Robert Cookson financialTimes.com 5/20/15
Martin Mills may have built one of the world’s largest independent record companies — launching artists from Adele to Vampire Weekend — but he still runs Beggars Group from a quiet residential street in Wandsworth, southwest London.
Boiling a kettle in a kitchen that doubles as the office reception, Mr Mills explains that he had no idea how big his business would grow when he acquired the property in 1984. So over the years, he bought four adjacent houses and connected them into a rabbit warren of rooms — including a basement overflowing with crates of vinyl, a boardroom where meetings take place around a ping-pong table, and two dormitory-style apartments for visiting artists.
“It’s nice when you have artists staying upstairs who come down for a beer at lunch time in their pyjamas,” he says.
That the Beggars headquarters is a series of houses rather than a conventional office suits the personality of the company well. Its business culture is starkly different to those of the world’s three major record companies — Universal, Sony and Warner — which all occupy flashy offices in Kensington.
“It sounds incredibly clichéd but we’re in it for the music. We’re not really in it for the money,” he says.
Yet a focus on nurturing original artists rather than chasing pop hits has not stopped Beggars becoming the largest and most influential independent record label network in Europe. Through its five labels — XL, 4AD, Matador, Rough Trade and Young Turks — the company has consistently been at the forefront of the global music scene. Its past and present artists include The Pixies, The Prodigy, The White Stripes and The xx, and in recent years it has struck gold with Adele, who has sold more than 35m copies of her two albums and is currently working on her third.
Mugs of tea in hand, Mr Mills leads the way up a small spiral staircase to a meeting room known as the Green Room. His green T-shirt blends into the sofa and wallpaper.
This is going to be a “big, big summer” for the record industry, he says. Apple is set to launch its new music subscription service, he explains, while YouTube is rolling out its own paid-for music offering and Spotify is locked in crucial licensing negotiations with the majors.
“All of those big digital players and their relationship with the industry are in play at the moment,” he says.
When Mr Mills founded Beggars in 1976, recorded music was all about vinyl. He was running a small chain of record stores in west London when an English punk band called The Lurkers, who had been rehearsing in the basement of the Fulham shop, asked for help putting out their music.
We’re big supporters of what Spotify has brought to the market
“It just grew from there,” says Mr Mills, an Oxford graduate with closely-cropped white hair and stubble. “For many, many years we were just putting one foot in front of the other without any kind of idea of where we were heading to. There was never any grand plan or grand ambition, it just happened.”
Yet the fact that Beggars has survived for four decades, even as hundreds of other indies folded or were snapped up by the majors, is not the result of sheer luck and blind wandering. It has grown even as spending on recorded music halved since 2000 and as the majors came to control about three-quarters of the sector’s $15bn annual sales.
One reason for survival is strict financial management. Even now, the 66-year-old still reviews every single payment made by the business and says he makes it very clear to employees when they have made a mistake.
“There’s a level of financial micromanagement that I think works really well, allied with a general very, very loose-touch management,” he says.
Though the Bob Dylan fan visits several live gigs a week, he leaves decisions about which artists to bring into the Beggars “family” to specialists in each of the group’s five labels.
The other big part of his job is making broad, strategic decisions for the future of the business. One of the most prescient of these was to set up offices in a dozen of the world’s major music markets, from New York to Tokyo. That gave Beggars control of its own global distribution network and differentiated it from most indie labels, which must rely on third parties.
“We work in a global market these days and you have to set up records globally,” he says.
Though rooted in vinyl and CDs, the company has skilfully navigated the consumer shift to digital and is consistently profitable. In an average year Beggars chalks up sales of £50m, generating about two-thirds from downloads and streaming, and the remainder from CDs and vinyl. Half of the money that flows in relates to its extensive back catalogue, and half to new releases.
Mr Mills is broadly confident that the rise of streaming will be good for the future of the music sector, though he cautions that “it’s hard to get perspective when you’re in the eye of the storm”.
“We’re big supporters of what Spotify has brought to the market,” he says, referring to its model of giving people access to millions of songs for $10 a month, in parallel with a free version of its service that includes advertising. Spotify is doing a good job of converting its rapidly growing base of free users into paying subscribers, he argues, and so rights owners should give it a “substantial degree of freedom” to develop in the way that it thinks will work.
But he warns that this “freemium” model is now under threat. Universal, the world’s largest record company, has this year become resistant towards free streaming and is putting pressure on Spotify to change the nature of its
service as it negotiates a new licensing agreement.
“They’ve swung 180 degrees in a short period of time and that’s proving disruptive,” Mr Mills says. “The problem is that we live in an oligopolistic world, and Universal very much drives the market.”
Yet, while Beggars is only a fraction of the size of even the smallest major, Mr Mills does wield power. He played an instrumental role in setting up the trade body Aim in 1999, which for the first time brought together hundreds of independent labels to speak with a single voice. He is also chairman of Merlin, a rights licensing body, which last year forced YouTube to back down in a bruising fight over the terms that it offered small record companies.
Mostly, however, Mr Mills operates out of the limelight. “I’m doing my best when I’m invisible,” he says. “People sometimes ask me what I do all day for a job these days, and my answer is I maintain the balance. There’s an awful lot of seesawing going on in this modern cottage industry that I preside over, and maintaining the balance is what I do.”