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 Music
Distributors:
How to Attract
them
and How to Work with
Them
by Christopher Knab Updated February 2008
Back to The Academy
At a time in music
business history when there is more product being manufactured, promoted, and distributed
than ever, the role of the distributor, and their relationship with labels is an
increasingly important one. The purpose of making a record is to (hopefully) sell it. The
following information is intended to introduce the role of, and the relationships between
Independent Distributors, and Record Labels.
Background
Information
To begin with, there
are several different kinds of distributors in the US.
- One-Stop
Distributors carry a wide selection of major label and select independent label
product, and sell to Chain Stores, Independent Stores, and misc. other retail outlets that
sell recorded music product.
- Rackjobbers are
companies that rent or lease space in large department type stores, and other mass
marketing retail outlets. They usually carry only the best selling commercial product
available, concentrating on major label product, and some independent label product with a
strong regional presence.
- Independent
Distributors are distributors of Independent Label product either on a regional basis,
or more likely, as national distributors. The 1990's saw the formation of many "alliance" of
regional distributors ( i.e. A.D.A., for example) bonding together to form larger
companies, representing many Independent Labels, and offering retailers a wider
variety of product.
The primary job of
a Distributor is to get CD's, Records, and Tapes into retail outlets. They do this by
working closely with the record labels to promote and market their CD's. Most distributors regularly publish catalogs listing the labels they carry, and the
titles available. They accept product on a negotiable billing schedule of between 60 to
120 days per invoice. They expect to receive a negotiated number of "free goods"
to be used as incentives for retailers to carry the product, and also need
"promotional copies" to be used in-house, as well as to give away to contacts in
the media, and at retail. they can also arrange for "co-op" advertising, wherein
the costs of media ads are split between the record label and a retailer.
The primary job of
a record label is to get customers into stores. The first step in all this is for the indie artist's label to attract the attention of distributors by having achieved a
modicum of success on their own, by selling product on consignment, or at live shows, andthrough various mail order and direct sales methods.
Having gotten their product accepted by a distributor, the job of a record label is to work closely with their distributor(s),
providing them with information on successful airplay, print media support, and live
performance successes. In addition the record labels create "Distributor One
Sheets", or fact sheets that include promotion and marketing plans, and list price
information.The record labels also provide the distributor with "P.O.P.'s"
(Point of Purchase) items, such as posters, flyers, cardboard standups etc., that can be
used for in-store display.
Basic Information
The CD is the
preferred format for recorded product in most cases, with vinyl and cassettes appropriate
for certain "niche" musical genre. The music should be professionally recorded.
A good measuring stick is to match the sound quality of the independent recording with the
quality of the material played on the radio.
A Record Label wishing
to have their product carried by a Distributor must have the following:
- Its own trademarked
name
- Catalog numbers on each
release ( usually a 3 letter abbreviation followed by the numbers, i.e. CJK415).
- A Universal Product
Code: The Barcode on the back of the product. This is required because most retail sales
are now tracked through the Soundscan technology that monitors retail sales.
What A Distributor
Wants To Know About a Label's Release
- Has the artist had any
success with established mainstream labels?
- Does the artist have a
following, if so, how well known are they?
- If the artist is
unknown, what specific promotion ideas does the label have?
- Are there any well
known "guest" musicians on the recording?
- Does the recording, and
artwork meet the standards of the musical genre?
- Is there any current
airplay on commercial or non-commercial radio?
- Will there be
independent promotion on the release to retail and to radio?
- Has the artist hired a
publicist, and/or what is the publicity campaign?
- Will the artist be
touring in support of their release, and is there a schedule?
- Does the label have the
financial resources to provide "co-op" advertising?
- Does the label have the
financial resources to press additional product?
- Does the label have a
salable "back catalog" of proven sellers?
- How much product from
the label is already out in the stores?
- Does the label have
other distributors selling the same product?
- What are the next
releases from the label, and when are they coming out?
- How are sales/downloads of the artist's release doing on the Internet, and such sites as www.iTunes.com, www.cdbaby.com, www.MySpace.com, www.Tunecore.com and the artist or band's own website?
Other Requirements
The shipping charges
are usually the burden of the label, but may be negotiated after a label has established
itself as a customer. Most national distributors require an "exclusive"
arrangement, making them the sole distributor of a label's product.
Many distributors have
monthly newsletters, and/or update sheets, as well as catalogs. They may require labels to
advertise in them, with the costs of the ad deducted from a particular invoice.
The Distributor One
Sheet should be 1 sheet (8 1/2" x 11") and include:
- Label's logo and
contact information
- Artist Name/Logo
- Catalog # and UPC code
(Barcode)
- List price (i.e.
$15.98) of each available format
- Release Date (to Radio)
- Street Date (for
Retailers, if different from Release Date)
- A brief Artist
background description
- Selling Points
(Discounts, Marketing, and Promotion plans)
All
"Promotional" product should have the artwork "punched, clipped, or
drilled." This is to make sure that they are not returned to the distributor as
"cleans". "Cleans" are the name for regular product sold in stores.
Many people who receive "Promos" have friends in retail or at distributors, and
can exchange "cleans" for CD's they personally want.
Labels sell their CD's
and Tapes to distributors for approximately 50% of the list price of the release. For
example a $15.98 list CD might be purchased by the distributor for $8.
When an invoice
becomes due for payment, the distributor may not necessarily pay that invoice in full. For
example, let's say a label has billed a distributor for a total of $5,000 worth of
product. Let's assume that $1,500 of this product is still in their warehouse. This means
that $3,500 worth of product is out in the stores, some of which is probably still on the
store's shelves, unsold. The distributor is responsible for paying the $3,500 worth of
product placed (less a reserve of 15% to 20% for the label's product which may be returned
to the distributor by the stores.) The distributor would hopefully send a check to the
label for about $2,800 to $3,000.
How "Co-op
Advertising" works
Co-op advertising is a
way for record labels to pay for media ad space with product, and is an effective way to
use their inventory to promote sales. For example, when a label wants to promote a certain
artist's concert, they approach a retailer through their distributor. The label will pay
for the cost of the ad, the retailer can deduct their agreed upon "buy-in" of
the label's product from their invoice with the distributor, while the distributor then
deducts the amount from their account with the label. In return for this, the ad features
the artist's release, with a mention of the concert. The retailer, in addition to carrying
the product (the buy-in), also agrees to give it good placement in their store(s), and put
the product on sale for a limited time. Basically, this arrangement is a win/win situation
for all parties involved.
Returns
It is a standard
practice that 100% of any defective and overstocked product can be returned by the stores
to the distributors. They insist that every label they deal with accept this policy. If a
specific title from a label is deleted from their catalog, the label must notify the
distributor, and it can take up to one year for the distributor to get deleted product
back from the larger chain stores. These larger chains will withhold up to 20% of their
payables to distributors as a reserve against returns.
Shipping Instructions
A packing slip must be
enclosed with each order sent from a label to a distributor. This must include details on
what was ordered, what has been shipped, the number of cartons in the shipment, and the
Purchase Order number from the distributor. All product must be shrink wrapped. In most
cases, for CD's, the jewel box is the standard package.
Invoices are sent
separately, through the mail. The invoice should include an Invoice Number, invoice date,
a detail of what was shipped, a ship date, unit prices of each title/format sent. The
distributors PO number, and the total amount due, should also appear on the invoice. Each
shipment must have it's own invoice.
Summary
The distributor's job
is to make the buyers at retail outlets aware of a label's product. They use their
sales tools; promos, one sheets, airplay, press, Internet, and live performance reports to try and
convince the buyers that they should stock the product they carry. If a specific title
sells, it is the job of the distributor, in cooperation with the label to provide the
retailers with a continuous flow of the product.
It is essential that a label have a consistent, professional, and mutually respectful relationship with their distributors.
Selling recorded product is a team effort, and that fact should never be forgotten. In the
business of music, no one is an island.
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Christopher Knab is an independent music business consultant based in Seattle, Washington. He
is available for private consultations on promoting and marketing independent music, and can be reached by email at: chris@chrisknab.net
Chris Knab's book, 'Music Is Your Business'
is available from the Music Biz Academy bookstore.
Visit the FourFront Media and
Music website for more information on the business of music from
Christopher Knab.
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