Earlier today it was announced that independent music aggregator IODA has come to an agreement for its catalogue of labels to be distributed via the new Myspace Music service.

But what does this mean in terms of the global negotiations with Merlin? Merlin (not IODA or The Orchard) are meant to be the primary industry body negotiating on behalf of the majority of independent labels. Does this MySpace Music announcement mean that both The Orchard and now IODA have broken ranks by signing up to MySpace?

Industry observers will note that in the process IODA has overlooked the fact that MySpace Music is actually a joint venture that includes the major labels, who will now profit from streams (via advertising) and paid downloads of independent music.

The Orchard and IODA are both digital aggregators and are not independent labels per se. They may have a decent amount of catalogue in terms of song numbers, but few are from labels and artists which actually sell in the digital space.  The popular (and commercial) appeal of these aggregator catalogues is relatively small compared to that of Merlin’s labels/catalogue. The Orchard and IODA make their money more through the breadth of their catalogue than through its quality.

So, from a long-tail perspective, this deal makes a certain amount of sense for both the aggregators and Myspace Music. But does it make sense for the labels who use these two aggregators to distribute their content? I would argue it is probably against their interest if advertising profit associated with the streams of their music is not shared by the Myspace Music and their major label partners. Why should major labels make money from the digital streams and sales of independent labels?

Rumour has it that Merlin will indeed be meeting with Myspace Music to negotiate some form of equity and therefore profit share in the Myspace Music JV in the next week or so. In my mind this was inevitable as the independent labels whom Merlin negotiates on behalf of  make up more than 25% of the global market in terms of recorded music sales. As such the market share of the labels represented by Merlin is equal to SonyBMG (now Sony) and very close to Universal Music Group.

The JV between the major labels and Myspace raise some issues. Is this just the tip of the iceberg? Are the major labels now going to insist on a JVs with all digital music retailers that want to sell their catalogues of music? If the answer is yes, then the independents need to seriously begin looking at creating their own digital retail outlets.

And where does all this leave music fans? Surely consumers do not want to go to one music retailer for their major label artists and another for independent label artists? Would this lead to one DRM format for major labels and another for independent labels? Personally, I believe that this would be a recipe for disaster and would only serve to drive music fans back onto illegal file sharing sites.

My main concern with the IODA deal though is the question of whether these unilateral moves by aggregators actually undermine Merlin’s bargaining position.  If so, why did these aggregators negotiate deals? My guess is plain and simple greed. Sure, they will claim it was in the interest of their label clients. We all realize however that this is a non-starter.

The IODA deal has established a precedent which sees the majority of independent music opting-out of profit share arrangement from the big digital stores and yet the major labels still make money off every independent music stream. How is that beneficial to the independent music sector in the long-term? Quite clearly it is not! Beneficial to aggregators yes – but they do not have the signing, recording and marketing costs to recoup that the independent labels do.

The Music Void view is that both The Orchard’s and the IODA’s MySpace Music deal is bad in the long-term for the independent labels who use these aggregators. On the flip side, it may actually result in many labels leaving these aggregators in search of better options.

As noted above TMV are sure that in the not so distant future some accommodation for Merlin will be made by both Myspace Music and its major label JV partners whereby the indie labels are accommodated in terms of shareholding and profit share.

Other readers also read:

MySpace Music Is No Spotify Challenger

How do the Indies Keep on Keeping On?

MySpace Music: Going Freemium