Merge Records: A Q&A looking back at two decades in the guitar-hero industry

Long before real estate and Wall Street collapsed, the music industry was already swooning. Executives were in a panic as consumers deserted the megastores and stayed home to download files illegally. But even as the biggest recording labels endured wrenching pain, a small label in North Carolina existed in a parallel universe: a topsy-turvy world where advances stretched into the four figures, where successful artists routinely got paid, where feasible budgets and modest revenues made the business of making music something resembling a traditional enterprise.

For 20 years, Merge Records, based in Chapel Hill, has been one of the favorite independent rock-music labels in the U.S., a home to such artistically cherished artists as Magnetic Fields, the Arcade Fire, Lambchop, Spoon and M. Ward. It's no coincidence that its founders, Mac McCaughan and Laura Ballance (pictured), were musicians before they were label execs. Singer-guitarist McCaughan and bassist Ballance comprised half of a hard-driving quartet called Superchunk, a favorite among critics and fans who followed the indie-rock stampede of the 1990s that was set off by Nirvana.