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Merlin hits out as The Orchard acquires Finetunes and Phonofile

By Chris Cooke | Published on Friday 5 May 2017

The boss of indie label repping digital rights agency Merlin was scathing yesterday about the news that Sony’s The Orchard had acquired European independent music distributors Phonofile and Finetunes. Merlin’s Charles Caldas framed the acquisition as another “land-grab of independent rights” by a major record company via a “faux-indie imprint”.

Norway’s Phonofile and Germany’s Finetunes formally came together under one parent company – SendR – at the start of last year. At the time the two music distributors described the move as “one of the most significant mergers in the history of the independent digital distribution market”, adding that the two businesses would now actively collaborate.

Under this week’s deal with SendR, Phonofile and Finetunes will now become wholly owned subsidiaries of The Orchard. This, the official announcement of the deal insisted, will give indie labels distributed by the two European companies “access to The Orchard’s enhanced services in over 25 territories worldwide, offering physical sales and distribution, global digital marketing, playlist promotion, interactive marketing, digital advertising, sync licensing, video services, neighbouring rights collections, and artist royalty processing”.

Confirming the deal, Finetunes founder Oke Göttlich said: “We feel confident that our labels will be best positioned for a healthy and prosperous future alongside The Orchard, which is dedicated to serving independents on a global level”.

Meanwhile The Orchard’s top guy Brad Navin added: “We’re honoured to welcome Finetunes and Phonofile to The Orchard family. Their addition greatly enhances our local representation in two of Europe’s key digital entertainment markets. Both teams are extremely knowledgeable and passionate, and they do an excellent job representing some of the most prestigious and important independent labels in Germany and the Nordics respectively. In joining together, we believe we have an exciting opportunity to provide even greater levels of service and global reach to our local clients”.

The Orchard also began its life as an independent company, but gained Sony Music as a shareholder via its merger with rival IODA in 2012. The music major then took complete ownership of the music services firm in 2015.

All of the major record companies provide distribution and marketing services to independent labels and self-releasing artists, whether through distribution deals done between individual acts and the majors’ frontline labels, or through label services units like Sony’s Red Essential, Universal’s Caroline or Warner’s ADA. And for Sony there is also The Orchard, which operates much more as an autonomous entity.

This isn’t a particularly new phenomenon, and occurred in the CD age too, the argument being that it is a nifty way for artists to get the benefits of a major record company’s global infrastructure, while retaining more control over their recordings business, and/or getting to work day-to-day with an independent record company.

Some in the indie label community don’t like the increased influence such arrangements give to the major music corporations. That increased influence arguably has a more tangible value in the digital age, because when negotiating streaming deals a rights owner’s negotiating power is often linked to its market share, especially when it comes to securing kickbacks like equity. The majors usually include the indie labels they and their subsidiaries distribute in their claimed market share to boost their negotiating positions. However, critics argue, the kickbacks are not then shared with the distributed labels or their artists.

The aforementioned Caldas has been vocal before (including in this CMU interview in 2015) about the role market share plays when negotiating streaming deals. And about the tactics employed by the majors to increase their market share figures, including relying on total rather than streaming market share stats (something that skews against the indies) and counting the recordings they distribute on behalf of other rights owners.

Commenting on this week’s Finetunes/Phonofile acquisition by The Orchard, Caldas added: “This is not positive news for the indie labels and artists affected by this deal. Merlin has long been vocal about our concerns that the majors, via their faux-indie imprints, are land-grabbing independents rights in order to bolster their market shares and use the value of those indie artists to extract disproportionate value from the market in their negotiations with digital services. That value flows only one way, and it is not to the indie labels and their artists who actually create that value”.