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Background Information
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.
Types of Distributors
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 has seen as "alliance" of many regional distributors (I.N.D.I. &
A.D.A.) bonding together to form larger conglomerates, representing many
Independent Labels, and offering retailers a wider variety of product.
Distributor Roles
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, Records, and Tapes. 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.
Record Label Roles
The primary job of a record label is 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, and through 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.
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Working With Distributors
Finding Them
The National Association of Independent Record Distributors (NAIRD) has an
annual Directory available that lists Independent Distributors operating
in the United States.
Format
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.
What the Label Must Supply
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. Note: For information on obtaining
a UPC code, contact the Uniform Code Council, Inc., 8163 Old Yankee Rd.
Suite J, Dayton, OH. 45456 (513-435-3870).
What A Distributor Wants To Know
This is the information a distributor cares about when deciding whether to
carry a label's product.
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?
Shipping
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.
Advertising Requirements
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
The Distributor One Sheet is one page (8 1/2" x 11") of basic information
about the band, and includes:
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)
Promo Copies
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.
Pricing
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. An $9.98 cassette would be purchased
for $5.
Payment Terms
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.
Co-op Advertising
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 additon 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.
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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, 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
FourFront Media & Music
Throughout his twenty-five year career in the music business, Christopher
Knab has shared his experiences at many industry conventions and
conferences, including the New Music Seminar, the Northwest Area Music
Business Conference, and numerous radio industry seminars. Mr. Knab is
also currently an instructor in the music/video business program offered
by the Art Institute of Seattle.
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