{"id":646,"date":"2014-08-09T18:18:35","date_gmt":"2014-08-09T18:18:35","guid":{"rendered":"http:\/\/dailykemp.com\/?p=646"},"modified":"2015-11-22T23:14:50","modified_gmt":"2015-11-22T23:14:50","slug":"major-success-in-a-minor-key","status":"publish","type":"post","link":"https:\/\/dailykemp.com\/2014\/08\/09\/major-success-in-a-minor-key\/","title":{"rendered":"Major success in a minor key"},"content":{"rendered":"

Tweet<\/a><\/p>

This story about\u00a0Merge Records<\/a>\u00a0was published at\u00a0<\/span>Business North Carolina magazine<\/a> in July 2011. I’m reposting it on my blog in celebration the label’s 2<\/span>5th Anniversary. The photo comes from the cover of the Merge Records book <\/span>Our Noise: The Story of Merge Records<\/em><\/a>. It was shot by the excellent live-music photographer <\/span>Brian Vetter<\/a>. Happy 25th, Merge!<\/span><\/p>\n

\n

By Mark Kemp<\/em><\/h2>\n<\/div>\n
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<\/div>\n
\n
\"Laura<\/a>
\n<\/em>Barbra Streisand seemed a bit flustered. Wearing a majestic necklace with shiny black stones and a flowing maroon dress, the veteran actress and pop star was standing at the podium during the Grammy ceremony in Los Angeles on February 13. Next to her, in a dashing black suit, was\u00a0country singer and songwriter Kris Kristofferson,\u00a0Streisand\u2019s\u00a0grizzled costar in the 1976 blockbuster A Star Is Born<\/em>. The venerable pair had just announced the nominees for the coveted 2010 Album of the Year award.Leaning into the microphone to read the name of the winner, the normally chatty Streisand was suddenly tongue-tied.\u201cAnd the Grammy goes to …\u201d She paused, apparently unable to distinguish the artist\u2019s name from the album title, then continued with a stutter: \u201cThe ssssSuburbs<\/em>\u00a0\u2014 Arcade Fire!\u201d<\/p>\n

For longtime North Carolina punk-rockers Mac McCaughan and Laura Ballance\u2014founders and co-presidents of the Durham-based record company Merge Media Ltd.\u2014the win was a glorious surprise. Merge had released Arcade Fire\u2019s third album,\u00a0The Suburbs<\/em>, six months earlier, and artists on independent labels don\u2019t normally win Grammys. \u201cTo get the Arcade Fire\u2019s name out there to all these people who don\u2019t care about Merge and don\u2019t care about alternative music is big,\u201d McCaughan says. \u201cYou rarely have an opportunity like this to get in front of these people.\u201dTo many of these people<\/em>\u2014mainstream pop fans unfamiliar with the critically acclaimed Canadian band or its Carolina-based label\u2014Arcade Fire\u2019s win was a shock.<\/p>\n

Television personality Rosie O\u2019Donnell took to her Twitter account and immediately addressed it in a snarky tweet: \u201calbum of the year? ummm never heard of them ever.\u201d Her comment kicked up a firestorm among fans of the more famous nominees, including rapper Eminem and pop singers Lady Gaga and Katy Perry. \u201cWho the hell is Arcade Fire\u201d became a mantra in flame wars on blogs such as Tumblr.com, where someone posted a page called whoisarcadefire. In France, a tongue-in-cheek line of T-shirts appeared emblazoned with the phrase \u201cWho The Fuck Is Arcade Fire?\u201d<\/p>\n

YOU CAN\u2019T BUY that kind of publicity on an indie label\u2019s budget, McCaughan says. The 44-year-old musician and entrepreneur is sitting with Ballance at a window table in a small coffee shop near the Merge Records headquarters, a blond-brick building tucked between an alleyway and a furniture store on Chapel Hill Street in downtown Durham. McCaughan is dressed in casual indie-geek chic: a blue sweater, jeans and sneakers. Ballance, also 44, is more stylishly hip: designer glasses, a brown RLX Polo Sport hoodie, muted-green shirt and turquoise necklace. They come here often to sip coffee, nibble on croissants, discuss business or\u2014in today\u2019s case\u2014talk to a reporter about the surprise success of their little record label that could.<\/p>\n

Over the past two decades, Merge has grown from a tiny punk-rock label operated out of Ballance\u2019s Chapel Hill bedroom into one of the longest-lasting and most well-respected independent music companies. Not bad for two people who never expected to become record executives. \u201cWe didn\u2019t start out with any expectations at all,\u201d McCaughan says, his high-pitched and somewhat squeaky voice sounding like it belongs more to the president of a computer software company than to that of a record label. \u201cOur ambitions were pretty small in terms of what we thought we could do.\u201d In fact, McCaughan and Ballance were barely out of their teens when they started Merge. Romantically involved, they were only interested in starting a label to put out singles by their own Triangle-based band, Superchunk, and some of their friends\u2019 bands. The only reason to start an indie label, McCaughan says, is to release fringe music that mainstream labels wouldn\u2019t consider economically viable. Indie labels depend more on fan loyalty and conservative budgeting than big record sales for their survival. \u201cIf someone starts up an indie label and it fails because of lack of record sales, then that person started it with strange expectations.\u201d He and Ballance declined to talk about the private company\u2019s finances.<\/p>\n

So what is indie rock, and what does it mean to the popular-music industry when a band such as Arcade Fire, on a little-known label run out of a nondescript building in Durham, wins a Grammy? For one thing, it means that Internet-era indie rock\u2014once a network of small, regionally based labels featuring adventurous musical styles connected by underground print music magazines and low-budget touring\u2014has exploded. Today, any kid in his bedroom can not only read about bands from obscure music scenes on indie websites such as Pitchfork.com or Stereogum.com but can instantly listen to and download their music, often for free. That levels the playing field between major labels under corporate umbrellas and tiny mom-and-pop indies such as Merge or Saddle Creek Records, the Nebraska label of singer-songwriter Conor Oberst, whose\u00a0I\u2019m Wide Awake, It\u2019s Morning<\/em>\u00a0album under the name Bright Eyes reached the\u00a0Billboard<\/em>\u00a0Top 10 in 2005.<\/p>\n

\u201cWe\u2019re now able to promote smaller bands online in ways that you never could before,\u201d McCaughan says. \u201cWhen there was just print media, we couldn\u2019t even afford to take out ads in [indie-music magazines like]\u00a0Option<\/em>\u00a0at a certain point, and we certainly couldn\u2019t afford to take out ads in\u00a0Spin<\/em>\u00a0or\u00a0Rolling Stone<\/em>. We still can\u2019t afford that for most of our releases. But we can afford to take out ads on blogs, and we also can email advance music to journalists that we couldn\u2019t have afforded to send out when we had to print up 500 review copies of a record that would only sell 2,000 copies in the first place.\u201d<\/p>\n

MERGE\u2019S SUCCESS did not come overnight, and it is not solely the result of Arcade Fire record sales. The label\u2019s first band\u2014McCaughan and Ballance\u2019s Superchunk\u2014was a critical success early on and in the \u201990s sold more albums than most of its indie-rock peers.<\/p>\n

\"Superchunk<\/a>
Superchunk touring in Tokyo, Japan, 2007. McCaughan is at left; Ballance is third from left. (Photo by Masao Nakagami)<\/figcaption><\/figure>\n

Merge and Superchunk both officially formed in 1989, and Merge has established itself over the years by consistently signing reputable artists\u2014bands such as Texas-based Spoon and popular New England singer\/songwriter Stephin Merritt, who puts out electronic-based folk music under the name Magnetic Fields. Among mainstream record executives, McCaughan is seen as a sort of taste-making indie-music guru. \u201cA recording with the name Merge on it is listened to promptly and seriously by anyone in the alternative-rock world, both in the United States and around the world,\u201d Danny Goldberg says. He\u2019s president of New York-based artist-management company Gold Village Entertainment Inc. and in his 40-plus-year career has been president of Atlantic Records and chairman and CEO of Warner Bros. Records and Mercury Records. Goldberg, who has worked with bands ranging from Led Zeppelin to Nirvana, attributes McCaughan and Ballance\u2019s Midas touch to instinct rather than calculating business sense. \u201cIt\u2019s palpable that every release on Merge is an expression of their artistic taste, without regard to transient commercial trends,\u201d he says.<\/p>\n

To McCaughan and Ballance, Merge\u2019s success is more a combination of instinct, timing and luck. As a teenager growing up in Durham in the early \u201980s, McCaughan followed bands on early indie-punk labels. After graduating from high school, he left North Carolina for New York to study history at Columbia University. During a break between his sophomore and junior years in 1987, he got a job at Pepper\u2019s Pizza in Chapel Hill, where, scruffy and dreadlocked, he met a fellow musical misfit who dyed her hair black, wore dark makeup and clothing and listened to Goth rock. Born in Charlotte and reared in Atlanta and Raleigh, Ballance was studying anthropology at Carolina. After they formed Merge to put out Superchunk singles, they quickly found that the band was outgrowing the label and decided to sign it to New York-based Matador Records.<\/p>\n

They borrowed money wherever they could to pay for Merge\u2019s earliest singles\u2014friends pitched in $200 here; family members, $500 there\u2014and after the records were sold, normally at punk shows, they would pay off the loans and start recording another one. Merge\u2019s first official release, on June 1, 1989, was a cassette by a band called Bricks. Over the next 12 years, the label\u2019s success was in direct proportion to Superchunk\u2019s. By 1994, after three successful albums on Matador and several singles on Merge, the band parted ways with the larger label. By then, Superchunk had become big enough to land a performance on\u00a0Late Night with Conan O\u2019Brien<\/em>, and Merge had moved out of Ballance\u2019s home. When they released\u00a0Foolish<\/em>\u00a0that year, it sold a respectable 40,000 copies.<\/p>\n

The label\u2019s growing stable of artists had come to include North Carolina alternative-rock bands Archers of Loaf and Polvo, Nashville alt-country band Lambchop and such nonregional acts as New Zealand\u2019s The 3Ds. Though the company was not able to offer big advances, its growing reputation for signing good bands was a powerful lure. \u201cWe were like, \u2018Here are the other bands on our label\u2014Superchunk, Polvo, Lambchop\u2014and we\u2019ll get your record out,\u2019\u201d McCaughan recalls. Merge had tapped one of the biggest independent-label distributors, Chicago-based Touch and Go Records. \u201cIt\u2019s one thing to tell someone you\u2019ll put their record out and another thing to say that it will actually be in stores. We could say that.\u201d<\/p>\n

\u201cA recording with the name Merge on it is listened to promptly and seriously by anyone in the alternative-rock world, both in the United States and around the world.\u201d \u2014\u00a0Music-industry veteran Danny Goldberg<\/strong><\/p><\/blockquote>\n

BALLANCE and McCaughan had carved out specific roles for themselves: He was the creative director with a golden ear and an eye for artistic presentation; she held the purse strings, making sure Merge didn\u2019t spend money unwisely. It was the perfect match, though their romance began sinking with the rise of their record company and band. Ballance was particularly unhappy. \u201cShe just reached a point where working with him, playing with him and being his girlfriend was too much. And she cut out the part that drove her crazy,\u201d McCaughan\u2019s college roommate Brandon Holley recalls in the oral biography\u00a0Our Noise: The Story of Merge Records, the Indie Label That Got Big and Stayed Small<\/em>. Journalist John Cook wrote the book\u2014published by Algonquin Books of Chapel Hill in 2009\u2014with Ballance and McCaughan. Many of the lyrics on\u00a0Foolish<\/em>\u00a0revolved around their breakup, and for a few years afterward, things were shaky for both the band and Merge. \u201cWhen we started the tour for\u00a0Foolish<\/em>, I asked for Mac\u2019s vocals to be taken out of my monitor mix, because the words were making me cry,\u201d she says in the book. \u201cI would be on stage, playing these songs, and I would be crying. It was terrible.\u201d<\/p>\n

Even today, hints of dissonance appear when the partners, both now parents married to other people, discuss business, but it\u2019s somehow clear that this yin and yang are part of what has made the company successful. Sitting in the Durham coffee shop, Ballance gently argues with McCaughan over the timing of Merge\u2019s move from her apartment.<\/p>\n

Ballance: \u201cI don\u2019t think we got an office before \u201994.\u201d<\/p>\n

McCaughan: \u201cIt was definitely before \u201994. I know that when\u00a0Tossing Seeds<\/em>\u00a0and the Polvo record came out, we were in an office.\u201d<\/p>\n

Ballance: \u201cIt was in my house then.\u201d<\/p>\n

McCaughan: \u201cReally?\u201d<\/p>\n

Ballance: \u201cYes.\u201d<\/p>\n

The soldiered on, building Merge\u2019s reputation with each new artist signing and taking risks as they went. The label\u2019s first big milestone came in 1999 with the release of Magnetic Fields\u2019 69 Love Songs<\/em>, a project considered an anomaly in the music industry: a limited-edition, three-disc set that included costly artwork. To everyone\u2019s surprise, it sold out immediately and received glowing reviews from\u00a0The Village Voice<\/em>\u00a0and\u00a0Rolling Stone<\/em>. The box set went on to sell more than 60,000 copies; combined with sales of each disc, later released individually, it has sold about 150,000 copies. \u201cIt surprised us,\u201d Ballance says. \u201cI mean, Magnetic Fields were already a big band on Merge, but that release went nuts.\u201d<\/p>\n

Merge became an even hotter property to younger artists, and label loyalty reached a new high. It signed Louisiana psychedelic band Neutral Milk Hotel and then Spoon. Then, in 2003, Arcade Fire, already fans of Neutral Milk and Magnetic Fields, needed a drummer. According to\u00a0Our Noise<\/em>, a friend of the band suggested they approach Howard Bilerman to fill in. Bilerman, a Canadian recording engineer, wasn\u2019t too impressed with what he had heard, but an impromptu live performance convinced him that the band had potential and persuaded him to join. Because of an early interest in Superchunk, Bilerman was friends with Ballance and McCaughan, and it turned out Merge was Arcade Fire founder Win Butler\u2019s ideal label. Despite Bilerman\u2019s reluctance to impose on the friendship, he sent Merge a letter and a CD.<\/p>\n

After hearing it, their expectations were modest, Ballance says. \u201cWe were like, \u2018This is great. I think maybe we could sell 40,000 copies.\u2019\u201d It sold 60,000 out of the box, more than the 50,000 it takes for an indie album to be considered a success nowadays. Arcade Fire, they figured, might one day be as big as Superchunk.<\/p>\n

 <\/p>\n

INSIDE THE MERGE office in Durham, exposed brick walls display lots of colorful, primitive artwork from one of indie rock\u2019s patron saints, assembly-line artist Steve Keene. The basement is a maze of shelves housing the growing catalog of records and CDs of the more than 80 acts on the label. But the space is not overly ornate, in large part due to Ballance\u2019s fiscal restraint. \u201cWe\u2019ve always been able to turn a profit,\u201d she says, \u201cbecause we\u2019ve never spent a lot of money on things we don\u2019t need. And that\u2019s only sensible: If you don\u2019t have the money, you can\u2019t spend it. That was particularly true in the early years, because it\u2019s not like anybody was giving us a line of credit.\u201d Big labels give executives expense accounts to court acts and rely heavily on record sales to remain afloat. Merge is a niche brand that signs acts who want to release records under Merge\u2019s name. \u201cIf you ask someone who works for Sony, \u2018Who do you want to sell records to?\u2019 they\u2019ll say they want to sell them to everyone who has access to a Best Buy. But for us \u2014 that\u2019s great if those people want what we have. That\u2019s awesome, and we want them to be able to get it. But we\u2019re not swinging for the fences in that way,\u201d McCaughan says in\u00a0\u00a0<\/em>Our Noise.<\/p>\n

The technological developments of the last decade have enabled Merge to save money on marketing, but records are harder than ever to sell, due to the blessing and curse that is the Internet. Now that fans can find music online and download it for free, the kinds of albums that once sold millions of copies often stall out at around 500,000. Despite the hubbub surrounding Arcade Fire\u2019s first two albums \u2014 2004\u2019s\u00a0Funeral<\/em>\u00a0and 2007\u2019s\u00a0Neon Bible<\/em>, which sold 92,000 copies upon its release \u2014 last year\u2019s\u00a0The Suburbs<\/em>\u00a0had sold only 486,000 going into the Grammys. According to the music trade magazine\u00a0Billboard<\/em>, sales spiked 238% after it won, but Ballance calls that a \u201clittle bump,\u201d not the kind of numbers one would expect for a band that packs arenas.<\/p>\n

Still, McCaughan and Ballance say the digital age\u2019s pros far outweigh its cons. After all, pre-Internet an indie-rock band would never have reached Arcade Fire\u2019s popularity without moving to a major label. And that\u2019s part of the reason the band has remained with Merge: They can release No. 1 records without a bunch of suits sticking their hands in the mix. On a major label, executives tend to mold young artists into hit-making machines, and if those artists don\u2019t deliver, they\u2019re dropped.<\/p>\n

McCaughan and Ballance don\u2019t think in those terms. When they first heard Arcade Fire\u2019s demo, they didn\u2019t hear top-10 pop potential or see a future Grammy winner. They saw and heard a good band. \u201cIt was obvious upon first listen what was good about them,\u201d McCaughan says. \u201cThe music was appealing in a way that\u2019s broad and emotional and all the things that make people like them. But it would be ridiculous to say, \u2018Oh, this band is going to sell a million records.\u2019 You just can\u2019t think that way.\u201d Ironically, that anti-mainstream approach is what has gained Merge respect from seasoned mainstream executives. \u201cIn the mainstream music business,\u201d Danny Goldberg says, \u201cMerge is widely respected not only because they signed Arcade Fire but because they held on to them.\u201d<\/p>\n

\"Merge3\"<\/a><\/h2>\n

The art of the deal<\/h2>\n

To major-label executives, indies couldn\u2019t operate more counterintuitively<\/strong><\/h2>\n

With their smaller budgets and modest sales expectations, independent record labels can release music that\u2019s more adventurous than most mainstream pop. But to do that, indie-label owners must think very differently than executives at corporate labels like Capitol or Warner Bros. Major labels expect records to sell well, and to that end, they offer new artists comparatively large advances \u2014 $150,000 to $300,000, typically. With those advances, artists are normally responsible for paying expenses such as producers\u2019 fees, packaging, distribution, marketing and promotional materials. An advance is like a loan, and the label recoups the money by deducting it from the artist\u2019s royalties, usually 10% to 13% of the retail price of the album.<\/p>\n

Artists who fail to sell enough records to pay off their (sometimes extravagant) expenses are normally dropped from the label. Major labels typically retain ownership of an artist\u2019s master tapes, so if the label decides not to put an album out, the music doesn\u2019t go back to the artist, it goes into the label\u2019s vaults, rarely ever to be heard by anyone except those who made it.<\/p>\n

By contrast, indie labels generally offer much smaller advances or no advance at all, and they don\u2019t normally retain ownership of the masters. Indie labels still recoup recording and other expenses before an artist is paid royalties, but the expenses are typically much lower for an indie record. Marketing of an indie record, for example, is targeted to specific fans rather than a mainstream audience. Merge offers very conservative advances but generous royalty rates, and Ballance and McCaughan have a reputation for encouraging bands not to spend money on unnecessary promotional stunts like videos. \u201cPart of it is being realistic about stuff and not putting yourself in a hole after one record because you spent too much money on either recording it or making a video or whatever,\u201d McCaughan told musician David Byrne (who also started an indie label, Luaka Bop) in a 2007\u00a0Wired<\/em>\u00a0magazine audio interview. \u201cThere are certain things in the business that even the bands we work with think are done in a certain way \u2014 like, oh, you have to hire a publicist, you have to do this, you have to do that. And we\u2019re like, \u2018Look, you can do that if you can afford to do that.\u2019 But sometimes it just doesn\u2019t make sense to do all the things that it seems like everyone does.\u2019\u2019<\/p>\n

Mark Kemp is a Charlotte-based freelance writer.<\/em><\/p>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

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He has written about music and culture since the early 1980s, and has served as senior music editor at Rolling Stone, VP of music editorial at MTV and VH1, executive editor of Option, entertainment editor at The Charlotte Observer, and editor-in-chief at Creative Loafing. In 1997 he received a Grammy nomination for his liner notes to Farewells & Fantasies, a retrospective of songs by '60s protest singer Phil Ochs. 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