Peter Spellman is director of career development at Berklee College of Music, Boston, and president of Music Business Solutions (http://www.mbsolutions.com), a training ground for music entrepreneurs.  He is author of "The Self-Promoting Musician," "The Musician's Internet" and his latest, "Indie Power: A Business-Building Guide for Record Labels, Music Production Houses and Merchant Musicians," all available from his web site.

Indie labels are a richly diverse group of small companies, spanning every music style from a capella to zydeco. Their business structures are diverse too, from full-corporate subsidiaries to solo micro-business. And so defining them remains difficult.

Some indies with minority or majority ownership by major record companies are classified as "independents" thanks to their use of independent distribution (i.e., national and regional distributors NOT owned by the major labels).

Others are distributed by majors, but remain fiercely independent in terms of spirit and ownership.

The rest (most, really) are very small, often artist-run music production/marketing companies doing the best they can in a tight marketplace.

Indie market share in the U.S. is about 25% (most surveys say 20%, but they don't account for "under the radar" sales that happen at performances and through direct mail). Indie market share is even higher in other countries like Japan where indies account for well over 50% of all record sales.

What they all have in common, however, is a focus on "niche" markets.

"Niche marketing" strategies have long been used by small or undercapitalized firms as a means of achieving some sort of competitive advantage against other companies in their market.

"Niche" is an architectural term referring to a special place that's designed to display or show off an object of some kind, like an ornament, that's placed in a recess of a wall or an arched area of a room.

And that's just what a niche can be for small labels. A niche sets them off from other labels who do something similar and draw the best possible attention to what they can offer.

Your best niche will always be the one that you're most motivated to work hard at, learn as much as possible about for years to come, and evolve with as it matures and develops.

Successful niche marketing among independent labels has taken a number of forms, including:

• Format specialization (such as Ryko's "CD-only" strategy and Twin Tone's "digital music file-only").
• Price (Rounder Records' focus on "cut-out" records, i.e., records that are no longer being manufactured).
• Distribution outlet (e.g., any number of small indie record companies operate strictly as mail-order houses).
• Packaging (Putumayo's colorful world music series is easily recognizable in stores).

Most indie record labels, however, use GENRE Ð the stylistic or thematic classification of popular music works Ð as their primary means of market differentiation.

The Americana sounds of New West Records, Red House Records' focus on singer/songwriters, the creative acid jazz of Instinct, and the deep reggae catalog of Trojan insures listeners they can expect quality discs from each company within their respective niche.

Indie labels have almost exclusive dibs on niche styles since their market size fails to attract major label attention. The majors simply can't justify putting resources into music styles where unit sale outcomes hover in the 2000 to 20,000 range. They need 150,000 sales and up to even register on their radar screens.

Music genres operate as social contracts of sorts, uniting those involved in the music production (including musicians, engineers, producers, and songwriters) and the music promotion (distributors, record stores, publicists, radio stations, clubs, TV networks, the press and consumers) in a shared understanding.

In a real sense, music genres serve as a shorthand between artist, label and listener.

Each music genre is surrounded by its own media culture too, enabling its promoters to target its unique market channels quite effectively, with high contact and little waste. The indie sector is the crucial breeding ground for new music. It serves as the R&D lab for the majors but its primary motive (unlike the majors) is the love of the music and an intimate acquaintance with the same.

"While the majors want to sell music like MacDonalds sells hamburgers, we'd rather be a small chain of gourmet restaurants with a line going around the block," says Alligator Records' founder Bruce Igl auer. "It's the menu that counts Ð not how many are served." Independent labels are artistically and creatively on the cutting-edge of the new music.

These companies didn't simply find a niche and fill it Ð as so many lesser new age and "fuzak" labels do. Nor did they just concoct one and market it, like so many major-label-forged "alternative" indies. They usually developed their label along with the music they presented, often as a hobby, bringing bands and artists to an ardent audience and then riding the crest of their influence.

For a number of the smarter ones, yesterday's hobby has become today's gold mine.

by Peter Spellman

Director of Career Development at Berklee College of Music, Boston, and author of The Self-Promoting Musician: Do-it-Yourself Strategies for Independent Music Success (Berklee Press). You can find him at Music Business Solutions.