Swedish music label X5 picks up Sun

Not every new digital music venture has roots in Sweden, but it often feels that way.

Less than two months after music streaming service Spotify captured widespread attention with its U.S. launch, fellow Scandi startup X5 Music Group is also making inroads Stateside, laying claim to that most American of musical institutions, Sun Records.

X5, founded in Stockholm in 2003, is a record label that operates under a unique strategy. The label signs no new artists of its own and has never released a physical album. Instead, the group acquires deep catalogs (mostly classical thus far) and sells them through iTunes and Amazon, repackaged into budget-priced thematic compilations with new artwork.

The strategy is not exactly new. In fact, a close analogue would be the Time-Life CD compilations historically sold during commercial breaks on the deeper recesses of basic cable. But the canniness with which the label has updated that strategy for the digital marketplace — with releases heavily search-engine optimized for online retailers, and inhouse-created cover art designed to look best at postage-stamp size — sets it apart.

Its efforts have paid off: The tiny company has quietly become the No. 2 classical label in the U.S. (trailing only the music industry’s overall leader, Universal Music Group), having sold more than 150 million songs since 2007, with 13 albums hitting No. 1 on the Billboard Classical chart last year.

The label’s American launch came after securing a $9 million January investment from Northzone Ventures, also a lead investor in Spotify. But this week’s deal to license the entire 6,000-track catalog of Sun Records, the legendary Memphis home (now headquartered in Nashville) of Johnny Cash, Jerry Lee Lewis and Carl Perkins, is the one that has them poised to make a new splash. (The deal does not include tracks by Sun’s most famous son, Elvis Presley. Those recordings were scooped up by RCA decades ago.)

Speaking from the label’s new American offices in the Empire State Building, X5’s North American CEO Scott Ambrose Reilly, who previously helped spearhead the development of Amazon’s MP3 business, acknowledged that the markets are quite different.

“For one, there’s no publishing to be paid (in classical),” said Reilly. “And two, classical catalogs are very easy to license, so fairly quickly after you have success you start to see copycat albums come around with more tracks, lower prices. It’s harder to hold the territory.

“With Sun we won’t have that problem. (A competitor) couldn’t just go to a different orchestra… So it’s competitively a better investment. We can’t go to the same track volume we do on classical releases, but because of the limited ability to license, we won’t need to.”

X5-distributed Sun releases will start to roll out next month, but the Sun acquisition is just the start. The company is at work acquiring other catalogs, and Reilly mentioned that some Sun material will be packaged alongside other labels’ material from the early rock era. Most promisingly, he noted that a vast number of Sun recordings have yet to be released digitally, meaning the company’s strategy could penetrate beyond casual “greatest hits” buyers.

“(Sun) has really focused on top-sellers, and we’re of the belief that for a catalog as great as Sun’s, there’s long-tail potential that they may have overlooked,” Reilly noted.

Sun Records prexy John Singleton puts it more simply: “I would compare it to, say, you take an older woman, put on new makeup, a new hairstyle, a new dress on her and she looks completely different,” he said. “They’re planning on doing something like that.”

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