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  Industry Profile

Industry Profile: Alison Wenham

— By Larry LeBlanc

This week In The Hot Seat with Larry LeBlanc: Alison Wenham

Alison Wenham is independent music's Joan of Arc.

In 2006, London-based Wenham was elected as founding president of Worldwide Independent Network (WIN) comprising over 20 independent trade associations in 30 countries. In January, WIN requested that the 30-year music industry veteran continue to head the organization in the newly created position of chairman.

In 2007, Wenham was one of the driving forces behind the creation of the global independent rights association Merlin

As chairman/CEO of the Assn. of Independent Music, the non-profit U.K. trade organization for independent record companies and distributors, Wenham is a fierce advocate for Britain's independent music sector.

AIM's 800 members represent an estimated 20% of the U.K. music market, and WIN comprises trade associations that constitute a similar share of the global market.

Wenham also oversees AIM Digital, which negotiates and administers collective licensing agreements for member labels with new-media partners. Additionally, she is also chair of the Small Business Group, and co-chair of the Business Focus Group of the Music Business Forum. She has also been vice president of IMPALA, the pan-European independent music companies' trade association.

In 2006, Wenham went to Shanghai to sign an agreement for the streaming of music and video clips from U.K. labels to 180 million registered users of SINA, China's largest Internet service provider. A week later, she became a new inductee (and the first woman ever) on the International Music Managers' Forum Roll of Honour.

AIM was launched in 1999, when numerous indie labels broke from BPI, arguing that Britain's recorded music body did not represent them properly. British indies had long been dissatisfied about the different ways in which major labels and their smaller counterparts were being treated by the authors' body, the Mechanical Copyright Protection Society (MCPS).

Prior to AIM, Wenham was founder and longtime managing director of the classical label Conifer Records (later BMG Conifer) which, under her direction, had grown to be the largest independent record and distribution company in the specialist music field in the U.K.

Like Wenham, AIM's other instigators were also former or current BPI council members: Beggars Banquet chairman Martin Mills, Pinnacle chairman Steve Mason, and China Records chairman Derek Green.

The first credible indie sector organization in the U.K. was Umbrella, established in the late '80s. Its future, however, was sand-bagged by the issue of what constituted an indie label. Umbrella decreed that its members should be independently owned and distributed. (AIM's criterion is that a label should be at least 50% independently owned.)

Umbrella's demise came with the revamping of the U.K.'s mechanical royalty rates in 1986. With royalties open to negotiation for the first time, Umbrella struck a deal over royalties with the Mechanical Copyright Protection Society (MCPS) that committed its members to a higher rate than the BPI subsequently secured at the Copyright Tribunal.

Wenham has long argued that the music industry needs to work closely with governments on creating a strategy that allows customers, artists and labels to benefit from the online explosion. She argues that you can't tame technology, you've got to get in it and try and monetize it along the way.

On Jan. 29th, the U.K. government presented the British parliament with its Digital Britain interim report, developed by Lord Carter, minister for communications, technology and broadcasting.

The report was jointly issued by the Department for Culture, Media and Sport, and the Department for Business Enterprise and Regulatory Reform.

Among its 22 recommendations is a proposal for an independent body, to be called the Rights Agency, with representatives from the music industry and ISPs that would encourage the development of new services and enforce anti-piracy measures.

Under the proposals, ISPs would, on receipt of a court order, be required to collect anonymous information on serious repeat offenders, to be made available to rights-holders together with personal details.

The proposals are all subject to further consultation but the BPI and the umbrella British music industry body, U.K. Music, have both criticized the targeting of individual offenders.

Meanwhile, Britain's independent sector is reeling from Pinnacle Entertainment, the country's independent distributor, going into administration (equivalent to Chapter 11 bankruptcy in the U.S.) on Dec. 3.

At least 400 labels worldwide were affected.

Pinnacle's collapse surely must be a disaster for Britain's independent music sector.

It is an ongoing disaster as well. It took everybody by surprise. The timing (December 3) couldn't have been worse. It was at the end of a busy trading period. I heard the news at 12:30 P.M. and we had a notice out to our members by 1:15. By 3 PM, our phone was ringing off the hook.

We had an emergency meeting the next day. About 70 labels turned up. We invited non-AIM members as well. In times of adversity, this is not about club membership. Everyone was welcomed.

While no further stock has been sold, the first offer by the administrator (to labels) was 10 pence plus storage. Then AIM was able to get charges down to six pence.

We appointed a lawyer to represent the 140 labels who chose to go through us. Retention of title has been proved in every label's case. We are now dealing with the return of stock. The next areas we'll deal with will be the return of long term stock as well as dealing with the MCPS [Mechanical Copyright Protection Society] where the mechanical liability is still technically due on shipments made by Pinnacle before their demise but for which the label has not been paid.

How has the British music industry reacted to Pinnacle's collapse?

The industry responded magnificently--the majors included--in offering short term deals to get people out of immediate trouble. We still have a lively distribution industry in this country. In some ways, (this bankruptcy) strengthens the distribution community. It has strengthened some of the other distributors. I have also been told by the administrators at Pinnacle that the warehouse there had not been invested in or modernized for some time. So one has to question whether Pinnacle was seeing a future for itself in the long term.

Pinnacle's bankruptcy follows a number of woes in Britain's music retail sector.

Yes. We almost had a melt down on the High Street late last year with Woolworths, and (music retail chain) Zavvi going down. This is after Music Zone, Fopp and MVC (going bankrupt) the year before along with a number of independent stores. We are looking at a very threadbare High Street right now.

Several independent stores in the U.K., however, are still reporting good business.

There is life in retailing if you are retailing with the right composition including having a knowledgeable and enthusiastic staff as well having lots of instore events. This brings back the fun, the excitement and the visceral touchy-feely side (associated with) being a fan. Rough Trade opened up one of the largest stores in this country (in 2007) in Brick Lane at a time when people might have thought it was tantamount to standing at a window and tearing up twenty pound notes. They are doing quite well.

[In 2007, independent record retailer Rough Trade opened the U.K.'s largest music store in a former Stella Artois brewery in a courtyard off Brick Lane, the hip east London street. Not only was the new store, at 5,000-square-foot, 10 times the size of Rough Trade's existing outlets but it has withstood a market downturn that has claimed Andy's Records, MVC, Tower Records, Music Zone, Fopp and recently music retail chain Zavvi which went into administration after being crippled by the collapse of Woolworths. Rough Trade director Stephen Godfroy was recently recognized by the British Council and U.K. Music Industry as one of the leading U.K. Music Entrepreneurs of 2008.]

You were recently named chairman of WIN.

A committee was formed in the summer (of 2008) because my tenure (as president) was coming to an end. This committee deliberated and then I got an email asking if I would stay on. While we'd like a rotating office, AIM's ability to provide the secretariat and the resource to run WIN is difficult to find in other parts of the world at the present time. MIDEM is the primary meeting time for our members. But we are having a meeting in New York in June.

People think AIM has some kind of superstructure.

It hasn't. It's a tiny organization. We have five full time staff and two interns. And a part time accountant.

I'm not sure WIN would have been possible 20 years ago. With globalization, independents worldwide have more in common today

I'm not sure there would have been a need for it back then. It was a local industry then. Independents were operating in their home markets and were doing some licensing in other markets. It was a less politically charged environment. We certainly weren't in a transition with new formats. For this industry, everything that came with the MP3 is quite different than what came before.

There also has been the coinciding of a number of different factors in the industry including consolidation, a very mature format in the CD, and internationalization through the new technologies driving internet access. So you can see the need for AIM, IMPALA, A2IM (the American Association of Independent Music) and so on to emerge as a working group sharing information, knowledge, expertise, and issues. This is invaluable to the independent sector.

The independents represent an estimated 30% of overall music sales in the world. How important are the independents to the growth of the music industry?

If you take a big picture view, anyone understanding the dynamics of the industry as a whole would support the notion that we should have a strong and healthy independent sector. It is the life blood and (provides) the A&R of the industry. To compromise, minimize or marginalize the independent sector has the potential to damage the whole industry.

The most prolific producers of music in the world are the independents. These are people that have nothing to lose and everything to gain. They have the joy, the energy and enthusiasm to follow their passion in a non-corporate, non-monetized way. And then turn it into a business if they can.

We saw that with Last.FM and more recently with MySpace that Independents can be marginalized in industry negotiations over music use.

And continue to be (with MySpace). That issue is not going to go away. The independents will stand firm. I believe there will be a solution that will respectful of the independents. That acknowledges that they are not producing second-class music by second-class artists. Or that there is some perceived greater promotional value to an independent (on MySpace) than there is a major that argues for a lower payment.

We've had similar encounters with Itunes, MTV and others over the past few years. And they will come again. But, in the end, either through (government) legislation or through competition laws or just through common sense prevailing, these issues will be resolved.

Are the disputes due to the majors throwing their weight around or more because the users don't understand the dynamics of the global music business?

It is a combination of both. The majors are looking after their businesses. There's nothing wrong with that. They have a singular remit. We are not on their radar MySpace, we don't seem to be on their radar either. You hear them say, "We value artists. We have done deals with the major labels and the artists are all being paid." What about Beggars Banquet, Domino, Epitaph, and Koch? These companies are all a significant size with considerable rosters.

A flashpoint in the independent community came over IMPALA and Warner Music Group's announcement in 2007 that the former would support Warner's proposed acquisition of EMI In return, WMG would help fund Merlin, and divest certain recorded music assets. Two British labels--Ministry of Sound, and Gut--resigned from AIM.

Was it a difficult time for you?

Yes it was. But the point is that (IMPALA's support) was misunderstood. And I had not committed AIM or any AIM member to the deal that IMPALA had struck with Warner's and EMI. But I am part of the (IMPALA) negotiating committee that did negotiate that deal. Frankly, it was a sensible approach. It was to a view of finding a remedies package.

Warners approached us in the spirit of finding a package of remedies that could be agreed on so (their) bid for or merger with EMI could be tabled at the Commission as a solution to the dangers that we perceived for the independent sector in a highly concentrated market.

I recall that the Commission had accepted the merger but did not embrace the remedies package first put forth.

We have been very successful in blocking mergers through Brussels. We are not, in principal, against mergers. We'd rather they didn't happen but companies have to make decisions according to how they read the marketplace and their position in it. What we absolutely object to are mergers without remedies. Without remedies, small companies become marginalized and unable to access the market.

[AIM had, in fact, led objections to the Sony-BMG merger of 2004.]

I'm not sure the marketplace today is any better off for independents with Universal and Sony being so dominant.

Unfortunately, what we now have is the worst of all possible situations in the U.K. We have an extreme example of a duopoly. Week by week, the Top 200, certainly the Top 20, album and singles market are (dominated) by Sony and Universal. Now we have this situation where EMI and Warners can't compete very effectively. Obviously, what you want is balanced competition.

AIM has been calling for an overall copyright strategy from the British government for some time.

Well, we have. Through U.K. Music formed in October (2008) we now have the first cross industry platform to create a single agenda with a powerful voice for all copyright owners. We can now try and find an accommodation between the infinites of technology, government, consumers, and our industry. It remains a very disharmonious arena.

What do you think of the report by Lord Carter?

It's a sensible report. There has been a slightly premature response from different parts of the creative industries saying that they are disappointed or that it falls short. The fact is this is an interim report. We have plenty of time to work with Lord Carter. There are many sensible suggestions in the report. It is extremely hard to find the balance between consumer access, the technology that drives (the online music market), and the industries that travel across those networks.

ISPs in Britain seem to being showing more of a willingness to comply with dealing with copyright infringers than their counterparts in North America.

The reason the ISPs came to the table in the U.K. last year was because they were required by government to talk with the music industry under the threat of legislation if they did not do so. I wouldn't say that they came willingly. But they came.

[Prior to the Carter Report, a memorandum of understanding between labels, the film industry, and six ISPs, resulted in ISPs in Britain writing warning letters to customers who the BPI had identified as using peer-to-peer services to share music illegally.]

There is growing pressure in the U.S. for the ISPs to deal more vigorously with copyright infringement.

Led firstly by its film industry, the U.S. has traditionally protected its creative industries, Creative industries suffer more than most in the technological environment because they are unable to prevent P2P file sharing and are unable to monetize the works created with our artists. So it is paradoxical for the U.S. not to be recognizing that the ISPs need to come to the table.

If I went into a store and I bought Ted Baker (dress) shirt and took it out onto the street and it fell apart in my hands, I can have the rest of the stock (in the store) off the shelves by midnight. There are very clear consumer laws and passing off laws (in retail). The laws dealing with the Internet at most levels are ephemeral and opaque. It is an unenforceable environment. So, in that context, what you have to do is look to revenue generating opportunities of working cross industry.

The ISPs may come to realize that protecting copyright is in their interest.

They have a very linear, one dimensional business model. They are in danger of driving their value to zero. They need to diversify quickly if they are to create competition, flourish and grow.

We have an alignment of interests here. If the (music) industry, perhaps, laid off a bit in the enforcement and infringement language and started to talk about alignment, co-operation, cross-industry synergies, we might see a more modernistic approach (to monetizing music), and we might be moving toward a solution.

You have been highly critical of DRM (Digital Rights Management) and the RIAA's strategy toward suing music fans for downloading.

We never embraced DRM because it was controlling usage (of music). We are not the only industry to experiment and then find other ways (of protecting copyright). I think it was an expensive experiment. Apart from its clunkiness and its limitations, DRM served to further alienate our fans from us.

DRM is, in fact, about monitoring, controlling and extracting information that the consumer hasn't necessarily given permission to extract. DRM is, in effect, spy-ware. It needs to embed itself and it needs to perform certain background functions.

You favor water-marking and encryption instead?

Yes. Acknowledging, recognizing, tracking and remunerating would be far more exciting than stopping and fining. We are not traffic wardens.

Conventional wisdom maintains that technology has changed the music retailing industry forever

I don't know how (music sales) are going to be resolved. All of the hype of digital has left us with a market share of 7% in digital business in 2008. So, it's still a 93% physical business. It certainly isn't digital switchover time as far as this country is concerned. Not by a long way, yet.

How big are digital sales in the independent community?

It varies. I'd say 20-40% would be a reasonable figure. On a good title across the world an independent probably is seeing up to 40% digital. Some of our labels are digital only. They have started in the last two or three years, and they do not do physical.

The (U.K.) market share statistics from 2008 show that the small (labels) do better on digital. Also, there is a very large amount of business that is adding up. It is very substantial but isn't measured (in industry stats) because it doesn't trouble the market shares or trouble the charts.

There's a huge amount of activity in music sales on the internet outside of the (mainstream) industry. It is coming from companies doing $5,000 up to $40,000 a year in Internet business. They are members of AIM. We can track them and it is quite exciting what's happening. Nobody can see it but us. Because after.1% (in industry figures), the market shares are suspended, and you get this wonderful "others" category.

When AIM was founded, you were a board member on the BPI Council. Early on many people expected AIM to be anti-major labels. Despite differences in the strategies of both sectors aren't the independents and the majors in the same boat on many issues.

We are. The issues may coincide or they may collide. When AIM was set up, it was the end of a long era of consolidation within the majors. In the '80s, the marketplace was extremely balanced. The largest independent was only half of the size of the smallest major. You could see that the ability to compete and win was balanced and open. By the late '90s, the market had effectively closed. So couple that with the advent of new media and all of the change it was going to bring to the industry, the timing for AIM to be formed was right.

There had been previously been another independent organization in the U.K. called Umbrella.

The key difference between AIM and Umbrella is that AIM was set up by a number of companies who recognized that in order for AIM to be effective and succeed as a professional organization that it would have to be professionally run with full-time dedicated staff and a senior person from the industry being brought in to set it up and run it. That was me. I think that just my appointment sent quite a strong message out to the (U.K.) industry.

You quickly forged a relationship with BPI.

Yes, we never set out to be anti-establishment or to be anti-major label. I don't believe that you achieve as much by guerilla tactics or being sidelined as a minority player - you need to sit at the industry table. You need to sit at the government table. You need to professionally acknowledged and included. Even if that is uncomfortable to others around that table.

AIM opened an office in China in 2006 and began to stream video clips into the market. You have since closed the office in Shanghai, however.

The office has moved to Singapore, and we've changed our strategy. We don't feel there needs to be a physical presence (in China) anymore, partly because of the Internet providing ease of access. China remains a challenging market. The live side of the Chinese music industry is far more important to building a good fan base and having a business in China than just selling music.

Was the streaming strategy intended to build up ancillary businesses?

Absolutely. It was to build awareness. It became clear to us with a couple of missions to China that this is a non-class audience which has never heard of any of our bands. By streaming British music videos, we can start to build up a fan base there. But the live music is more important. The Beijing Pop Festival is what we've been promoting as the most important festival that (British) bands can play at.

Was the inaugural Independents Day on July 4 a success?

The media response in the U.K. was overwhelming. Radio and TV stations loved the concept and wholeheartedly supported it. It was one of those joyful days where playlists were torn up. Stations even created IDs for the day and some played independent music back-to-back the full day. There were four programs (on independent music) produced for Channel Four. We will be celebrating Independents Day the week of July 4th this year as well. But we're changing some of the ingredients.

Alison Wenham can be reached at:

Larry LeBlanc is widely recognized as one of the leading music industry journalists in the world. Before joining CelebrityAccess in 2008, Larry was the Canadian bureau chief of Billboard from 1991-2007 and Canadian editor of Record World from 1970-89. He was also a co-founder of the late Canadian music trade, The Record. He has been quoted on music industry issues in hundreds of publications including Time, Forbes, the London Times and the New York Times.

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