The purpose of making a record is to sell it. The job of a distributor is to get records into retail stores, the job of a record label is to get customers into retail stores, and both use promotion and marketing tactics. Today more music product is manufactured, promoted, and distributed than ever before, (11,331 new releases were put out in 2005), and the distributor is increas-ingly important to independent labels who want to get their records into stores nationally.
What does it take to gain the respect and attention of distributors, and how do they work? In-dependent labels and artists who are releasing their own records need to understand the role of distributors and the relationships between record labels, distributors, and retail stores.
A distribution company is a “middle man” between a record label and the retail stores. It isn’t possible for an independent label to get into the many record stores across the country without a distributor. Although they can “consign” their records to stores on a store-by-store basis, the independent label can only get national retail coverage through a distributor.
Basically, the buyers for the distribution company buy music “product” (CDs, vinyl records, etc.) from a record label. The sales staff for the distribution company sells the label’s product to their retail store accounts. Thus, the primary job of a distributor is to get CDs, vinyl records, and an ever-decreasing stock of cassette tapes into brick-and-mortar retail out-lets; as well as the plethora of online music sellers. They do this by working closely with their clients—the record labels—to promote and market the label’s product.
Different Kinds of Distributors in the United States
One-Stop Distributors carry a wide selection of major label and select independent label product, and sell to independent (mom-and-pop) stores and other retail outlets that sell re-corded music.
Rack jobbers 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; they concentrate on major label product but also carry 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 1990s gave birth to alliances between many regional and national distributors and prominent independent labels. By forming an alliance, independent distributors combine forces to form a stronger entity, representing many inde-pendent labels, and offering retailers a wider variety of product from one source.
A primary job for a new record label is to attract the attention of a distributor. The label does
shows, through mail order and direct sales. So, make sure there’s a market for your style of music. Prove it to distributors by showing them how many records you’ve sold through live sales, Internet sales, and other alternative methods.
After a distributor accepts your product, you must work closely with them, providing informa-tion on successful airplay, print media support, and live performance successes. Keep the dis-tributor updated on any and all promotion and marketing plans and results, as they develop.
Create a relationship that is a true partnership between your label and the distributor.
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 sales/promotion ideas does the label have?
• Are 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 of the release to retail and to radio?
• Has the artist hired a publicist, and/or what is the publicity campaign?
• What kind of Internet presence do the label and the act have?
• Will the artist be touring in support of the release?
• Does the label have the financial resources to provide “co-op” ads?
• Does the label have the financial resources to press additional product?
• Does the label have a “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?
What a Traditional “‘Brick-and-Mortar” Distributor Requires
The CD is the preferred format in most cases, with vinyl records and cassette tapes appropri-ate for certain “niche” musical genre. Obviously, the music should be professionally recorded.
A way to determine if your record sounds professionally recorded is to match the sound qual-ity of the recording with that of the material played on the radio.
In most cases distributors make the following requirements of record labels:
• The label must have been in business at for least three years or have at least three previous releases that have sold 10,000–30,000 copies. Most distributors will not take on a first re-lease product. Note: an exception is the newer breed of “boutique” distributors like Nail which specialize in alternative rock labels.
• The label must have its own trademarked name.
• Catalog numbers must be on each release (usually a three letter abbreviation followed by the numbers; for example, CJK415).
• Each release must have a Universal Product Code, the bar code on the back of the product, because most retail sales are now tracked through SoundScan technology that monitors re-tail sales.
There are many “store programs” that labels can buy into. You must pay for any distribution or retail promotions. These programs can get a release into the “listening stations” in the chain store. Prices for a month-long program can range from $2,000 to $5,000 per chain store. They can arrange for “co-op” advertising, where the costs of media ads are split between the record label and a retailer for specific new releases. The record labels also provide the distributor with “P.O.P.s” (point-of-purchase) items, such as posters, flyers, and cardboard stand-ups that can be used for in-store display. Your record label needs to be well financed. It’s a big mis-take to try to work with distributors without a realistic budget for participating in promotional opportunities.
Be able to furnish the distributor with hundreds of “distributor one-sheets.” These are sum-mary sheets that describe your promotion and marketing plans for your album. They include a bar code, list price, small photo of the album cover, release date, and catalog number of your product.
Distributors expect to receive a negotiated number of “free goods” to use as incentives for retailers to carry the product. Distributors may ask for hundreds of free promotional copies of your release. They need “promo” copies to use in-house, as well as to give away to contacts in the media and at retail stores. All promotional product should have the bar code “punched, clipped, or drilled,” and should not be shrink wrapped. This is to make sure that they are not returned to the distributor as “cleans.” Cleans are the regular product sold in stores. Many people who receive promos have friends in retail or at distributors who can exchange cleans for other CDs.
Labels sell their CDs to distributors for approximately 40–50% of the list price of the release.
For example, a $15.98 list CD might be sold to the distributor for $8. Online music retailers have their own price structures for buying independent CD releases, and I suggest you associate with www.cdbaby.com and consult the site for their amazing list of all their affiliated online music retailers. By the way, the recently announced their first relationship with a brick-and-mortar distributor, so check their site for information on how that can work for you.
If you work with a traditional distributor, when an invoice comes due for payment, the dis-tributor 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 the distributor’s warehouse. This means that $3,500 worth of product is out in the stores, and some of it’s probably still on the store’s shelves, unsold. The distributor is
respon-tion of the label’s product which may be returned to the distributor by the stores. The dis-tributor would, hopefully, send a check to the label for about $2,800 to $3,000.
Distributors accept product on a negotiable billing schedule of between 60 to 180 days per invoice. Don’t expect a distributor to pay your invoices in full or on time. You’ll always be owed something because of the delay between orders sent, invoices received, time payment schedules (50-120 days per invoice) and whether or not your product has sold through or re-turns are pending.
Most national distributors require an “exclusive” arrangement, making them the sole distribu-tor of a label’s product. Also, expect the distribudistribu-tor to request that you remove any product you have on consignment in stores so that they can be the only one to service retailers. Be prepared to sign a written contract with your distributor, because there are no “handshake”
deals any more.
Before You Sign With a Distributor
Investigate the distributor’s financial status. Many labels have closed down in recent years and you can’t afford to get attached to a distributor that may not be able to pay you. Read the trades, especially Billboard, for weekly news on the health of the industry and/or the status of your distributor.
When searching for a distributor, find out which labels they represent. Then talk to someone at those labels to find out how well the distributor got their records into retail and online stores. Ask if the distributor has a sales staff and how large it is. Get to know the Sales Reps.
Find out what commitment the distributor will make to help get your records into stores. Is the distributor truly a national distributor, or only a regional distributor with ambitions to be an national distributor? Many large chain stores will only work with national distributors. Make sure that your distributor has the ability to help you set up retail promotions, such as co-op advertising, (where you must be prepared to pay the costs of media ads for select retailers), in-store artist appearances, in-in-store listening station programs, and P.O.P.s (point of purchase posters and other promotional items).
How Co-op Advertising Works
Co-op advertising is a way for record labels to use their product to pay for media advertising space, and it’s an effective way for them to use their inventory to promote sales. For example, when a label wants to promote an artist’s new CD, they approach a retailer (through their dis-tributor) and offer to take out a media ad that features the retailer selling the release at a spe-cial price. The retailer must purchase a certain quantity of the CD (a “buy-in”). The store also agrees to give it good placement in their store(s), and puts the CD on sale for a limited time.
Basically, this is a win/win situation for all the parties involved.
Returns
It’s standard practice that 100% of defective and overstocked product can be returned to the distributors by the stores. They insist that every label they deal with accept this policy. If a record label deletes a specific title from their catalog, the label must notify the distributor and it can take many months 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 re-serve against returns.
Shipping Instructions
A packing slip must be enclosed with each order the record label sends to a distributor. This must include details of 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, the jewel box is the standard package for CDs. Shipping charges are usually paid for by the label, but may be negotiated after a label has established itself as a customer of the distributor.
Invoices are sent separately, through the mail. The invoice should include an invoice number, invoice date, details of what was shipped, a ship date, unit prices of each title/format sent. The distributor’s PO number and the total amount due should also appear on the invoice. Each shipment must have its own invoice.
The Big Picture
The job of the distributor’s sales staff is to make the buyers at on and offline retail outlets aware of a label’s product. They use promo copies and one-sheets, as well as airplay, press, and live performance reports to convince the buyers at music retail stores to stock a label’s product. If a specific title sells, it’s the job of the distributor, in cooperation with the record label, to provide the retailers with a continuous supply of that title.
It’s essential that a record label has a consistent, professional, and mutually respectful rela-tionship with their distributor. Your distributor will only be as good as your ability to sell the record. Don’t expect them to do your work for you. Remember, all they do is get records into the stores. Work your product relentlessly on as many Fronts as possible—commercial and non-commercial airplay, Internet airplay and sales campaigns, on and offline publicity ideas, and touring, eternally touring!