By
John McGlasson
In my first column, I called myself out as a label owner first thing, to look at whether an artist/band even needs a label in these days of digital, and stated my opinion that labels are still necessary for success. This time I'm calling out the music distribution industry to determine if the middleman is necessary today.
If you read my first column, I gave great credit to our distributor for securing an artist exclusive feature pre-release on a major download site, but in this column I'm going to shed some sunlight on some dark, ugly secrets about distribution and its relationship with big retail, not our distributor in particular, because I don't think they do anything out of the ordinary, in fact I think we come out better then with others we could've signed with.
With the inevitable death of big, corporate retail, to which every major music distributor is tied, what will be left for distributors to do when there are no more big retail stores to ship to? As I mentioned in the last column, Best Buy is eliminating the cd as their loss leader, and now rumors are flying that Barnes & Noble will end music sales after the holidays. Tower was the largest, so if people don't see their doom as a sign they're just in denial - Tower was not mismanaged. It doesn't matter that Virgin's stores are slick and huge, that's where people go to buy Justin Timberlake, and do I really want our catalog in the same store?
The truth is, our kind of stuff is not selling in big retail anyway. Only the major labels can afford to play the big retail game, spending $10million to take in $10.3mil. But old-world distribution forces every label to play that game, shipping your goods to major operations where at best you can expect to move only a few cds, but it costs hundreds or thousands per store to get decent placement to make that happen, so what's the point?
The return policy is what kills labels, as the distributor keeps their portion of the sale no matter what, and if that cd gets returned, you pay the retailer the full price they paid, the shipping back and forth, and a restocking fee to the distributor, essentially buying back your own cd at nearly full retail, up to 40% more then you would've made had it not been returned. With the rate of store closures, and an open-ended, limitless return policy provided to retailers by distributors, this is just bad business in this new industry.
So what's the alternative? When one good selling title’s profits are eaten up by return charges from a title that's not doing as well, how does one ever sell music and get paid for it? We're looking at many new ideas for direct-marketing to indie stores, nothing new there, but I believe that the return policy must be changed in the industry for labels to be able to continue to provide goods to retailers. Indie labels like ours must be willing to sell less, for less, to get paid, and retailers must be willing, in exchange for the much better pricing, to carry a title longer before returning it, if they can return it. We'll sell at a very low price to indie stores outright with no or a limited return policy, ensuring it stays on the shelves long enough for our promo efforts to bear fruit.
With the distribution business now becoming the returns business, it appears that the labels will soon become the distributors. We welcome it.
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