Dance of the music majors and minors: In a week of record company wins Roger Trapp surveys the industry

THE High Court and the Monopolies and Mergers Commission have brought two big doses of cheer to the music industry in the past week. Although the verdicts in favour of record companies in both the George Michael dispute with Sony and the investigation of CD prices had been widely predicted, they nevertheless take a load off the minds of a business that despite its huge size has difficulty being taken seriously.

Last year, worldwide sales of recorded music rose 5.9 per cent to hit dollars 30.5bn, with the United States accounting for nearly a third of the total. The UK saw sales of nearly dollars 2bn, 6.5 per cent of the total. More importantly, UK artists' share of the international market is much larger - about 18 per cent, according to figures from the British Phonographic Industry. This is largely due to the UK ownership of Thorn EMI, the industrial conglomerate that now includes the former 'mini-major' Virgin among its companies.

However, the fact that this figure is down on past years is fuelling the belief that the UK industry is in decline - largely dependent on ageing artists, such as Sting, Eric Clapton and Phil Collins. This, in turn, is being blamed on the dominance of the likes of Thorn EMI, Sony and Time-Warner.

But, while these international combines account for a large share of the market - and make the biggest waves - there are still seemingly unlimited numbers of independent companies. Although their size may suggest that they have little in common with their larger brethren, they are not unaffected by developments like the George Michael case and the CDs investigation.

As one business insider said of the Michael case: 'This industry is all about relationships.' And on the strength of those they develop with the majors, the independents tend to stand or fall.

For instance, Pangaea, a label set up by Sting and his manager Miles Copeland to find acts that cannot be easily pigeonholed, is distributed by A&M, the Polygram-owned label that boasts Sting among its acts. Next month it is seeking to raise its profile with two new albums, a sampler album and the re-promotion of one of its original acts. But, as Mr Copeland admits, one of the biggest boosts it and the artists can get is from Sting himself. He can give the groups opening slots on his tours - and so bring them to a wider public.

It also helps that Mr Copeland has a track record in discovering new talent. As head of IRS - now part of EMI - he was responsible for the early career of REM, now one of the biggest-selling acts in rock. 'I've started a lot of bands from nothing,' he said.

Other small labels catering to the acts that do not appeal to the majors because - says Mr Copeland - 'they cannot get excited about artists who are going to sell 20,000 records', start off as genuine independents, only to team up with a major later.

This is what happened with Creation Records, current fave of the 'indie scene' through such groups as Primal Scream, Ride and Teenage Fanclub.

Founded by Alan McGee and Dick Green in 1983, it originally expanded through a manufacturing and distribution deal with Rough Trade, another independent which eventually collapsed, and other arrangements with WEA and Pinnacle. But in 1992 it moved another step forward when Sony paid pounds 2.6m for a 49 per cent stake and took control of the label's product overseas.

To Cliff Dane, a former music industry finance director who for the past two years has published a financial survey of the business, these companies are classic independents. This is because - despite their pragmatic arrangements with majors - they are dedicated to spotting and recording new talent.

But there are two other kinds - both of which are dependent on old material. On the one hand are re-issue companies, such as Demon, Ace and Charly, which - though mostly well established - are receiving a boost from the advent of CDs. On the other hand are TV-advertised producers of generally cheap compilation records, such as Telstar and Dino, whose 'Blues Brother - Soul Sister' collections are highly popular.

The former group - often dismissed by rivals and observers as hobbyists because they do not seem concerned with making money - are heroes of the collectors, especially since some make efforts to accommodate the growing band of counter-revolutionaries who refuse to accept the passing of vinyl records.

Since the apparent dearth of new talent has forced the majors to look to their back catalogues, these small companies no longer have all the vaults to themselves. However, Demon, which has the pre- Warners recordings of principal shareholder Elvis Costello in its catalogue, is convinced that it can still find obscure or lost recordings that will not attract the interest of the big companies.

'Some major labels won't consider reissuing an album if it will sell less than 2,000 copies, but our overheads are lower, so it's more feasible for us to do that sort of album,' said the company's Alan Robinson.

A popular sideline over its 14- year history has been the licensing of recordings from small labels in the United States. And here it has established the same links with the majors as have the true independents. Several years ago, it released what is regarded as the breakthrough record by John Hiatt, an American singer-songwriter playing in London this week, and it also introduced American Music Club to a growing audience before Virgin took the group on last year.

'There are limitations. We can't be all things to everybody. If an artist wants a name producer, say, we can't always do that,' said Mr Robinson.

He also seeks to differentiate the company's efforts from those of the majors and the budget market through pointing to the quality of packaging and the determination to use original master-tapes where possible.

This is certainly not always the case with the budget market, now more prominent after the recent flotations of Tring International, which issues cheap recordings, and VCI, a video company with a profitable music arm whose products range from Marc Bolan to folk and reggae collections.

Mr Dane - who is a director of Castle Communications, involved in the re-issue market via the Sequel label and also present in the budget market - said: 'The profit seems to be in cheap and mid-price re-issues.'

It is a point ruefully acknowledged by Brian Couzens, former independent producer and founder of Chandos Records in 1979. Although the company is now the largest independent classical label in the world with 1,200 titles, he admits he has been hit hard by budget recordings issued by companies such as Naxos.

Like the independents in the popular music field, he believes his future lies in avoiding the mainstream. Without one of the big classical stars - who are mostly signed to Polygram - he cannot compete in that area.

As well as finding unusual music to record, Mr Couzens and his management team - which includes many members of his family - constantly seek new ideas and ways of marketing. For instance, they seek sponsors to subsidise recordings. 'If you do that you can survive,' he said.

The company also takes hope from new markets opening up in the Far East and Eastern Europe. However, these can bring problems. An operation set up in the Czech Republic is suffering from currency difficulties. Consequently, the records are several pounds cheaper than they should be.

So with all these 'frustrations', as Mr Couzens calls them, why do small record companies continue to spring up and why do they go into anything except the budget compilation business? After all, even successful independents such as Creation are not thought to make a profit worth the amount of effort they put in.

Mr Copeland believes this is because the business is a creative one where there are many more groups than deals because 'financial entry is not so daunting'. Pointing out that it is not essential to spend half a million pounds on a record, he said: 'There are still studios where you can make a record for pounds 10,000. There are dance records being made in people's living rooms for nothing.'

(Photographs omitted)