This is an interview taken from the research The Online Music Economy for Independent Music Entrepreneurs.

Alison Wenham is the Chief Executive of AIM, the Association of Independent Music, a non-profit-making trade organisation for independent record companies and distributors in the UK whose activities include hosting training and networking events, commercial negotiations and legal advice and lobbying on behalf of its growing membership of 900 independent music businesses.  I spoke to Alison in February 2009 to find out more about AIM’s work and the independent sector’s response to the rapidly changing music economy.

Susi O’Neill: On an interview with you on the AIM website, you describe how AIM bought indies in very early into digital agreements, describing your role as the “fifth major”.  Could you describe these activities in more detail?

Alison Wenham: If you go back even to before AIM was formed, the advent of the new media market and the impact that would have on the supply chain was very much part of why AIM came into being in the first place. It was always on our agenda that however this new order would materialise it would have a very major impact on the way people traded.

What we did fairly early on was to set up Music Indie, in the early stages of the new media industry, which was able to license collectively for the independent sector because the service companies hadn’t grown up, there was an enormous void between the old distribution structure and the new delivery mechanisms.  I remember speaking to the distributors at the time to try to understand how they viewed this new market model.  They had a rather depressing view of their own viability – they called themselves ‘dinosaur distributors’.  They were very much part of the old way of doing business and they would die out like the dinosaurs.  Although I didn’t see it that way at all, it was quite clear we needed to get the independents into the marketplace more quickly.

So we created a vehicle through which we could do that – a proper licensing platform.  Couple that with the fact that the independents are far more likely to be far more eager and curious about new things -whether it’s a new sound or a new band, a new technology or a new platform.  The independents have a lot less to lose and a lot more to gain from experiments so they needed to be in the market early.

SO: Have you extended your work now beyond just distribution to look at other aspects of the online music economy for your members?

AW: We’ve actually reconfigured the whole thing. AIM is 10 years old this year and it has come full circle in that now we do none of that work.  It was hard early on to see exactly how one would monetize or where and when, to be in there was the most important thing.  As the business materialized, it became a business, albeit we know there are enormous problems around the business, but it nonetheless has turned into a self-sustaining economy.

The supply chain grew up which was capable of servicing our members without us having to intervene.  It’s not ideally the role of a trade association to be central in a commercial supply chain but that’s where we were for some time because we had to encourage that supply chain to be built.  When it was built we then stepped down and handed it over to commercial competitors, the commercial marketplace, which is quite right and proper.

However, new problems have grown up and those problems are around the global licensing and structure and also licensees – the companies who are unwilling to recognise the independent sector as a commercial licensor.  I could cite a number of large companies – like AOL, Yahoo or MTV – American led companies like MySpace, YouTube or Google – who pay and form contractual relationships with the majors simply because they have to because otherwise it would be straightforward copyright infringement.  But they like to purport to be helping the independent sector by promoting their artists and giving them a promotional platform, which is a thoroughly disingenuous and unacceptable stance from our perspective.  So we’ve gone on to create Merlin, which is not a UK solution as Music Indie was but it’s a global licensing rights agency which has taken us three years to build.

SO: Do you feel that the solutions to distribution need to be tackled globally now, it’s not even just a continental issue?

Yes, we were dealing on a global level with Music Indie, our old vehicle, from day one because our members were able to license their rights globally. What we were not doing, however, was offering a service to the global independent music community because that would just have been too much for us to deal with and we had a primary duty to our UK members.  Merlin has been built from other work AIM has been doing over the last 10 years which is to facilitate the birth of Impala, A2IM in the US, and WIN (Worldwide Independent Network). There now is a coherent global structure with the US included, and of course the US has been historically the most hostile terrain on the planet to run a trade association because the Americans are uniquely individualistic in their approach to business.  But we were able to persuade them that even in the US it’s better to get your wagons in a circle that to get scalped by the Indians.  So they have formed A2IM;  it’s now in its fifth year and it’s doing very well.

So having organised the US to have a voice and a trade association, Merlin was the next natural step from that.  We have created Merlin on an international scale: it’s a company registered in Holland, we have an Australian CEO and we have an international board that stretches right across the planet, from New Zealand to Japan, the US through the UK and all points North, East, West and South.

It is able to do for the independent companies what the majors are perfectly able to do for themselves in cases where people are unwilling licensees.  Merlin is there to do what we call ‘licence the un-licenceable’. It’s not there to interfere in the supply chain we facilitated in the creation of, because a download store can get most of the rights to most of the labels most of the time, either directly or through their aggregators, and aggregators now exist.  Merlin is not there to interfere with that fairly linear supply chain, it is there to deal with the user-generated content sites, and the sites that refuse to acknowledge that independent music and copyright are not third class.

SO: Looking at some of your members’ experiences, the press like to promote the digital music revolution as an opportunity for bedroom labels and wannabe pop stars to secure an international audience – we’ve seen that through the rise of artists like Lily Allen.  What are AIM’s views?

AW: I think the jury is very much out on the long tail theory, I think a tail is never a similar circumference from the top to the bottom, so you can still live in the tail but it would be nice to be at the thicker end of the tail than the thinner end. Will Page at PRS For Music has debunked the long tail theory: he took a set of data stats and analysed them very thoroughly.  I wouldn’t necessarily go about this in an analytical, statistical proving the point to your question, I would go about this in a more holistic way, to say that music is part of society, it’s a language that belongs to society, it doesn’t belong to me or you or YouTube or A.N. other record company.  Music is an expression which human beings have made since they can speak, let alone stand.

So in theory the new open gateway is for any bedroom, any band, anywhere in the world.  In practice of course, you tend to fall back on old-fashioned skills which are about communication, marketing, strategy or funding – much more that about A&R.  So the theory is right, the practice is that you need a fairly old-fashioned, normal, bog-standard set of skills to be able to translate what is in essence a pure cultural art form, a piece of music or a song, and turn it into a business.

We have seen here at AIM a fairly large number of small companies joining in the last two to three years – and that pattern is growing.  There is a large army of small business that number maybe one part-timer, possibly not even anybody doing a full-time day job, averaging a £40,000 to £50,000 turnover a year.  Then there’s a large number of companies clustering around the £100,000 to £300,000 a year turnover bracket that don’t trouble the market share and don’t trouble the normal weights and measurements that the industry applies to itself to judge its size and its reach.

So there is an industry outside of the measureable industry that is peopled by exactly the sort of people that you catch in your question and who are having, I hope, a really good time, experimenting and finding some fans that might do a pyramid selling job for them.  The best salesman you can have is an enthusiastic fan, then waiting to see if that translates into more and better.

Which takes us back to the beginning of time – is the band any good? We can’t ever legislate for that.  One thing that AIM can never do is critique the music itself.  We take that as a given that you feel passionate enough about that that ten, a hundred, a thousand, a million more people might like to share in the experience of discovering this music and hopefully in some way, shape or form paying for it – which is a whole other set of problems.  But it goes right back to the original creation, which is the music itself.

It’s very lively, there’s a lot of companies coming into the market and the models are changing, you’ve got lots of different business models but you’ve also got over a third – possibly on the way to half – of the major companies workforce laid off over the last 10 years.  It’s a sort of commercial migration and these people come with an awful lot of experience and expertise and an in no way dampened enthusiasm for music.  So our sector is being considerably strengthened by experienced people coming in who understand the business of business, and what it takes to make a business.

SO: In adapting to the changes of the online music economy, what do you feel were the major failures by both the majors and indie sector?

AW: I don’t think we failed at all, I think we’ve been pioneers.  We’ve been brave frontier men. It was always going to happen, nobody could deal with the piracy – well piracy’s a strong word, the copying and the sharing that technology has enabled – but I don’t think the independent sector has put a foot wrong.  I think where the independents are hurting is where they are locked out of opportunity by cynical, large companies who see that they simply can.  That’s where the trade associations and Merlin are here to remind them, very forcibly if necessary, that they cannot.

What did the majors do wrong?  Well there have been lots of books written about that.  I have a great deal of sympathy with the majors on this one, yes they didn’t drop everything and rush into the arms of new media, I mean why the bloody hell should they?  Would the shareholders of British Airways, or Sky, or Virgin or whoever else you want to cite as a market leader, have warranted British Airways to build an airway on a marsh?  I have considerable sympathy, the major labels have taken some stick on this.

It’s important to remember that this industry has survived a hundred years on the creation of artefact.  A thing, a product – whether it was sheet music or an LP or acetate or a CD – and around any industry that produces a product, territoriality applies, of distributions, of rights ownership, of management, because that’s the way that products works.  So suddenly the ground shifts and the rugs vanish from under your feet, I think it is the equivalent of asking British Airways to build a runway on a marsh, to ask an industry that was worth £2 billion in the UK, $50 worldwide to go and see if that plane would land on that marsh.

What did we do wrong? We didn’t build a runway on a marsh.  We may have wanted to test it more, we may have perhaps wanted to research it more, we may have been guilty of not recognising the different skills that may be needed to take advantage of new technology.  We have been considerably hindered by the safe harbours provision in the copyright act 2002, which is the only time that any industry has been given a get-out-of-jail card for making copyright material available without any sort of liability.  And that goes for 300 years worth of copyright, not just the last 10 years.  So the government didn’t help by giving the safe harbours provisions to the ISPs, and the ISPs are the pipes, the pipes are the distribution.  We’ve had a very challenging set of circumstances to deal with.

What did we do wrong?  You know the more I talk to you, the more I think we didn’t do very much wrong.  We are an industry that loves to be hated, we’re never an industry that curries favours. What did we do wrong?  In 1991 we defended ourselves over the right price of our CDs according to what we believed the consumer price should be.  If you want to go back in the history, it was the CD pricing enquiry that created hostility, and if you want to go back even further, it was the sudden creation of multi-millionaires out of long-haired layabouts, ‘why aren’t I one of those?’  It was the envy culture.  Where there’s envy, there’s hatred.

SO: You mean envy of musicians?

AW: Yes, the industry did not start to create high profile winner until the ’60s.  And in the creation of those stars, you may want to say it was wrong or it was right, it’s a question of sociology and philosophy, was it right for Mick Jagger and The Rolling Stones to earn hundreds of millions of pounds?  I don’t know, but they did.  And presumably off the back of that their businesses earned even more, so presumably it was a business decision.  The fans love to love the artist but they choose to ignore everything about how that artist gets into their living room or their consciousness.

SO: And they can be very fickle as well.

AW: Very selective thinkers.

SO: How do you see the online music economy shaping the next two years of business for your members?  What will be the next major changes or shifts?

We are in the process with Merlin of settling a number of very high profile infringement cases.  That is our first port of call, to make sure that the independents are acknowledged and respected as the fifth major when it comes to licensing rights on the international platform that can’t be licensed easily locally or through aggregators.  So we will be doing quite a lot of market remedying over the next few years.  That doesn’t sound very blue sky but we need to establish, once and for all, that the independent sector cannot be overlooked, ignored or patronised by new services coming along and having to deal with the majors because they have to and then giving this sop to the independents that it’s somehow good for us to live on fresh air, some sort of perceived benefit of promotion.

I’m not very good at crystal ball gazing in terms of what do I think is going to be the next big thing.  Twitter is this week’s darling, Spotify was last week’s darling,  I do get slightly cross-eyed reading every morning, as I do, about all the new things that I’m suppose to remember to remember by the end of my working day.  But you’d need an encyclopaedic brain to even file all that stuff, let alone know whether it’s going to be of use to you as a business. So I suspect like me, a lot of my larger companies are waiting for companies that reach out to them before they look seriously to see whether that’s going to be a worthwhile conversation.

The most important thing that all independent labels can do right now is to use the tools of marketing well.  And these tools cover very old-fashioned things like database management to very new fangled things.  Marketing into the web and via the web and via mobile is quite the most invaluable thing that labels can be doing.  And those tools and that knowledge have to be fresh.  So over the next two years I’m making sure that my members have got the best knowledge, the best input that they can possibly have to determine what those things are.

We do an awful lot of networking events here, we are serial network event throwers, because we believe that labels learn more from each other through meeting – some formal, some semi-formal and some informal – what’s working and what’s not working.  A VC-funded business is not likely to come along and tell you that it’s not working. I think that peer group learning is by far the best thing that we can be doing and we do it in a facilitated way through audits, health checks, events, panels, business platforms – all sorts of things.  Through research we commission or have others deliver to our members, just keep them focused on what’s working today, tomorrow, and this week and this month.  I do not envisage AIM taking a big picture for the next 10 years.  I’m not sure anybody would actually.

SO: Do you think there are lessons the computer games, film and TV industries could learn from the music industries early experiences?

AW: Absolutely – welcome to our world.  I think they are just beginning to feel the chill wind that has been howling through our industry, simply because we produce skinny little files called MP3s that flap around in the wind – or the internet – like so many leaves in a park in autumn.  Their weighty great big files don’t move so quickly across slow networks, but as the networking speed revs up and revs up – and will not stop revving up – they are being exposed to a similar set of challenges that we have been dealing with for 10 years.

So we are fairly battle hardened, and we still battle and there are still battles to be fought and won. But what I think that they could learn to do, and they could learn to do it with us and partner with us to do this, is to keep kicking the shins of government.  Because actually the solution to all the terrain that exists between consumers, fans, the technology industry and content providers – the answer lies with government, it doesn’t lie with anyone else.  No one’s done anything wrong – the technology industry hasn’t done anything wrong, we haven’t done anything wrong.

You’ve just got to read this morning’s press, that somebody made a wee little mistake by putting up the U2 album. In any other time in any other business they’d be saying ‘forward planning, jolly good, well done that man’ – but they got the U2 digital album ready for sale on iTunes three weeks before release.  Someone pressed the wrong button, it went out.  This morning 100,000 people have downloaded it from a bit-torrent.

People say, ‘let’s find a consensual place to live with the ISPs’, and I have been centrally involved in that message and that debate.  I’m going off it right now – partly because the ISPs themselves have not seen that they’re driving their own business values to zero and that the answer to a vibrant, rich, diversified ISP industry is with content providers. But there’s so desperately keen not to say that anywhere outside of the pub after midnight, I would think.  The truth that dare not speak its name.  The ISPs have been difficult.

I’ve been working with the government, or attempting to work with them, for 10 years. I take all my new jobs in the spirit of challenge, of adventure, of learning, and this one has been particularly challenging and adventurous and about learning and very fulfilling.  But 10 years in, if you don’t recognise that you have failed to move one iota of change through government you’ve got to put it down to them not you. I’m not an unsuccessful person.

SO: The creative industries have had very little movement their way, it’s not translated into anything positive except for the film industry.

AW: That’s right, and a lot of waffle.  I noticed Gordon Brown, his little speech tick trotting out the finance out first as an example of great British industry has been replaced by us, we are now number one in his speech tick.  He has so far not put together a single policy – endless consultations, endless green papers.  I can point with almost forensic precision about what government should do about SME enablement, what government should do about access to finance and access to markets, both here and internationally.  I’m not actually wrong, and I know you may say I’m probably telling them the wrong way, well I probably have.  But I’m an entrepreneur – I’m not a lobbyist and I’m not lawyer.  And if they need lobbyists and lawyers to speak to them in lobby speak, you’ll get the sort of results that you currently see government performance pointing to, which is very mediocre.

SO: So it’s an un-resolvable saga for the music industry to conquer.

AW: We accept that we didn’t particularly speak with a unified, coherent voice.  There’s no particularly compunction to do that, but government used that as a reason for inertia at their end.  So we’ve created UK Music – with Fergal Sharkey as the Chief Executive –  which combines all elements of the music industry into one. Get out of that.

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