wendyday

THE DAY REPORT: Distribution

A very important aspect of selling your own record is

getting it into the stores and onto the websites that do the bulk of the

download sales. There’s no shortcut here; hard work is the only way to do this

unless you have an incredible buzz, a recent sales track record, or a fool

proof guarantee of record sales to the retailer. The important aspect in this

equation is leverage.

There are three things a distribution company looks at when deciding whether or

not to distribute an independent record label: The quality of the product

(music), the flow of the product into the pipeline (does the label have enough

product to release something every few months), and the economics (does the

label have enough financing to be a real record label and cause

“push” and “pull” through the retail stores).  They also want to know that there is someone

on the team that knows what they are doing (experience is crucial).

 

“Push” is getting the retail stores and websites

excited about carrying the record so they’ll order it for their stores, and

“pull” is getting the consumers into the store or onto the website to

buy the record. Retailers are in business to sell records, be informed about

artists and their releases, create store loyalty, provide a local service (sort

of a music industry center in their local area), and make a nice profit. I find

that if you treat them as such, and with respect, they are happy.  Websites are in business to attract consumers

and sell advertising because that traffic is significant.

 

The stores don’t owe you anything as a new label– bear in

mind they’ve seen many, many labels come and go. It’s your job to convince them

you are serious as a label: understand their strengths and difficulties

(competition in local markets, credit concerns, the internet, etc), and support

them financially through price and positioning and through co-op advertising.  This is not always financially easy to do as

a small label–it’s tough to get a better position in the store than Sony or

UNI, unless there is some incentive for a local store to hook you up–liking

you is good motivation, bringing the artist through on promotional tour to sign

autographs is another good motivator.

 

In a perfect world, retailers want to carry product that

will fly off the shelves at breakneck speed regardless of the price they are

charging. Read that again, it’s important– retailers want to carry product

that will fly off the shelves at breakneck speed regardless of the price they

are charging! Just having a good album does not insure this. Proper set up, a

strong buzz on the streets, strong awareness of the project, radio play, a

healthy budget spent properly and efficiently, added to good music does insure

this.

 

Bear in mind that when a record sells at a discounted price,

the retailer is not absorbing this loss, the label is. The label reduces the

wholesale price by a percentage often by offering more units for a fixed price

to make up the percentage difference– for example a 10% discount might be

offset by offering one record free for every ten ordered instead of lowering

the invoice by 10%. By the way, this free “11th” album is considered

promotional (“free goods”) and the label is NOT responsible for paying

artist royalties on that unit (which is a very good rationale for artists to

limit their “free goods” in their recording contracts). Sorry labels,

gotta look out for the artists!

Because most new labels don’t have a track record or the proper financing to

have flow of product yet, getting distribution even locally through a

legitimate distributor is difficult.   The

goal is to have enough leverage to negotiate from a position of strength

instead of when you need something. And waiting until you no longer need

distribution is hard as hell. That means you have to go to each retail store,

convince them to carry your record (often on consignment, if they even offer

that), and then convince them to pay you for it. Once the record is selling

sufficiently, it’s no longer a struggle, but it’s still time consuming to go to

each store to pick up your money and deliver more records.  The internet is a bit easier to convince

because there’s no storage issues as there are with traditional retail

stores.  For the clients I consult, we use

TuneCore (www.TuneCore.com).  It’s one

place where you can upload your CD (music and artwork) and then they send it

out to the major internet retail sites like CD Baby, iTunes, etc.  Of course, it’s up to you to market and

promote your music once it’s uploaded to the various sites.

Once the record starts selling, or has an incredible regional buzz, the

distributors will become interested and you just need to ask what they can do

for you that you can’t do yourself. Is what you’ll gain worth giving up 20 or

25% of the money? Sometimes yes, sometimes no. A regional distributor (like Select

O Hits) can expand your coverage area (provided you can afford to expand your

area with promotions). But you must weigh the cost of that service.

 

When a distributor looks at your company, preferably through

a business plan so they can see where you’ve been and where you’re going, they

are looking to see how feasible and realistic it is for you to last over the

long haul. Do you have proper staff in key positions: retail sales, radio

promotion, video promotion, marketing, publicity, street promotions, finance

(very key position), etc. These positions can be outsourced as necessary, but

the distributor needs to know the company has the potential to last in an

industry where most have zero staying power.

 

Do the artists or owners of the label have experience and

connections in the industry? Have they ever sold a record before in their

lives? How have they done it? What is the likelihood they’ll be able to do it

again? Do they understand how the industry works? Will they still be in

business down the road or will they fold if things don’t go as planned? Are

they properly financed or are they in over their heads? Properly financed means

enough money to press, create and fill demand, and repeat this process for a

few records in a row without depending on immediate income to sustain the

company.  These are all of the things a

legitimate distributor is considering before doing business with you.

 

It takes anywhere from $200,000 to $1 Million per artist to

properly promote a rap record (even regionally) and takes conceivably 90 to 120

days to get paid after the consumer buys the record, less reserves (the amount

of money the distributor keeps to offset returns from the retail stores–

usually 25% is kept and then liquidated in 6 to 9 months, depending on who

negotiates the deal and your level of power in the negotiation). Can this label

sustain that kind of commitment or will they run out of money half way through

the first project? What is their reputation in their local home base? Have they

sold records before? Do they understand how the music business operates?  How hard do they work? Will they continue to

work hard or will having a distributor make them lazy? How serious are they about

putting out records? What’s their vision–where do they plan to be next year?

In 5 years? In 10?  These are the

questions a distributor is asking themselves about you and your project.

If a distributor likes all the answers they ask about the record label (both to

themselves and others), they then choose to distribute the records for a period

of time (most likely 3 years) and set the percentage they are willing to split

(80-20 is great, with 20% going to the distributor and 80% to the label), the

length of time in which they are willing to liquidate reserves, and the amount

of advance they are willing to part with, if they advance monies at all–most legitimate

ones do not.

 

The more risk they take and the more they give you upfront,

the less you will receive on the back end split. The skill in securing a

banging distribution deal is how badly they want you and how much power you

have when approaching them.  

So

what’s a label to do?  First of all, let’s clear this up out the gate: not

every person putting out a record is a record label.  A real record label

has a small staff, it has more than one release in the pipeline, and it is

properly funded.  Without the proper financing, someone releasing a record

is just that–someone releasing a record.  Without being a real record

label, there is no “juice,” no clout, and no leverage to insure payment. 

Please understand the difference between being an independent record label and

being an entrepreneur trying to control one’s own destiny (and marketing). 

Someone

who comes to a distributor with zero experience selling records, one album with

no set plan to have others follow, and asks for an advance to market that

record, is deluding himself (or herself) into thinking he (or she) will get

paid.  Without pipeline, it will be difficult to get paid.  “Pipeline”

is the release of subsequent albums that a distributor would be able to recoup

any monies from, if there were returns on a prior release.  Therefore it is another form of leverage to

insure payment from a distributor. 

Distributors

have lost so much money on poorly planned record releases over the years that

they tend to shy away from new projects now.  It is harder than ever to

get a real distribution deal from a legitimate distributor, and harder than ever

to get paid.  It used to piss me off when I saw the bullshit some

distributors chose to release, but then I realized that the average distributor

knows NOTHING about rap music or what’s hot on the streets, other than “is it

selling or not,” so when someone arrives on their doorstep with the “hottest CD

in the world,” they tend to take a chance on it.  Guess what happens when

they lose $50,000 on “the hottest CD” in the world, a few times in a row! 

It gets harder for everyone, and the distributor stops taking such a high risk

on new records.  Unfortunately, that’s where we are right now.  The market is overcrowded with mediocre music

that doesn’t stand out, and doesn’t sell well.

For

someone who really wants to release a record, and I am STILL a huge proponent

of going the independent route– it’s not hard to just do it right!  This

is not rocket science.  It’s easier than selling most stuff on the

street–and legal.  But just understand how it works, what a distributor

is supposed to do and not supposed to do, and be able to look at things from

the perspective of others: the distributor, the retail store, the promoter, and

the radio station.  Easy, right?

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