Fadil Pinandita
Music Business, Intake March 2013
SAE Institute Jakarta
May 7, 2013
Music
Business Journal #2:
MAJOR
AND INDPENDENT RECORDS LABEL
(Case
Studies of Universal Music Group and SM Entertainment)
I.
Foreword
Major
records label and independent records labels are the most common topic in music
industry. Currently, there are three major labels that are acknowledge
worldwide and often referred as the ‘Big Three’; Universal Music Group, Sony
Music Entertainment and Warner Music Group. According to the statement above,
the rest of the records labels in the world should be counted as independent
records label.
What makes
them different, the major and the independent? Usually, the major records
labels have the larger scale of business and distribution networks, also the
larger budget. On the downside, it’s often said that major records label hold
more control power of their artists. Meanwhile, the independent records labels
are often assumed as the more freedom-giver to their artists, with less creative
control over the artists’ works and more lenient contracts. And on the
downside, independent records labels often associated with the lacks of
distribution networks and funds. But, were that sufficient enough to explain
the differences? I feel there’s more left to be unfold as there are still lots
of grey area in this matter.
On this
paper, I’d like to take a comparison between two companies; Universal Music Group (UMG) as the
representative of major records labels, and Star Museum Entertainment (SM) as the representative of the
independent records labels. What I’d like to do here is to explain the systems
and strategies that are used by both companies with unbiased feeling, so I try
to present as much as the facts that I can get from the worldwide web.
II.
Universal Music Group Overview
Universal Music Group (UMG) is
counted as one of the ‘Big Three’ major records labels in the world. On their
own website, they stated that they are the global music leader with strong
position in recorded music, music publishing and merchandising. UMG is known as one of the largest American
music corporation, with the headquarters that are located in Santa Monica and
New York, United States. But in fact, UMG is 100% owned by Paris-based media
conglomerate, Vivendi SA, since the
complete takeover of Matsushita shares in 2006. And now UMG acts as Vivendi
SA’s subsidiary.
With the long-running history in the
music industry since 1934, under the name Decca Records, UMG acts as a parent
of some of well-known records labels with strong history in the music industry.
There are some notable mentions, in the likes of Interscope Geffen A&M, The
Island Def Jam Music Group, Republic
Records, Decca Music Group and
several others. UMG has their branch offices all over the world to take care
and manage the local artists. UMG also owns Universal Music Publishing Group (UMPG), one of the largest companies
in the world that operate music publishing businesses.
It would take too many spaces to
list UMG signed artists, but here some big names on their artists’ roster with
recent released records: Justin Bieber,
Will.I.Am and Michael Bubble. Not only recent artists, UMG also owned the music
catalogue from some legend musicians like ABBA,
Bob Marley, Marvin Gaye, and some others.
III.
Star Museum Entertainment Overview
Star Museum Entertainment (SM) is an
independent Korean multi-purpose company. SM acts as records label, talent
agency, producer, event management and music publisher. SM Entertainment founded
in 1989 by Korean entrepreneur, Lee Soo
Man. And in 1995, the company became
a publicly traded company and traded as KRX: 041510. SM was an abbreviation
from Soo Man’s name, but now it’s changed into Star Museum. SM Entertainment
headquarter is located in Seoul, South Korea.
During its progression, SM
Entertainment owned several subsidiaries: SM
Tin Tin Hall, SM Entertainment Japan,
SM Academy, SM Beijing, SM Pictures,
SM Entertainment USA and many
others. Its recent subsidiaries are SM
Town Travel and SM Culture &
Contents that founded in 2012.
In music department, SM
Entertainment holds the exclusive contracts with some Korean big names like Girls’ Generation, Super Junior, TVXQ, BoA, Kangta, Shinee, f(X), EXO and TRAX. SM also owned all their artists’ music
rights, including their old rosters like H.O.T,
S.E.S and many others.
IV.
System Comparison
In this part of the paper, I’d like
to compare the systems that are used by the both company in music industry. I try
to divide the comparison into two parts, the ‘Artists Signing and Music Publishing’ and the ‘Distribution and Promotion’.
a. Artists Signing and Music Publishing
i. Universal Music Group
As the parent company of several
records label, UMG is not responsible in searching the talents for them to be
signed. Those records labels act as the feeder and filter for UMG. One does not
simply send their music demo to UMG, the material itself has to be recommended
to UMG’s A&R Department by well-known manager, producer, agent, radio DJ or
other music industry professional. The artists’ contracts and well-being are
controlled by those respective labels. The contract itself can be varied
depending on each artist agreement with the certain records label under UMG.
Under UMPG, UMG takes care of the
music publishing for songwriter and music supervisor. UMPG also takes care of
direct signing and catalogue acquisitions. By the work of UMPG, UMG does not
need to get their hands on directly for the music publishing.
ii. Star Museum Entertainment
As an independent records label, SM
is responsible to search and sign its own talents. Since SM Academy is founded
in 2003, SM scouts and handpicks all the talents through audition. All the
chosen trainees are subjected to a long-term contract for 13 years. But due to
dispute that the contract was referred as the ‘slavery contract’, now it is changed to 7 years, if the artist is
going to be promoted in South Korea, and 10 years, if the artist is going to be
promoted globally. And since then, all the artists that published by SM are
picked from the academy.
As music publisher, SM takes care
and handles all the music that used by their artists. Until now, there are only
a few composers and songwriters that are signed directly by SM. The rest of the
composers and songwriters are contracted by their songs that are used by SM’s
artists.
b. Distribution and Promotion
i. Universal Music Group
In the United States, a sub-company named Universal
Music Group Distribution (UMGD) manages and takes care
of the sales, marketing and distribution of UMG assets in all
formats including digital, physical, streaming, subscription and mobile. UMGD has been the
industry market share leader for the past fifteen years.
In some markets
outside the United States, UMG companies handle their own distribution and sales. In other
markets, UMG companies have sub-contracted services to third parties or entered
into distribution joint ventures with other record companies.
Most of the global promotional activities of the UMG’s
artists and music are going in the worldwide web through its official websites,
including the websites of the artists and the records labels. But the other
promotional activities are varies according to the artists’ scoop and each
records labels’ policy.
For case study, I pick the Justin Bieber’s 3rd studio album ‘Believe’. The album was released on June 2012 by UMG’s Island Records. But before the album
was released, the first single of the album, ‘Boyfriend’, were released first in March 2012. And after the album
was released, other promotinal singles from the album were released
consecutively. The last single that released was ‘All Around the World’ on February 2013. The physical album itself
distributed globally through records stores all over the world. The digital
copy of the album is distributed worldwide through iTunes and Amazon.
The success of the album is followed by more than 100
shows of ‘Believe Tour’ that are
still subjected to be going on until August 2013 in North America, Europe,
Africa, Asia and Oceania.
ii. SM Entertainment
Until 2011, SM self-distributed its
own releases in South Korea. Korean Music
Power Holdings (KMP Holdings) took over the responsibility. KMP Holdings
are joint venture corporation that limited by shares that are created by seven
big records labels and music publishers in South Korea, including SM.
Outside the South Korea, SM only
distribute their music officially through distribution labels in several
country including Japan, Taiwan, Malaysia/Singapore, Philippines, Thailand and
Hong Kong/Mainland China. Some big local music distributor in the likes of Avex (Avex Group, Avex Music, Avex Asia), Universal (Universal Music,
Universal Records), EMI,
Warner Music, MCA Music and several others are associated as SM’s music
distributor. SM also has SM
Entertainment Japan, SM Beijing and
SM Entertainment USA in their
subsidiaries list to manage some the distribution and promotion activities in
Japan, China and United States.
For better explanation, I choose Girls’ Generation’s 3rd
studio album, ‘The Boys’, as the
case study. The Boys is the first
album of Girls’ Generation that
including an English version single. On October 2011, the first single with the
same title was released. And the full album came out later in the same month,
and on November 2011 the album was re-released with their second single Mr. Taxi. The physical album is sold
only in some countries by some associated music distributors, and the rest of
the world must order the album straight from South Korea. The digital copy of the
album is released in iTunes on
November 2011.
In United States, the album was
released and distributed on November 2011 by UMG’s Interscope Records. And in Europe, the album was released and
distributed on February 2012 under UMG’s Polydor
Records. The Japanese version of the repackaged album is released and
distributed on March 2012 in Japan by UMG’s Nayutawave Records.
The promotional activities of the
album including several music performances and local TV show programs in some
countries. ‘The Boys’ also extended
the ‘2011 Girls’ Generation Tour’
that has previously held in South Korea on July 2011 and China on September
2011. The added tour schedules are in Singapore on December 2011, in Hong Kong
on January 2012 and Thailand on February 2012.
V.
Closure
Based on what I’ve been explaining
above, the distinctive differences between UMG and SM are the artist signing
system and the distribution system. If the UMG relies on its records labels as
the feeder, SM relies on its audition and academy program to sign the artist.
On the distribution system, UMG has their own company that manages the
distribution of its assets while SM has to rely on their deals with other
distributions companies outside South Korea.
And with this paper, I’d also like
to erase the mainstream ideas that make the major label became the evil side
that take full control of their artist, while the independent records label,
like SM, even has the artists tied up with the long-term contract. And about
the funds and budgets, SM might needs some distribution channel to distribute
their products but that doesn’t mean they are lacking in money. In its
progression, SM even built the kingdom by having some subsidiaries.
And finally, even though this paper
is made as a school’s paper. I hope the little comparison that I’ve made could
be media for knowledge and bring the positive attitude to the world’s music
industry for whoever that reads it, especially in my country music industry.
There’s a long and winding road to reach a success in music industry, and the
choice of which road to choose could help to reach the glory.
VI.
References
