JEFF LEEDS of the NY Times reports..

Even as the recording industry staggers through another year of declining sales over all, there are new signs that a democratization of music made possible by the Internet is shifting the industry’s balance of power.
Leeds says that independent music companies are making big advances at the expense of the four global music conglomerates by exploiting online message boards, music blogs and social networks, making the established music business model look increasingly outdated.

CD and digital album sales so far this year are down 8 percent compared with the same period a year ago, according to Nielsen SoundScan data.
Sales of digital tracks through services like iTunes have risen 150 percent, to well over 320 million songs this year. Overall sales are down less than 5 percent if the digital singles are bundled into units of 10 and counted as albums, according to estimates by Billboard magazine.

Hawthorne Heights
Still, despite the slide, dozens of independent labels are faring well with steady-selling releases by, among others, the Miami rapper Pitbull and the indie bands Hawthorne Heights, Bright Eyes, Interpol and the Arcade Fire. Independent labels account for more than 18 percent of album sales this year.

In a world of broadband connections, 60-gigabyte MP3 players and custom playlists, consumers are moving beyond the music that is presented through the industry’s established outlets, primarily radio stations and MTV.

“Fans are dictating,” said John Janick, co-founder of Fueled by Ramen, “they can go find something that’s cool and different. They go tell people about it and it just starts spreading.”

Trends suggest more of the independent labels’ repertory will find an audience. The independent sector as a whole already outsells two of the big four companies, Warner Music and EMI.

The big music companies have also embraced many vehicles that had primarily showcased independent material. Many labels buy advertising space on blogs that post free music files, and this year Interscope Records, a division of Universal, struck a deal to distribute music from a new label created in partnership with MySpace, the popular social networking site that claims 40 million members.

Even so, the gains of independent labels appear to stem from more than online buzz: the small labels have also found themselves the darlings of television and film music supervisors looking for out-of-the-mainstream sounds.

But no factor is more significant than the Internet, which has shaken up industry sales patterns and, perhaps more important, upended the traditional hierarchy of outlets that can promote music. Buzz about an underground act can spread like a virus, allowing a band to capture national acclaim before it even has a recording contract, as was the case this year with Clap Your Hands Say Yeah, an indie rock band.

In addition, the music specialty shops and small retailers that once provided an anchor for independent label sales are being squeezed out by mass merchants who heavily discount new releases, and the broader problems of piracy and competition from other products like DVD’s and video games.

Pretty Girls Make Graves
An established independent like Matador Records - home to acts including Pretty Girls Make Graves and Belle and Sebastian - can turn a profit after selling roughly 25,000 copies of an album; success on a major label release sometimes doesn’t kick in until sales of half a million. “The majors are really just focusing on platinum artists and no longer have an appetite for artist development except in the rarest instances,” said Steve Gottlieb, chief of TVT Records

Britt Daniel, the singer and songwriter who leads the Austin, Tex., band Spoon, agrees, and counts himself among the beneficiaries. After the band was dropped from the major label Elektra in 1998, Mr. Daniel found his way to a new contract with the independent label Merge, and Spoon’s third album for the company, “Gimme Fiction,” has racked up sales of nearly 100,000 copies, outstripping the previous two and ranking as one of the year’s best-reviewed releases.

Britt Daniel;Spoon
“There are great bands on major labels and bad bands on independent labels, but it seems like the records made on independent labels are more about real creativity and more heartfelt stuff,” Mr. Daniel said. “It may just be a three-, four-, five-year cycle where indie music is cool. Sometimes I get cynical, but people tell me, ‘No, this is the way things are going to be from now on.’ ”

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