By Bernard Baur
Getting your record
into the retail market using old-fashioned brick-and-mortar distribution
isn’t easy. More often than not, it is a brick wall that a majority
of unsigned and indie artists are unable to scale. Music Connection discovered,
however, that there is more than one way into that “Old World”
market. To help you understand the rewards as well as the pitfalls of
distribution, MC consulted with major and indie distributors, experienced
artists and an accomplished music attorney. They not only explain how
best to deal with distributors, but also how to self-distribute your record.
You’ll even find a section entitled “What Distributors Don’t
Want You to Know.”
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THE KEY TO SUCCESS
One of the greatest thrills an artist can ever have is when a perfect stranger buys his recording. This is especially true when it comes to unsigned acts, artists who have a hard enough time getting people out to their shows much less getting them to fork over $10 for a CD. But the ultimate goal of most artists and every label is starkly simple –– sell records.
Distribution means quite a bit more than simply trucking a load of CDs
to stores. It is being able to obtain rackspace for them and getting the
right kind of placement in the right kind of store. How do you do that?
The same way almost everything else is done in the entertainment business
–– with relationships and money.
Every established distributor, whether local, regional or national, has
a circuit of retail outlets they service on a regular basis. Because of
that, they have ongoing relationships with store managers and personnel.
“Putting product in a store is only the first step,” points
out Andy Allen, president of Alternative Distribution Alliance (ADA).
“In addition, you need a sales force that is not only in touch with
the marketplace and the product, but has also nurtured a relationship
with the people [who work] in the stores.”
In fact, the distributor/retail relationship is more important now than
ever, says Dave Mount, Chairman and CEO for Warner/Elektra/Atlantic (WEA),
and is a major factor in successful distribution. “Today, with the
consolidation of retail, you really need strong contacts and the ability
to micro-manage your product. You can only do that if you really know
the people running the stores. That’s where a good sales and marketing
force comes in very handy.”
ADA’s Allen concurs, “Our sales people are the eyes and ears
of the artists and their labels. They’re out there every day in the
marketplace, talking to people, recording sales and seeing what works.
They know the trends and understand the product, which allows them to
present it properly and get the right placement in the right store for
the right music.”
Allen maintains that without that commitment and understanding, you’re
not going to get a successful result: “It’s the key to everything,”
he maintains.
“We’ve had consignment deals with several Borders Books & Music stores. It wasn’t a bad deal; they only took 25 percent of our retail price. But, to be honest, it involved a huge amount of time and work on our part.”
––Robin
Gray, singer, Crazy Cat George
CHOOSING A DISTRIBUTOR
Of course, not every distributor is appropriate for every artist or every
label. In fact, there are very few distributors who can do it all. But,
with a little research and a couple of questions, you can at least determine
which distributors are a viable option.
Eric Paulsen, Chairman and CEO for Navarre Distribution, suggests that
artists should first find out which acts a distributor handles. “See
if the type of music you do is in their area of expertise. Very few distributors
deal with every genre in existence. They really don’t want to,”
he says. “because most distributors want to focus on the genres that
work best for them.”
In that regard, one of the most effective ways to find a compatible distributor,
according to ADA’s Allen, is to call or visit retailers. “Talk
to them and find out who is handling your type of music. You have to understand,”
he specifies, “that jazz is not metal and that metal is not hip-hop.
It seems elementary, but too many people think a distributor is simply
a general conduit that can handle everything when, in fact, they can’t.”
Once a list of potential distributors is narrowed down, it is important
to decide if you want to go with a major or an independent ––
or if you even have a choice. Aldy Damian, president of D3 Entertainment,
an independent label/distributor, claims, “The only difference between
a major and an indie is a perceived credibility. Many people believe that
a major gives them more legitimacy.” However, Damian points out that
both function exactly the same way. “They do the same things,”
he says. “It’s just that a major will expect to see higher sales
numbers in more territories and an indie will settle for quite a bit less.”
Sales numbers are important to every distributor because it is how they
make their money. It’s going to be one of the first questions they
ask when contacted by an artist or a label. “How much have you sold?
Where have you sold it?” and “Do you have documentation proving
it?” Naturally, those questions go both ways. You would likewise
want to know if a distributor is able to efficiently handle demand, when
it occurs, by getting product to retail as quickly as possible.
WEA’s Dave Mount declares, “The primary goal of any distributor
is to shorten the supply line by physical efficiency.” That’s
a fancy way of saying that they should deliver product quickly. Mount
also reports, “Many small and local distributors may be short on
resources, which could affect their ability to fill the pipeline in a
timely manner. So it would be wise for an artist to investigate a distributor’s
performance before committing to them.” An easy way to do that, according
to Mount, is to simply call a few of their artists or label clients.
Most artists realize that there are several different kinds of distributors:
local, regional, national and the simplified “one-stops.” What
may be less obvious, however, is that basically they’re all identical
–– they do the same thing and cut the same deals. The only difference
is in the territory they cover. And more often than not, even a local
distributor will want an option in writing which extends that territory,
blurring the line even more.
As such, a basic consideration for any artist is to find out which territories
a distributor works most effectively. A few phone calls to stores in the
area should get that answer. But you also have to keep in mind that distributors
go where the sales are, and those sales are determined by your act’s
popularity. If you, the artist, are selling well in one area, a good distributor
will generally work that locale as much as possible. “We follow the
opportunities,” ADA’s Allen explains. “We’re not going
to put a product in a market that has no sales potential.”
It would be foolish, then, to contact a distributor who deals in East
Coast hip-hop if you’re a West Coast pop-rock artist, unless you’re
planning to change your genre and extensively tour that area.
MINIMUM REQUIREMENTS
Obtaining a distribution deal is often as difficult as getting a record deal. In fact, Bob Rogel, Sr. VP at Syn-Drome/Ryko, explains, “Even if you’re a hot act with a solid following in a small region, major distributors probably won’t be interested in carrying your record. They generally look for much wider exposure.”
Indeed, in order to get any distributor interested in your recording,
you have to be realistic. One of the first things an artist or label must
know, according to Gabby Castelano, president of HepCat Distribution,
is whether or not a demand exists for the record. “We need to know
if there’s a market for it,” he explains. “We also look
for a ‘hook,’ something that compels us to work with it.”
Castelano recommends that artists do their homework first. He suggests
that they do some legwork and test the market to see if anyone will buy
their record in the areas they want distributed. “Artists really
need to ask themselves if there is an actual demand at the retail level,”
he states.
“The sales price for consignment is based on two things. The base price the artist wants to sell it for and our mark-up. For example, if the artist wants $10, we’ll probably sell it for $18.”
–– Craig
Martin, Tower Records, Marina Del Rey
If there is, Eric Paulsen of Navarre states, “The next step is one that sometimes poses a problem for a lot of acts. They need a business plan and a marketing scheme to sell the music.” Paulsen relates that distributors like to know that they’re associated with someone who knows the business aspects of the music industry. “In most cases,” he says, “they’re going to have to market and promote the record, so we’d like to examine their plans.”
Additionally, ADA’s Allen looks at a track record. “I’d
like to see if the act or label has launched anything before. What’s
the track record on their projects? Have they ever broken into the market
before? Essentially,” he emphasizes, “I need to be convinced
that they know what they’re doing.”
Allen Becker, Sr. VP at RED Distribution, takes that thought a step further,
explaining, “We need to be sure that our clients know how to compete.
We’ll look at prior Sound-Scan numbers or any other records they
want to submit.”
Ultimately, it’s going to take money if an artist or a label wants
to seriously pursue distribution. Bob Rogel of Syn-Drome indicates, “They
have to have the necessary re-sources before they can even begin to think
about distribution. It will usually take a minimum of $10,000 to properly
market a small record. If you want greater results in a larger area, it
will take much more than that.”
DISTRIBUTION DEAL POINTS
If you have it together enough to seek a distribution deal, it helps if you know what to expect in the typical deal situation. Ben McLane, a veteran music attorney who represents artists as well as labels, has been negotiating distribution deals for his clients for many years. McLane explains that typically there are several main deal points to be negotiated.
“The term is usually two to three years, with options, but,”
he points out, “shorter is better so that you can see how the relationship
is working out.”
The second main point is the territory covered. “Most distributors
do not deal with territories outside of the United States. In fact,”
McLane says, “many of them focus on certain regions.” As a result,
McLane suggests that you don’t give away areas the distributor doesn’t
cover. “That may seem like common sense,” he says, “but
contracts will often state that they cover the world, or will ask for
more territories than the distributor is currently working.”
The last, and possibly most important, point is the royalty rate. “Typically
the distributor will ask anywhere from 20 percent to 35 percent of the
wholesale price, if the artist or label presses the CD. If, on the other
hand, they manage to get a distributor to do the pressing, the rate is
reversed and the distributor will ask for 60 percent to 80 percent of
the wholesale price.”
WHAT DISTRIBUTORS DON’T WANT YOU TO KNOW
Distributors are not in business to make your career happen. To them, the bottom line is always in focus and they expect to see a certain amount of sales from anyone they get into business with. In order to avoid losses, they will frequently ask for a guarantee of some sort.
“A few will ask for up-front fees that will cover their costs,”
attorney Ben McLane relates, “and that alone may equal several thousand
dollars. Others will ask for a bond or take a lien on the masters.”
In essence, many distributors are taking a fail-safe position and putting
all the risk on you –– the client.
The second misconception which artists sometimes have is the assumption
that distributors will market and promote the recording. “Most distributors
will not promote your record, except for retail space, unless you’re
a top act signed to a label,” McLane reveals. “They will not
promote it to radio or market it in the press. Their sales force simply
deals with retailers, not the buying public. That’s generally the
responsibility of the artist or the label, and it’s the reason why
distributors require a financial statement before they offer a distribution
deal.”
The third area is of great concern –– getting paid. McLane exposes
the fact that if a distributor doesn’t see the minimum number of
sales they want, the artist probably won’t get paid. “All too
often,” he maintains, “the biggest complaint is that payments
are not forthcoming. Even though they’re supposed to pay monthly
or quarterly, no statements are sent out and no checks are received. Then,”
he says, “we have to go and try to renegotiate all over again if
there isn’t a reversion clause in the contract.”
The clause McLane is referring to is one that terminates the agreement
and reverts all rights back to the artist or label if the distributor
does not pay them.
Another area of concern, one which few people even realize exists, is
the right of distributors to hold money in reserve. “A reserve account
is used to hold back money in case there are returns [of unpurchased CDs],”
McLane reports. “Usually about 20 percent to 30 percent of the gross
royalties are held for an agreed period of time.” McLane advises
that the percentage and the time period be as small as possible. “One
way to avoid it altogether,” he suggests, “is not to overship.
Too many new acts overdo it, thinking that they’re going to sell
phenomenal numbers. Then when they don’t, the distributor holds back
money and the act gets frustrated.”
In that regard, McLane believes that the artist or label should work closely
with the distributor to determine a reasonable number of CDs for shipment,
and hold the rest for later delivery. “It’s better to have the
reserve be your CDs, not your money,” he reasons.
“Find out who is handling your type of music… It seems elementary, but too many people think a distributor is simply a general conduit that can handle everything when, in fact, they can’t.”
–– Andy
Allen, ADA
DO IT YOURSELF
In case all of this information makes you want to gag or forget about distribution altogether, you could consider the do-it-yourself mode. After all, an artist should know who his fans are and where they’re located. If you’re willing to do the grunt work, or are able to enlist people to do it for you, distribution is right around the corner.
There are many local outlets that take CDs on consignment, including Tower
Records, Borders Books & Music, The Wherehouse, Sam Goody’s and
Best Buy. Christopher Allen, a manager at Borders, informs, “We usually
give consignments a six-month trial period. If we think the music fits
our customer base, or the artist knows their fans are in the area, we’ll
stock it and see what happens.”
Craig Martin, general manager for Tower Records in Marina Del Rey, CA,
explains, “The sales price for consignment is based on two things.
The base price the artist wants to sell it for and our mark-up. For example,”
he illustrates, “if the artist wants $10, we’ll probably sell
it for $18.”
Of course, it’s always best to call the store first and speak with
the person in charge of consignments. After a few calls, you might discover
that not every store in a chain will take consignments. Tower Records’
Sunset Boulevard branch, for example, is cutting back on consignments.
Not all Borders locations will accept CDs on consignment. To avoid wasting
time, then, you should telephone first before lugging your CDs all over
town.
Then, of course, there are the mom and pop, neighborhood stores where
deals can sometimes be even better than at the major chains. In this regard,
your ingenuity is your only limitation: a recent cover story in Music
Connection described how God-smack sold their first CD out of a comic
book store. After selling well and creating a buzz, the same album was
later picked up by Republic/Universal and went platinum.
Local blues artist K.K. Martin sells his CDs out of his neighborhood liquor
stores. “They buy them outright,” Martin proclaims, “and
then mark them up for a profit.” Of course Martin only sells them
to the stores at $5 to $6; but he says, “If I maintain my regular
circuit, I can make several hundred dollars every time I make deliveries.
In fact,” he reports, “I sell out of my supply on a continuous
basis.”
Martin also sells his CDs in friends’ stores. “Some of my buddies
own or run stores, while others simply work in them. They not only have
my records in stock, they play them over their sound system,” he
explains.
Another Los Angeles-based act, Crazy Cat George, has followed the chain
store route. Robin Gray, lead singer for the group, relates, “We’ve
had consignment deals with several Borders Books & Music stores. It
wasn’t a bad deal; they only took 25 percent of our retail price.
But, to be honest, it involved a huge amount of time and work on our part.”
Gray relates that artists have to do follow-up on a consistent basis.
“Every one to two months, one of us went into the store and counted
inventory.” Gray admits that their job would have been a lot easier
if they had a bar code on their CD. “Then we could have run it through
their system,” she explains. As a result, Gray indicates that without
a bar code, it’s hardly worth your time.
“The next generation of Web sites will be Dynamic Virtual Interfaces or DVIs. Web sites should resemble video games more than magazine layouts.”
––Scott Thomas Agostinelli, Webmaster for Zrealm.com
Artist Relations, Ernie Ball Inc.
THE ULTIMATE QUESTION
In the final analysis, the threshold question is, “Are you ready for distribution?” If so, you have to ask yourself, “Where is your best chance?”
Ben McLane informs, “Too many acts try to set up distribution in
all parts of the country, even though they don’t have radio play
or tours going there. And there’s no way that they will ever sell
sufficient numbers to make it worth a distributor’s time.”
In order to turn that scenario around, an artist has to take care of business
first and develop a marketing plan. “Everything has to come together,”
McLane explains. “And when it does, distributors will be willing
to give you a chance.”
As a final piece of advice, McLane echoes the usual caveats, “Always
do your homework and check out any distributor you’re interested
in. Find out if they’re reliable and honest and can actually deliver
product when and where you need it. And,” he emphasizes, “never
give away more, in the way of territory or rights, than a distributor
is capable of handling.”
“But,” he concludes, “when you finally find the right distributor
for your music, it can be a great partnership, one that benefits both
of you beyond your greatest expectations.”
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CONTACTS FOR THIS ARTICLE:
Distributors:
ADA 212-343-2485
D3 Entertainment
310-373-4003
Hepcat 714-490-5520
Navarre 612-535-8333
RED 212-337-5200
Syn-Drome/Ryko/WEA
818-344-8880
WEA 818-843-6311
Retailers:
Tower Records 310-208-3061
(Marina del Rey)
Borders 310-475-3444
(Westwood)
Artists:
Crazy Cat George
310-203-7837
K.K. Martin
714-271-5694
Attorney:
Ben McLane 818-752-6694
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©2001 Music Connection Inc.