“The Irony of the Indies”

Highlights of a study by Stanley Aronowtiz and Michael Roberts

Volume CI, No. 10October, 2001

Stanley Aronowitz and Michael Roberts

Below are the highlights of the study “The Irony of the Indies: Post-Fordist and Post-Industrial Production Patterns in the Recording Industry,” by Stanley Aronowitz and Michael Roberts for Local 802. For more background, click here.

There is a commonly held notion in the record industry – much the same as in the film industry – that the most creative artistic work takes place at the margins of the industry, a place occupied by relatively small production companies which are understood to be separate from the larger companies. It is the role of small, “independent” record companies to provide the entertainment industry with a new, cutting-edge aesthetic. Together, these smaller record labels are known as the “indies” (industry short-hand for independents), and it is widely held that they, unlike the “Big Five” record labels (also known as the “majors”), are able to produce novel sounds and interesting music because they are free from the marketing juggernaut that propels the music produced by the majors.

In short, the “majors” produce records to sell, and they will stay with whatever formula sells – usually a formalistically simple pop song – until it stops selling. As a result, the corporate machine known as the majors cannot deliver an adequate diversity of sounds, only a homogenized, prepackaged product. The indies, on the other hand, are staffed with “legitimate” artists who care about the artistic quality of their product rather than its “exchange value,” or its widespread appeal to a mass audience of mostly teenage consumers.

Consequently, the indies are seen as a collective form of resistance to the corporate regime that dominates the record industry, and the entertainment industry as a whole. The indies, so the story goes, represent a collective refusal to “sell out,” a refusal to allow the marketing wizards of the corporate establishment to reduce their art to mass-produced commodities void of any legitimate aesthetic value.

It has also been pointed out that much of the content of indie records (CDs) is an explicit critique of the cultural/economic status quo in the U.S. You don’t have to look far to find an indie record that criticizes the racist, sexist, capitalist establishment in the United States. If indie record labels do become popular and begin to sell lots of CDs, as is the case with punk and grunge rock as well as with rap, hip-hop music and, to a lesser extent, blues and jazz, then it is seen as a fortunate turn of events that the mass audience has developed an ear for “good” “alternative” music.

Nevertheless, there remains a certain irony about the indies…because it is precisely the group of labels that are considered to be “radical” or “outside the establishment” that play an integral role in the corporate strategy to outsource production. In short, the majors are using the indies as subcontractors to cut back on production costs, principally labor costs – a strategy that mimics a widespread pattern of farming out production, a strategy that cuts across almost every industry in the United States.

Just as in other industries, most of the subcontracting companies in the recording industry use non-union workers – in this case, musicians – and just as in other industries, subcontracting companies in the recording industry do not honor terms and conditions required by the union’s labor contract. The indies are in many cases silent partners in the corporate assault on union labor – in this case the musicians’ union, the American Federation of Musicians.

In addition to creating the conditions for the erosion or reduction of pay scales for professional musicians, the increasing use of the indies by the majors is draining money from two of the union’s funds, the Music Performance Trust Fund and the Special Payments Fund. In other industries, it’s clear that corporate subcontracting and outsourcing is an assault on organized, union labor. In the record industry [this] is more difficult to see, because not only is it difficult to find out just how indie labels are connected to the majors, but the collective representation of the indies as anti-establishment blurs their role as non-union subcontractors.

[At the point of consumption, it may seem like the “independent” record labels are part of an anti-corporate, anti-establishment project, but at the point of production, the indies are indirectly part of a reactionary, “pro-establishment” project, because it is often the case that the indies provide the majors with opportunities to use non-union labor, a phenomenon widely known as “union avoidance.”]


Post-industrialism and post-Fordism refer to overlapping trends in the new economy. In both cases, the new economy presents challenges to organized labor, because formerly in-house union work in all sectors of the economy has been increasingly farmed out by corporations to subcontractors who use non-union labor. Corporate euphemisms like “downsizing” refer to the phenomenon of cutting down on the company labor force and contracting with smaller, non-union firms to do work that was previously done by the contracting company. The popular term for this phenomenon is “outsourcing.”

The massive loss of blue collar jobs as a result of outsourcing and automation has resulted in a nationwide occupational shift toward service-sector work, where jobs are less likely to be union jobs and more likely to be part-time, contingent and [to] pay lower wages. Industrial production has become a global assembly line, where corporations continually farm out production work to areas outside the U.S. where labor is cheap. Meanwhile, the corporations concentrate their power by creating new ownership patterns through mega-mergers of giant companies.

While social scientists, and media personalities have focused much attention on the negative effects of these new economic arrangements – such as declining wages, loss of job security and shrinking union density – in the blue-collar, manufacturing sector, little attention has been given to the entertainment industry, and the recording industry in particular. Upon closer analysis, [it is apparent that] the mega-corporations that dominate the recording industry – Time Warner/AOL, Bertlesmann AG, the Seagram Company, SONY and EMD – have followed the lead of corporations in other industries in a general pursuit of the post-industrial, anti-union economic agenda.

The growing market share of indie record labels represents a kind of outsourcing of production, which is the most recent phase of vertical disintegration of the major record labels, conditions that signal a shift to a post-Fordist pattern of production. What is novel in this arrangement is that increasing vertical disintegration coincides with increasing corporate power. Production in the new economy has become more and more dispersed, even as the numbers of companies that dominate the economy become fewer and fewer.

In the “new” economy, concentration of corporate power and corporate hegemony over the economy is achieved through the monopolistic control of distribution and information systems, and through the manipulation of finance capital and the establishment of new ownership patterns via mergers and joint ventures. Direct control over the means of production is no longer the key element in corporate power as it was in the 19th and 20th century industrial capitalist regimes of accumulation. Unlike the industrial capitalist regime, where corporations sought to directly own and control the means of production, in the “post-Fordist” regime, production is dispersed among various smaller companies, who serve as subcontractors as the mega-corporations lock up control over distribution. What seems odd in this new arrangement is that the further the corporations move away from production, the more concentrated their power over the economy becomes.


In the recording industry, the growing number of joint ventures, pressing and distribution deals, equity deals, production company contracts, and distribution deals between indie and major labels and between indie and major distributors, is a good example of the increasing industry control and concentration of power among a small number of corporations at the top, coupled with dispersed production among many smaller “indie” record labels at the bottom of the industry.

In short, the increasing market share of indies translates into the decreasing bargaining power of professional musicians and their organization. These new arrangements present the musicians’ union, the American Federation of Musicians, with the most recent set of problems in a long history of struggle with the major record labels.

In the recording industry, the union most affected by the structural transition to post-industrial production patterns is the American Federation Musicians. Although the AFM was once a dominant union with a well-known, charismatic president in James C. Petrillo, few people in the industry – including famous royalty artists who are, themselves, represented by the union – know much about the union. Usually, when we hear about labor-management issues in the recording industry, the story we hear is about a contract dispute between members of a popular band and the label that signed them.

It is widely understood by industry insiders that the structure of recording contracts makes it very difficult for royalty artists to earn any income from the sales of CDs. In a typical “major label” recording deal, royalty artists don’t make a dime until their album sells over 500,000 units, because they have to repay the record company – out of royalties they make from the sale of their album – for all their recording costs. This process is referred to as recoupment. Since the sales of most records never reach that mark, the number of musicians making a living off royalties is a relatively small number.

While royalty artists like ‘NSYNC do sign individual recording contracts with record labels, they nonetheless remain represented by the AFM because all session musicians – the side musicians and the royalty artists who participate in recording sessions for a major record label – are covered by union protections and guidelines set up by the AFM. Most consumers of music and many musical artists don’t know that a union exists to represent the interests of musicians in the U.S. and Canada.


In a similar fashion to corporations in other industries, the major recording companies have undergone significant vertical disintegration while at the same time taking over control of the industry. They have not only downsized their own administrative staffs and reduced the rosters of acts on their labels and their subsidiaries, but they have also outsourced production, farming it out to subsidiary labels, partially-owned labels and production companies.

In other cases the majors have increased the number of pressing and distribution agreements with “indie” labels, and more recently the majors have fully or partially purchased independent distribution companies to get control of new markets, such as Sony’s partial acquisition of RED distribution and Time Warner’s partial acquisition of ADA distribution. In short, the majors control the industry through control of distribution rather than the traditional practice of monopolistic control via vertical integration of production, distribution and marketing. In all of these cases, the consequence is an increasing market share of nonsignatory labels.

It was [in] the period beginning in the early 1970s that the structure of the recording industry began to change, as the majors began to focus more on distribution arrangements rather than production variables. This was the beginning of a new “open” system of production that replaced the older “closed” system of production. The majors began to disperse the recording process among various subsidiaries and increased the number of distribution agreements with labels in their outer orbits.

While production was more dispersed beginning in the ’70s, the production companies were still identical with subsidiary labels. In other words, the majors had yet to subcontract production to separate companies. A subsidiary of RCA, like Arista, [would] use the services of independent producers, but the production of the sound recording remain[ed] a product of the Arista label. In the second wave of mergers, however, the majors changed their strategy of wholly purchasing labels to a new strategy of partial purchase, joint venture or distribution deal. The new trend of joint ventures, beginning in the early 1990s, is the maturation of the post-industrial model, because the production of the sound recording is farmed out to companies partially owned or not owned at all.

Today, unlike a few decades ago, where the majors competed directly with the indies and absorbed them when they became successful, the majors cooperate with the “independent” labels, and rather than buy them out, the majors pursue “joint ventures” or equity deals, partial ownership, and distribution deals with independent labels.

These kinds of arrangements indicate union avoidance, because according to labor law in the recording industry, if an “indie” label is less than half owned by a major, then the major is not responsible for enforcing the terms of the Phonograph Record Labor Agreement and the Phonograph Record Trust Agreement, which are the two contracts that the AFM uses to regulate working conditions in the entire industry. Most of the equity deals are structured so that the major owns less than half of the indie label.

Similarly, if a major label distributes a non-union, nonsignatory label, it is not required to enforce the terms of the Phonograph Record Labor Agreement. In the past few decades, as the majors were absorbed into huge multinational corporations like SONY, the Seagram Company, Bertelsmann AG, EMI Group PLC, and Time Warner, they simultaneously developed novel production and distribution arrangements with a growing number of “independent” labels, labels that were garnering increasing shares of the market due to the popularity of rap/hip-hop and alternative rock. There was, in short, a concentration of power in the industry at the top, through corporate mergers and increasing control over distribution, while at the bottom there developed novel relationships with indie labels that signaled a kind of vertical disintegration.

The main issue for the AFM is how much of the market share represented by the indies is non-union. How many of the successful indies are nonsignatory labels, and what is their connection to the majors? How much money is the union losing to the Special Payments Fund as a result of the growing market share of nonsignatory labels? How many musicians are working at these indies for wages under scale set by the AFM?


To put all of this in [understandable] terms, we have outlined five types of arrangements between majors and indies that represent a kind of post-industrial pattern that, potentially, threatens to undermine the presence of the union through increasing sales of non-union, or non-signatory records.

First, the major label will create a spin-off label and send it through both the major and independent distribution networks, with the new label referring to itself as an indie, even though the imprint label is entirely owned by the major. Sony’s new label “550” (Celine Dion) is an example. In most of these cases, the spin-off or imprint is a signatory, or union, label and remains true to guidelines established by the AFM.

Second, a major label will buy part or half of an already existing successful indie label, but without sending the records through the major distribution channels – but rather exclusively through independent distribution networks. Warner Bros. 50 percent purchase of Tommy Boy (Coolio, De La Soul) is an example of this kind of arrangement, known as an “equity deal.”

The third arrangement is a different kind of equity deal, where a major will buy half or part of an indie and send the records through the major distribution network. The relationship between BMG and Zomba (Backstreet Boys, ‘NSYNC, Britney Spears, R. Kelly, Tribe Called Quest, Mystikal, Too Short, KRS-ONE) fits this model.

Fourth, a major label will purchase all or half of an existing indie distribution company to get access to the indie marketplace, through the smaller retail outlets. Sony’s purchase of RED distribution, EMD’s interest in Caroline Distribution and Warner’s partial purchase of ADA distribution serve as examples of this trend.

Fifth, a major will launch its own “indie” distribution arm rather than make an equity deal with an already existing distribution company.

Some of the kinds of deals listed above are referred to as “joint ventures,” a growing trend in the industry. In the last three cases, the majors end up distributing a significant number of nonsignatory labels. It is a confusing landscape to map because a label, by definition, is considered an “independent” label if it is distributed through independent networks rather than by the majors. A label can be partially owned by a major and get larger amounts of capital investment, but still be considered an indie if it isn’t distributed by the major.


The industry is controlled by the entities that control distribution. The indies began to garner significant percentages of the market in the early ’90s and, since 1996, they have held fourth, third and second places, consistently taking over 16 percent of the market. Some of the most important indie labels were formed in the early ’80s, including Jive (part of the Zomba group of labels), Priority, Profile, Tommy Boy (Rap labels), TVT, Roadrunner, Mammoth, Restless, Relativity, Sub-Pop (alternative post-punk labels), Rykodisc and Big Beat. Many of these labels have remained independent, despite licensing deals and takeover bids by the majors.

For the year 2000, independent labels accounted for 205,212 of the 288,591 albums that were released, or about 71 percent of titles. Yet the indies had only 17 percent of the market in total sales, which means that the majors captured 83 percent of the market in sales of units, while only releasing 30 percent of the albums last year. However, many of the releases counted as “major” are mostly indie-owned, while many of the “indies” are partially owned by the majors.

The giant among the indie labels is Jive Records, one of the many imprints that comprise the Zomba family. The Zomba case is unique among the indies because its huge empire [is] built mostly upon the success of Jive records, first established in 1981. And almost all of the Zomba-owned labels are nonsignatory, with Reunion Records being the exception.

In this case the signatory corporation, BMG, decentralizes its production by farming it out to the non-union company, Zomba. BMG has accomplished this in two ways: first, BMG sold Reunion Records to Zomba in 1996, then in the same year it purchased a 20 percent stake in Zomba’s records division.

While Zomba is not considered to be an independent label because it is distributed by BMG, it is mostly independently owned and it has amassed a large empire, the giant among independently owned record companies. Zomba’s labels and producers represent a kind of subcontracting in the record industry that allows BMG to develop a pattern of union avoidance.

The other majors have established significant equity deals like the one between BMG and Zomba and, like [that] deal, these arrangements are good examples of union avoidance. There are a myriad of examples where arrangements between major and indie labels undermine the AFM. Examples of other important joint venture and equity deals include the following: Warner’s equity deal with Tommy Boy, EMI’s equity deal with Priority records, another successful hip-hop label, Atlantic records’ joint venture with Mammoth records, and Capitol records’ equity deal with Matador records.

If a label is less than half owned by a major label, then the major isn’t responsible, legally, for any recording work that takes place at the indie label. As a result, neither the indie label nor the major label is concerned with honoring the terms of the AFM’s labor contract and recording contract. This is a classic case of union avoidance. So while the forces of production change the structure of the recording industry, labor law isn’t able to protect the interests of the musicians working in the industry.

Whether a major has almost half ownership of an indie company, or whether it merely distributes an indie label, in neither case is it or the indie required, legally, to adhere to the terms of the Phonograph Record Labor Agreement or the Phonograph Record Trust Agreement. Even as the major is intimately involved with the indie label, legally the indie is outside the purview of the terms of the contract, since the indie is a non-signatory. This leaves the AFM unable to use labor contracts to enforce terms that protect professional musicians. In all cases named above, the labels mentioned are non-union, or non-signatory, indie labels that represent a growing share of the market.

Many of these labels have albums that have reached “gold” status at the RIAA, selling over 500,000 copies. And, in all these examples, the indies are, more and more, becoming part of the establishment. Unlike a few decades ago, when the indies were truly outside the “establishment,” today the indies are an integral part of the corporate plan to challenge the role of the AFM in the recording industry, a strategy that mimics the widespread corporate assault on union labor nationwide. It is a misnomer to say that the indies represent a challenge to the corporate control of the entertainment industry. On the contrary, the indies are unwittingly involved in a process that undermines one of the only forces that can resist corporate abuses: the American Federation of Musicians. As such, the indies find themselves in an ironic place: as the “anti-establishment” component of the establishment.