Indie labels in 2020: A surprising tale of resilience

In October 2020, Greg Katz, owner of indie label New Professor Records, ran a Twitter poll asking fellow label owners if their 2020 sales were either up, roughly the same or down compared to last year. Given the broader narrative this year about the economic suffering of independent music scenes in 2020, the results were perhaps surprising: Over half of the poll’s 54 respondents said that their sales were either up or the same.

Without the ability to generate touring income and sell merch on the road, independent artists have lost their most dependable revenue sources and have had to recalibrate their business models to an all-digital approach, with bands more acutely affected than solo artists like rappers or electronic producers. Unsurprisingly, through campaigns like Justice At Spotify, many artists have expressed that streaming revenue and online merch/album sales alone haven’t been enough to cover their costs of living.

Beyond musicians themselves, the greater music-industry apparatus has also endured numerous scares throughout 2020. In the first week of COVID-19 lockdown in mid-March, streaming activity was reportedly down 7.6% and album sales had tanked 27.6%, resulting in the worst sales week for albums in over 60 years. Additionally, manufacturing delays at vinyl pressing plants and increased strain on the hobbling USPS made the day-to-day operations of record labels — particularly pressing and shipping albums to fans and record stores — more and more uncertain.

With all that said, and with all of the valid critiques of Spotify and legitimate struggles of independent artists in mind, many indie labels actually haven’t suffered the catastrophic losses that they braced themselves for in the spring. In fact, many of them have had a relatively normal or even positive year for sales.

“[The result of the poll] means that even amongst the realm of indie labels, which are financially usually pretty precarious, there was still some resilience that one might not have expected,” Katz, who also owns the boutique artist-management firm Slowdance Management, tells me. “From my meandering conversations with other indie label owners, it chalks up to having some benefit from the growth in streaming that the whole industry is experiencing, and a big effect from Bandcamp Friday on the ability to sell physical products in one shot every month.”

More fans warm up to streaming

The initial drop at the beginning of the pandemic had led some industry experts to assume that streaming rates would sag, as people stopped commuting to work and traveling outside the house. But that decline never sustained itself in the long term. According to Spotify’s Q3 2020 earnings report, the company’s monthly active users were up by 21 million from July through September (a 29% year-over-year increase), while paid subscribers alone grew by 6 million (up 27% YOY).

Those figures come with the asterisk that Joe Rogan, Michelle Obama and other marquee podcasters landed on the platform in Q3, so those subscriber increases can’t be directly equated with an increase in music consumption. However, Hunter Giles, who owns the royalty accounting firm Infinite Catalog and the indie label Infinite Best, has seen streaming become an increasingly reliable revenue source for the 40 catalogs for which he processes royalty payments (including Don Giovanni Records, Kill Rock Stars, Fire Talk, Sooper Records and Father/Daughter Records, to name a few). “The income continues to stay flat or in some cases increase for what we’re seeing as far as streaming data goes,” he says.

Giles is careful to emphasize that there could be a multitude of reasons why a label’s overall streams might increase, including the possibility that a former artist who’s now signed to a bigger label is filtering down streams due to fan engagement in their back catalog. Additionally, Spotify’s average per-stream payout rates and average revenue per user (ARPU) are actually decreasing each month. But the overall increase in usage on the app does appear to make its way down to indie labels’ bottom lines. “The stuff that Spotify publishes in their quarterly investor reports where they’re like, ‘The average number of hours per day for our users is up’ — that has an effect downstream,” Giles says. “It seems to reach every corner in a fucked up trickle-down way.”

Katz has seen a 30% to 40% increase in New Professors’ streams this year, likely making 2020 the label’s biggest year to date both in streaming and in overall gross revenue. Katz believes that that’s partially due to the ongoing growth of top DSPs like Spotify and Apple Music, but also because indie-rock fans — a corner of the music world that’s always been partial to physical releases and/or circumventing hyper-capitalist platforms — have become more familiar with those services.

“I think any indie-rock label owner would tell you the same thing,” Katz says. “That five years ago you could release something and it would just not stream at all. It might sell, but it wouldn’t stream at all. And now those days are over — thankfully.”

Bandcamp proves a valuable buoy

Aside from streaming, many of my sources also cite Bandcamp as a primary revenue driver this year. The online music marketplace had been a cornerstone of the underground multiverse for over a decade now, but 2020 was the year that it became an unavoidable force in the industry as a whole, beyond just the worlds of indie rock and vaporwave.

To date, Bandcamp has brought in $642 million in total music and merch sales since its founding in 2007; nearly 60% of that money ($372 million) was from the last two years alone, and 12% ($75 million) came in during the COVID-19 pandemic alone.

Even more staggering, over half of that $75 million came from just nine days of an official pandemic relief initiative, dubbed “Bandcamp Friday,” in which the company waived their share of revenue (typically 15% for digital music purchases, 10% for merch) on the first Friday of every month from April to December, funnelling all the money directly into the pockets of labels and artists. According to Bandcamp, the first Bandcamp Friday raked in $4.3 million in sales, which was 15x that of a typical Friday. The next one nearly doubled that with $7.1 million.

“It’s pretty much kept us in business this year,” says Father/Daughter Records owner Jessi Frick. “If you compare the other 30 days of sales compared to that one day, Bandcamp Day is easily like five, six times as much as we make the rest of the year. It’s been huge.” While streaming was Father/Daughter’s largest source of revenue in 2017 and 2018, it’s been bumped down to the No. 2 spot in the past few years, as direct-to-consumer sales on sites like Bandcamp rose to the top.

Unlike with streaming rate increases, which are much more difficult to parse and harder to make sweeping generalizations about, Giles can confirm with confidence that every single catalog he accounts for has seen a noticeable bump in Bandcamp revenue this year. There are two main reasons for this — the first being that fans have a real urge to continue supporting artists the way they used to by going to shows and buying from the merch table. “They can’t do that anymore and Bandcamp is by far the most clear way to direct support in a fun way that is rising up to fill that void,” Giles says.

The other reason is the easily understandable appeal of Bandcamp Friday, which Katz believes is as much of a marketing opportunity as it is a day of increased revenue for labels. ”The actual percentage off from Bandcamp Day, in my view, wasn’t what made the difference in how much income we got from it,” Katz says. “It was just having everyone focused on actually buying something on that day and aiming to release something interesting on Bandcamp Day.”

In this vein, Bandcamp Day has become something like a digital version of the annual Record Store Day initiative for physical retail, which also revolves largely around exclusive limited-edition album drops and helped drive nearly 2 million physical album sales in the U.S. between August 29 and October 24 this year. As far as what works on Bandcamp, ”people responded really well to special merch, something that felt above and beyond,” adds Katz. “Whether that was a vinyl repress in a new color or a really well-made garment or other merch item. Something that felt super limited or felt super high quality.”

As helpful as Bandcamp was for more established indie labels, it also became an invaluable part of the business model for newcomers. Elise Okusami, who makes music as Oceanator, is an independent artist and label owner who’s had a surprisingly successful year, mostly thanks to Bandcamp. In August 2020, after pushing back her debut album due to a kerfuffle with her former label, she self-released Oceanator’s Things I Never Said as the first project on her own label Plastic Miracles.

Like many artists who released a project this year, Okusami was incredibly stressed about how it would perform, and especially concerned with how she would be able to sell the vinyl she already ordered with the intention of bringing it on tour with her. “I was like, ‘I don’t know how I’m ever going to sell 400 records,’ it just seemed like so many records to me,” she says. “And then they sold out, which I was not expecting at all.”

Not even two months after the release of Things I Never Said, Okusami signed with the indie institution Polyvinyl Records, who repressed the record immediately. Additionally, she was able to put together physical releases for three other artists on Plastic Miracles and, much to her amazement, break even with the label in its first year as a company.

”I would’ve been stoked for that to happen any year, but I was just extra stoked and surprised for it to happen this year because I was not expecting that,” she says. ”I think the fact that so many people were getting onto Bandcamp to find new stuff was definitely very helpful.”

Miscellaneous obstacles: Delayed shipping and sync opportunities

Despite these real success stories, there’s no ignoring the 44% of respondents to Katz’s poll who said their sales were down.

Even with the Bandcamp spike, Frick says that Father/Daughter Records has seen an overall dip in revenue this year. This could be because of a sparser release schedule compared to prior years, and/or because of a blow to two other historically significant revenue sources: Sync licensing deals and retail sales.

As TV and movie production remained at a standstill for most of the year, labels didn’t have anyone paying them to use their music in their productions, which typically pay out anywhere from $3,000 to $12,000 apiece. Frick says that they only had one of those come in throughout the entire year.

“When a successful release is profiting in the range of $10,000 or $20,000, if you wipe out a couple Netflix syncs at $5,000 [each], well, there goes the margin on that release,” Katz says.

Additionally, Frick says that Father/Daughter lost at least 25% or 30% of their income from retail stores. Once brick-and-mortar stores reopened and began restocking post-lockdown, Frick noticed that they’d buy all the easy sells like Taylor Swift and Billie Eilish. “But for us, maybe something that they’d [otherwise] buy three to five copies of, they’d buy one,” she says.

Another obstacle has been the ongoing issues with shipping and manufacturing delays. Katz and Frick have been more concerned with how physical orders will play out in 2021, given the shockingly long timeframes that vinyl manufacturers are giving to their clients. Frick says that Father/Daughter’s pressing plants are telling her it will take six to seven months to press a record that would normally take just 12 weeks. “Even I’ve just noticed getting art proofs — we would normally get it in 24 to 48 hours, and now it takes almost a week to get new proofs for things,” says Frick.

Although it’s hard to calculate exactly how much of a financial impact shipping delays are having on a given release, Okusami believes that the widespread inability for packages to arrive on time is dissuading people from ordering online altogether. ”I imagine people decide not to order something because it’s going to take forever to get there,” she says. She’s had to send out repeats of records that got lost in the mail or never arrived at their proper destination, which has cost her money and created some aggravation on the customer’s end.

That said, some sources say that people have been relatively patient with the uncertainty and it hasn’t seemed to have too much of an impact on his sales. ”Usually, when [I tell customers] there is this global mishegoss that is slowing down everything and has screwed up the whole world and we can’t wait to get this to you on the day it arrives here and we can throw it in a box, most people are pretty understanding,” says Katz.

This can be extended to other obstacles as well, where none of the sources I spoke with saw these revenue declines being so catastrophic to the point of needing to stop business altogether. “It’s affecting our bottom line a little bit, but not to the point where we have to think about closing our doors,” Frick says.

In fact, Giles takes an even stronger stance that right now is “absolutely” a good time to start, sign to and/or release a record on an indie label.

“I don’t want to downplay what people are saying on Twitter and the frustrations they’re evincing that are super real and super valid. But the data does paint a more nuanced picture,” he says. “This would be a different conversation 15 years ago, when so much of the income was based on a physical sale that happened in a brick and mortar store or at a merch table at a show. But because we’re well into the transition to digital and there’s a lot of actors in the space who are very aggressive about increasing engagement of their users, music has been this very stable thing.”

The above anecdotes show how, unlike live-events companies, record labels have been able to adapt more easily to the chaos of the pandemic thanks to a balance sheet that had already been relying heavily on digital channels. More fans of all genres are embracing streaming services, which can help labels with discovery and monetization of back catalog on a much longer time scale. At the same time, these fan bases are becoming more accustomed to buying physical music and merch on sites like Bandcamp — bringing the decades-old practice of direct artist and label support back to the center of the industry conversation, in a way that will continue to reverberate in 2021.

“Fans are still looking for great recordings of great songs,” Katz says. “The recording of a song has proven to be one of the most resilient media of all time.