Foreign Distribution
By, Wendy Day from Rap Coalition (October 2002)

In this column we’ve talked about many of the ways to get started putting out records, finding regional distribution, getting radio play, promoting and marketing, getting product into stores, and the consumers into the stores to buy the CDs. For those of you who have missed those articles, you can find the articles from this past year at www.murderdog.com under “Rap Co Intel Pro” and all past three years’ articles at www.rapcointelpro.com. (By the way, Rapcointelpro stands for Rap Coalition Intelligence Program, and it is our way of making a positive out of the word Cointelpro which was such a clandestine, ugly government action to destroy Black organizations, and therefore people of color, in the 1960s, and some argue it continues even today).

Once you have exploited the United States selling your product, what’s next? For years I have been writing about the basics of selling records regionally and now I am going to speak about what those who’ve been following this column for years can do to get to the next level. Rather than sign a deal with a major label to sell records around the world, you can find your own independent distribution in other countries. Although there is rap music in other places, like South and Central America, Canada, Europe, Africa, Asia, etc, those markets are key places to sell US based rap music since this is where it started and fans in other countries fiend for US rap.

There are 2 ways to sell overseas, short of picking up and moving. That is to do a licensing deal or a distribution deal for non-US areas. Either way, you will most likely have to enter into a contract with a foreign record distributor. They can be done on a long term basis or just project by project. First, you have to make certain that your artist (even if it is you) is signed to your record label, and that in the agreement it specifies that the label has the right to distribution worldwide or a licensing deal worldwide. If not, the artist or producer (or owner of the master) has the right to do the foreign deal.

Let me tell you upfront that I have not yet done a foreign deal, so I’m speaking to you about what I have learned from research, not what I’ve actually done myself, and I hate that! So the best advice I can give you is to read my words, and then to go and do more research on your own. A great place to start is on the internet. If you are more of a hands-on person, another great place to do physical research is at MIDEM (www.midem.com), which is an international music trade show every January in Cannes, France. I went last year for the first time and found it very impressive. It is a convention where serious business people meet to buy and sell music--all types of music.

What I liked about MIDEM, and so many people I know in the business go to it, was I got to learn in one four day period how influential and important rap music is around the world. There were quite a few music business people I recognized from the US. It is a very costly convention to attend (registration alone was around $900), and Cannes is not a cheap city to stay or eat in (although it is a gorgeous place right on the Mediterranean Sea, known as a playground for the rich and famous in warmer months), so it was a pretty big investment for me to make. It lasted for 4 or 5 days in the end of January and rather than spend upwards of $200 a night, I went on the internet and found a private apartment to rent for a week for $700 within walking distance to the convention center (Palais De Congress). This year they are going to offer a section called “Urban Village” just because of the increased popularity of urban music around the world.

What I did not like about MIDEM was it was a giant convention full of some people who were legitimate, but many more who were not. It seemed to me that anyone with a grip of cash to get in, and a self-printed business card that said “distributor” or “record label,” could be considered a distributor or record label. I have a hard enough time in the US figuring out who is legit, and meeting someone from Poland, Korea, or Canada for 15 minutes who says he (or she) is the #1 Rap music distributor in that country, makes it difficult to sort out who is real and who is not. So MIDEM, to me, is not an end-all-be-it, it is a place to start. Seeing so many US urban music folks there made it easier, so I later knew whom to call to discuss the folks I had met who do overseas distribution (Larry Robinson from Avatar, Fiona Bloom who works with underground hip hop music, Tony Mercedes, Tom Silverman from Tommy Boy, Eddie O who does some rap and dance stuff, Allen Becker from RED Distribution, publishing people, lawyers, etc). Folks like Larry Robinson and Tom Silverman have proven invaluable because for years they have done overseas deals for their labels and have war stories to share. I even saw Evander Holyfield there hawking overseas distribution for his label.

Another great place to learn about foreign distribution (and where I learned the bulk of what I know) is at the far more affordable AFIM (www.afim.org), which has just merged with NARM (www.narm.com) for their annual trade show every Spring (this year it’s mid-March in Orlando). Since NARM is a convention for retailers and AFIM is for indie labels, it is a good convention to meet with your retail folks and to learn about how to be a better indie label through the panels they offer. The Indie Crash Course that occurs the day before the actual AFIM convention is invaluable and only costs like $150. I have attended every year since 1996.

There are a variety of types of foreign deals, but I am going to focus on two: foreign distribution and foreign licensing. A foreign distribution deal is where you enter into a deal with a major overseas distributor for all territories outside of the US (for example, Universal, Sony, BMG, etc.). The advantage to having only one foreign distributor is that it makes it easier for accounting purposes, as well as you are not juggling a variety of distributors in different areas all of whom may have different needs and payment policies. Most of these deals give the distributor a first option on all of your releases for a certain amount of time, like 3 years, 5 years, etc. It would be like having an overseas affiliate.

You can also have a variety of foreign distribution deals in separate countries, continents, or territories. So, for example, you might utilize Groove Attack in Germany, ChronoWax in France, Sony in Japan, and High Note in the rest if Asia to distribute your releases. The important thing, in this case, is to know your markets. The French Music Industry Organization (www.French-music.org) claims that France is the second largest market for rap music outside of the US, but the type of music they listen to is as far from “Gangsta Rap” as one can get. The most popular rap in France from the US is underground hip hop (like Mos Def, Talib Kweli, etc) and commercial radio rap (like Jay Z, DMX, JaRule, etc). But unlike the US, Mos Def outsells Jay Z about 10 to 1 in France. I’m not exactly certain why this is, but when I asked Oliver Rosset who owns ChronoWax when I saw him at MIDEM last year, he said it was because Mos Def does songs with local French stars and actually tours in France, while Jay Z has never done so much as a show in France (I can understand why, sort of, because Jay Z can make more money doing a show in Boston for one night than he could performing seven shows in a week, every night in different city in France combined. Also, Jay Z’s contract at Def Jam only allows him to collect half of his royalties for records sold overseas--so it is far more profitable to stay home). But it is important to do the research to find out if your artist will be well received in places outside of the US, and good promotional efforts are still important for sales in areas that would be open to your artist.

In a foreign distribution deal, the foreign distributor usually distributes the album for a fee and it is up to the indie in the US to pay for promotion, just as the label does in the US. The foreign distributor often helps with the promotion process, for a fee. In a foreign licensing deal, the foreign label or distributor offers a set price to license the album, and then they are responsible for everything: the marketing, the promotion, the distribution, etc. They then pay the US label a fee on the back end (similar to a royalty) for every unit sold.

Since I am not the most trusting person in the world, I once asked Tom Silverman (CEO of Tommy Boy Records) how a small label could be guaranteed to get paid, after all, the US label wouldn’t know how many units really sold in say, Korea. Tom said that aside from doing the research and learning whom to trust and whom not to trust, there really wasn’t any sure way of telling real sales numbers. He then went on to say something I will always remember because I’ve applied it in so many other areas of my life: he said, if you accept the upfront money thinking that is the total amount you will ever see, and you can live with that price, any other money they send you afterwards will be like found money, and if they never send you another dime, it doesn’t really matter to you because you aren’t expecting it. Brilliant!

Regardless, you should get an advance against royalties (back end) on product delivered (somewhere between $500 and $5,000) and that number is determined by the realistic amount of sales projected to sell in the foreign area. Just as it works in the US, the advance is non-refundable and is applied towards the amount due (royalties) from the sales. Any and all payments are usually twice a year, along with the accounting statements. The royalty rate is usually a percentage of the sales price received by the distributor, often a rate of around 10 to 20%, but it is better to get the rate at a set price as opposed to a percentage, if possible. You need to have a firm release commitment so if they do not release your product by a certain date after delivery (3 to 6 months is plenty of time), then you can find another distributor or licensing deal in that territory. All-in-all, the structure of the deals aren’t much different from what you should be requiring in your US deals. If you do the proper research and have good business skills, selling overseas will be a new market for you to conquer to increase sales.