more inspiring performers, more culturally impactful releases — to consumers. This end goal fails when any company is allowed to dominate or control its competitors or its trading partners.
  • Second, treat the creative community fairly. You cannot be independent if you’re working to keep the artists you partner with from becoming independent or self-sufficient. Our industry is built on top of creative works, made by human creators. They deserve fair and equitable trading terms and transparent accounting. They also deserve their fair share of revenues and other compensation — including equity stakes from digital services. We need to adopt and support laws and systems that make it harder for companies of any size not to do the right thing.
  • Third, stop selectively applying free market principles. You can’t argue “free market this, free market that, just give us the free market”, but then work to create artificial and anti-competitive advantages just for yourself. For example, going to government or the copyright royalty board to set multiple statutory rates, a better rate for yourself and a lower rate for everyone else, is simply anti-competitive behavior no matter how you justify it. It is the antithesis of a free market approach. Doing something like this is called being a Two Face Harvey. Two Face Harvey is neither free market or independent, he’s just confused. And he’s not going to last very long. (He doesn’t in that Batman movie.)

And finally, if you are still lost in the woods, perhaps hopelessly entangled in all the complexities that the music industry has to offer, please resort to the following principle as your final guide:

To find your independence, contribute to the independence of all others.

Thank you.Music Business Worldwide

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