Independent labels, tired of being treated like second-class citizens at the bargaining table, have banded together to become a "virtual fifth major" label, and they've already started signing deals. Separately, each independent is tiny; together, they could form the largest label in the world.

The new licensing authority is called Merlin, and it was announced four days ago at this year's Midem music conference in Cannes. The group is headed by Charles Caldas, the former head of Australia's largest independent music distributor. Labels from the US, UK, France, Norway, Japan, Brazil, Spain, New Zealand, Australia, and other countries have already signed on to use their collective size as a bargaining asset.

Caldas has already inked a deal with SNOCAP (the company that Shawn Fanning founded after leaving Napster) that will provide an easy way for independent artists to sell their music on MySpace or to construct their own stores elsewhere. Under the deal, SNOCAP will provide all the backend distribution and payment processing systems and will serve files as unprotected MP3s. Independent labels have been open to selling music without DRM for years (eMusic, the number two download store in the US, offers only MP3s from independent bands), as many artists are more concerned with building a fan base than with possible piracy.

IMPALA, a European consortium of indie labels that has joined the new group, claims that independent music accounts for 29 percent of worldwide music sales and 80 percent of all new releases. These numbers would make Merlin the largest single label in the world, ahead of the "Big Four" of EMI, Warner, Universal, and Sony BMG.

But Merlin isn't a traditional label. That is, it is neither a content aggregator nor a distributor, but simply a licensing authority that negotiates rights. The member labels remain in full control of their own catalogs. Alison Wenham, who heads the World Independent Network, says that "independents will now achieve parity with each other and with the majors in getting a fair share of the revenues now being generated by new business models. Without Merlin, the sector ran a huge risk of being cut out of the revenue chain. No more."

In the past, it has sometimes been difficult for small indie labels to cut deals with the big online music stores because of the negotiating effort required and the relatively small size of such deals. Merlin provides a single point of contact for music stores, which can now negotiate with five major entities and secure rights to nearly all of the world's popular music.