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If some of this seems ridiculously basic, you're way ahead of the game!
1. What's the first step?
Send a sample of your product. Most distributors accept finished product
for consideration only. CD's are the format of choice. Most distributors
rarely consider cassette only releases for distribution, and most no
longer deal with vinyl. At the moment, most distributors are strictly a
distributor and not a label (i.e. they do not manufacture finished CD's
from your master)
The music should be professionally recorded, and the artwork should be
appropriate for the genre.
If you are pressing your own CD s and selling them, in distributor's eyes
you are a label. A label must have its own name, catalog numbers, and
Universal Product Code. We recommend a trademark search when naming your
company. When designing the packaging, the catalog number (preferably
consisting of a three letter label abbreviation followed by the number,
[or instance ARC 1001) should be clearly visible on the spines, The
catalog number should be the same for CD and Cassette. The UPC Code Bar
Code) must be on the back cover of the CD and Cassette. Most distributors
cannot distribute any product that is not bar coded, All of their
important accounts currently insist on bar codes to track product. If you
already have salable product manufactured without bar codes, this can be
remedied by having decals printed with the appropriate codes.
For information on obtaining our own UPC code, Contact The Uniform Code
Council, Inc. in Dayton, 0H.
2. How do distributors decide what to pick up for distribution?
The most important thing to remember is that the distributor is your
customer. They purchase pre recorded music that they believe they can sell
to stores, who then sell to the consumer. There are a great number of
factors that weigh upon their decision to distribute a particular
recording or catalog. Some of the most important questions they ask upon
presentation of finished product are:
Is the artist well known with an established following?
Does the artist have a sales track record in the mainstream record trade?
Is there independent radio and/or retail promotion?
Is there a co-op ad budget? (see #10 below)
If this is a new artist, what sort of promotion can they expect from the
label or the artist that will help sell records?
Is the artist actively performing or touring in their area?
Is there any current radio activity on this title?
Are there any well known guest musicians?
Does the label have the resources to press enough product if the demand
becomes great?
What are the label's upcoming releases, and when can they expect them?
Does the label have a salable back catalog?
Does the label also sell to competing distributors in their territory?
How much of the catalog is already on store shelves?
Does the quality of the recording, and the artwork measure up to the
standards of its genre?
All of these concerns will have a bearing on the distributor's decision to
pick up a label for distribution. Unfortunately, it takes a lot more than
just the inherent quality of the music to sell records.
3. Suppose the distributor has decided to distribute your label-what next?
The distributor will place an initial purchase order for goods to be
shipped to the distributor's warehouse.
The distributor may need a letter from the label authorizing our
exclusivity for certain accounts in their territory.
Some distributors ask that new labels advertise a page in their monthly
new release mailing which goes out to all their nearly accounts. The
distributor will charge back the cost of this advertising against our
account with you.
In order for them to effectively solicit your product, most distributors
ask that you provide them with a suitable quantity of "One Sheets" and
promotional goods with your initial shipment.
The "One Sheet" is a single 8 1/2" x 11" page describing your release in
the terms that you feel will present your product in the most favorable
light to the store buyer. This can include descriptions of the music, a
list of the musicians, a reproduction of the cover, reviews, etc. The most
important function of the "One Sheet" Is for data entry, so it MUST
include the catalog number and UPC code (either the numbers or a
reproduction of the bar code will suffice). Most distributors will be
happy to provide you with examples of effective "OneSheets" if you are
interested.
Distributors prefer at least a box of promotional CDs (Also known as
DJ's). The artwork should be clipped, punched, drilled or otherwise marked
to discourage stores from returning promotional goods for credit. In store
play is a great way to sell CD's. A lot of stores try a new CD only if the
distributor can furnish them with an in store promo copy. In the long term
it is not practical try to save a few dollars by not sending promos. No
one will buy your music without an idea of what it sounds like.
4. What about your price to the distributor?
As a general rule of thumb, labels sell to the distributor at 50% of the
list price. The most common price points for front line new releases are:
For a $14.98 list CD, the distributor pays $7.50, and for an $8.98 list
cassette, they pay $4.50. Most distributors will tell you have that lower
price points will stimulate sales on new artists and catalogue re-issues.
If you sell CD's by mail order, the distributor will want you to charge
list price plus a handling charge, in order to provide consumers the
incentive to purchase your product through record stores.
5. How does your label get paid?
Some distributor's terms for labels who have established themselves by
releasing product which consistently sells through at retail and is not
returned by the distributor's customers pay on a 2% 60 days/end of month.
That is, if the distributor receives your invoice on January 10, the
invoice will be paid, with a 2% prompt payment discount taken on March 31.
Labels just getting started, or labels coming into a distributor's system
for the first time can expect to be paid down to the distributor's floor
inventory level plus an allowance for product still on store shelves on
the above explained 60 day end of month basis. Let's say, for example, a
label has billed a distributor for a total of $5,000 worth of product.
let's then assume that $1,500 worth of this product remains in the
distributor's warehouse at the end of the first billing cycle. This means
that the distributor has "placed" $3,500 worth of product at retail, some
of which still remains on the stores' shelves unsold. The distributor is
responsible for paying for 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 label should look for a check for about
$2,800 to $3,000.
Payment for Christmas product is generally made at the end of March, after
all returns have been taken from the stores and all excess product has
been returned by the distributor to the label.
6. Returns?
One of the unique and unfortunate aspects of the American record business
is the industry-wide returns policy. All goods must be 100% guaranteed
against defects and overstocks, returnable for full credit for any reason.
All the independent distributors, must extend a 100% guarantee against
defectives and overstocks to all of our customers. We regularly accept
returns from our customers, issuing full credit for all acceptable product
returned. If the distributor deletes a label from their roster, it will
take them from 6 to 12 months to receive all the returns. Additionally,
some of the larger chains currently practice withholding up to 20% of
their payables to distributors as a reserve against returns.
From time to time, the distributor will return defective and overstocked
product to their labels for full credit. Distributors hate returns, so
they should try to order conservatively and often.
7. Shipping and Invoices?
For all shipments to the distributors, you should enclose a packing slip
detailing what was ordered, what has been shipped, the number of cartons
in the shipment, and the Distributor Purchase Order number. CDs and
cassettes should be shrink wrapped and in salable condition. CD's should
be sent jewel box only. Product sent in blister packs or longbox will
often be subject to a repackaging charge. Invoices should be sent
separately, under separate cover, to the distributor's Accounts Payable.
The invoice should include an invoice number, invoice date, a detail of
what was shipped, a ship date, unit prices, the distributor's Purchase
Order number, and the total amount due. Each shipment should have its own
invoice; do not bill separate shipments on the same invoice. Often times
this is ABSOLUTELY NECESSARY for any payment to be made. The distributor
warehouse guys don't usually write checks from your packing slips; it is
imperative. that they have the proper documentation to process payment.
8. Who is responsible for promotion?
Generally, distributors look to the labels to provide most of the
promotion directed toward the consumer. This includes getting the records
on radio, national advertising, publicity to print and other media. The
object is to get people to go to their local record store looking to buy
titles on your label.
9. What can I expect from the distributor?
The distributor's responsibility is to make the buyers in their territory
aware of your releases, using their sales tools, promos, one sheets,
airplay reports, touring information, etc., to convince the buyers that
they should stock your product. The distributor can provide a flow of
information to the retailers so that they can order the product that suits
their clientele, and anticipate consumer demand. Many distributors don't
provide store by store sales reports, but they may run an inventory report
by request to gauge product placement and estimate sell through. If your
title is a hit, it is the distributor's responsibility to make sure that
their accounts are serviced with a consistent product flow. When you call
them with leads, stores that are interested in your product, they should
follow them up right away. Additionally, they may arrange co op
advertising for radio and local print media.
10. What is Co-op advertising?
Co-op advertising is a method by which a label can effectively pay for
media space with product, preserving cash flow and maximizing the use of
excess inventory. For example if you want to run an ad in a local
newspaper advertising your new release and promote a local performance by
your artist, the retailer will purchase the ad, deduct the cost of the
media buy from its account with the distributor, then the distributor will
deduct this amount from its account with the label. In return, the ad
features your new release and the retailer is expected to make a
significant "buy-in" of the product, give it favorable placement (end
racks, etc.) and put the product on sale for a specified time period. This
is a great way to get more media and retail exposure for your money.
However, the distributors balance with the label should be significant
enough to support this expenditure.
11. What if you take your label to another distributor?
For a variety of reasons, labels and distributors part ways. If you decide
to have a third party distributor sell your product into your first
distributor's account base you should expect the following:
The first distributor should ship its floor inventory to your new
distributor, or to any location that you decide. Shipping will be paid by
the label.
The label should issue the first distributor credit for the product
shipped to your new distributor.
The first distributor should pay the account down to approximately 15% of
the previous total. This is to allow the distributor to make a deletion
announcement to its accounts and to allow the stores return any of the
labels' product to the distributor.
After 6 months, the first distributor should zero its account, making one
final return of product sent back to it by the stores.
12. How can you help the distributor sell more records?
Keep them informed of your artist's whereabouts, tour schedules, etc. They
need advance notice when your artist is playing in their territory. Then
they can effectively solicit the stores to pay more attention to your
product. If your artists are good with people, send them into the stores
to meet with the buyers. Send them your radio tracking so that they know
what stations are playing your music.
13. What is their territory? What about the rest of the country?
Many distributors belong to a coalition of independent regional
distributors, and they can recommend that your label be picked up by the
other members if potential national sales can justify their involvement.
14. What about overseas?
Does the distributor do any export business to areas outside North
America? Some distributors look to the labels to provide them with a
discount price for export, which they should pass on directly to their
foreign territory customers, (who often bear all the freight and
promotional expenses). Because export sales are one way (no returns) this
can work out to be a pretty good deal.
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Peter Spellman is Director of Music Business Solutions, a provider of
music business info products, training and consulting, and Career
Development Coordinator at Berklee College of Music in Boston. He is
author of the book, Music Biz Know-How: Do-it-Yourself Strategies for
Independent Music Success (Bootstrap Press Intl.) and percussionist for
Friend Planet, a multimedia world music ensemble.
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