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So in the past two articles we've discussed: the
importance of having great music that will sell outside of your circle of
friends, choosing the single based on reaction from local DJs and
retailers, focusing on two or three markets in which to first release and
work your record, and timing as the most important element in the success
of your project (after good music that is). Then in the last article we
talked about the importance of bar codes for Soundscan (retail sales
tracking system), having enough money to work your project so you don't
run out of financing half way through, and where to turn to raise the
loot. We talked about having the streets covered with an experienced
street team, and if you have a radio record: the importance of BDS (radio
tracking). A very important aspect of selling your own record is getting
it into the stores. There's no shortcut here; hard work is the only way to
do this unless you have famous artists on your record, an incredible buzz,
a recent sales track record, or a fool proof guarantee of record sales to
the retailer. The important aspect in this equation is leverage. For
example, in Chicago right now Twista is releasing his own compilation
record called Legit Ballin', it may be easier for him to get this record
into stores than for John John to get The GoGetters into stores because
Twista has a track record of sales and his name is more recognizable to
retailers and fans.
Let's go back a step: There are three things a distribution company looks
at when deciding whether or not to distribute a record label. The quality
of the product (music), the flow of the product into the pipeline (does
the label have enough music to release something every few months), and
the economics (does the label have enough financing to be a real record
label and cause "push" and "pull" through the retail stores). "Push" is
getting the retail stores excited about carrying the record so they'll
order it for their stores, and "pull" is getting the consumers into the
store to buy the record. Retailers are in business to sell records, be
informed about artists and their releases, create store loyalty, provide a
local service (sort of a music industry center in their local area), and
make a nice profit. I find that if you treat them as such, and with
respect, they are happy. They don't owe you anything as a new label-- bear
in mind they've seen many, many labels come and go. It's your job to
convince them you are serious as a label: understand their strengths and
difficulties (competition in local markets, credit concerns, etc), and
support them financially through price and positioning and through co-op
advertising (not always financially easy to do as a small label--it's
tough to get a better position in the store than Sony or UNI, unless there
is some incentive for a local store to hook you up--liking you is good
motivation, bringing the artist through on promotional tour to sign
autographs is another good motivator). In a perfect world, retailers want
to carry product that will fly off the shelves at breakneck speed
regardless of the price they are charging. Read that again, it's
important-- retailers want to carry product that will fly off the shelves
at breakneck speed regardless of the price they are charging! Just having
a good album does not insure this. Proper set up, a strong buzz on the
streets, strong awareness of the project, radio play (if applicable), a
healthy budget spent properly and efficiently, added to good music does
insure this. Bear in mind that when a record sells at a discounted price,
the retailer is not absorbing this loss, the label is. The label reduces
the wholesale price by a percentage often by offering more units for a
fixed price to make up the percentage difference-- for example a 10%
discount might be offset by offering one record free for every ten ordered
instead of lowering the invoice by 10%. By the way, this free "11th" album
is considered promotional ("free goods") and the label is NOT responsible
for paying artist royalties on that unit (which is a very good rationale
for artists to limit their "free goods" in their recording contracts).
Sorry labels, gotta look out for the artists!
Because most new labels don't have a track record or the proper financing
to have flow of product yet, getting distribution even locally is
difficult. The goal is to have enough leverage to negotiate from a
position of strength instead of when you need something. And waiting until
you no longer need distribution is hard as hell. That means you have to go
to each retail store, convince them to carry your record (often on
consignment), and then convince them to pay you for it. Once the record is
selling sufficiently, it's no longer a struggle, but it's still time
consuming to go to each store to pick up your money and deliver more
records. In a larger city there can be over 100 retailers. Even in a
smaller market like Tulsa/Oklahoma City (they are 45 minutes apart) I
found over 25 stores that sell rap music and another 10 or 15 that could
sell music because they attracted a rap consumer (hip hop gear stores,
etc). So every few days your visiting those stores servicing them. It's a
lot of work.
Once the record starts selling, the distributors will become interested
and you just need to ask what they can do for you that you can't do
yourself. Is what you'll gain worth giving up 20 or 25% of the money?
Sometimes yes, sometimes no. A regional distributor (like Southwest
Wholesale or Select O Hits) can expand your coverage area (provided you
can afford to expand your area with promotions). But you must weigh the
cost of that service. If you have to sign exclusively it isn't worth it
because then if a national distributor comes along you won't be able to
leave without buying them out. If your goal is to stay regional for awhile
until you can strengthen your track record like Cash Money did (they
remained a regional label churning out records every six weeks for a few
years growing more and more successful with each release), then a regional
distributor can be most helpful. In some cases they'll even advance funds
to help defray costs. This was helpful for Cash Money because they were
able to start buying regional cable advertising which tripled their sales.
When a distributor looks at your company, preferably through a business
plan so they can see where you've been and where you're going, they are
looking to see how feasible and realistic it is for you to last over the
long haul. Do you have proper staff in key positions: retail sales, radio
promotion, video promotion, marketing, publicity, street promotions,
finance (very key position), etc. These positions can be outsourced as
necessary, but the distributor needs to know the company has the potential
to last in an industry where most have zero staying power. Do the
principals have experience and connections in the industry? Have they ever
sold a record before in their lives? How have they done it? What is the
likelihood they'll be able to do it again? Do they understand how the
industry works? Will they still be in business down the road or will they
fold if things don't go as planned? Are they properly financed or are they
in over their heads? Properly financed means enough money to press, create
and fill demand, and repeat this process for a few records in a row
without depending on immediate income to sustain the company. It takes
anywhere from $800,000 to $2 Million per artist to properly promote a rap
record and takes conceivably 90 to 120 days after the consumer buys the
record, less reserves (the amount of $$ the distributor keeps to offset
returns from the retail stores-- usually 25% is kept and then liquidated
in 6 to 9 months, depending on who negotiates the deal and your level of
power in the negotiation) to get paid. Can this label sustain that kind of
committment or will they run out of money half way through the first
project? What is their reputation in their local home base? Have they sold
records before? How hard do they work? Will they continue to work hard or
will having a distibutor make them lazy? How serious are they about
putting out records? What's their vision--where do they plan to be next
year? In 5 years? In 10?
If a distibutor likes all the answers they ask about the record label
(both to themselves and others), they then choose to distibute the records
for a period of time (a legitimate national distributor like BMG, RED,
Sony, Priority, etc will want at least 3 years) and set the percentage
they are willing to split (80-20 is great, with 20% going to the
distributor and 80% to the label), the length of time in which they are
willing to liquidate reserves, and the amount of advance they are willing
to part with, if they advance monies at all--most do not. The more risk
they take and the more they give you upfront, the less you will receive on
the back end split. The skill in securing a banging distribution deal is
how badly they want you and how much power you have when approaching them.
OK, time to brag: with Cash Money we held all the power (I didn't start
shopping the deal until we were in a position of strength and that was
VERY planned, I assure you) which is why the deal is so outstanding. It
all came down to timing. They did their part and I did mine and both sides
excelled at the exact same time, creating an illusion of a very serious
and on-point record company that had been overlooked by the industry for
the 8 years they had been in business independently (a word I fought very
hard to keep in the equation at all times). The company had a bangin'
business plan (even if I do say so myself), a track record of consistant
sales that increased with each release in terms of market penetration,
target area, and market share (the amount of sales taken away from other
labels in order for the consumer to buy Cash Money product), and an
incredible buzz (BIG hype, thank you very much) in their local market and
in the industry. It was all planned from day one by a very bored and
frustrated white girl (me, duh!) who wanted to shift the balance of power
and create a Black owned version of Priority Records. As an aside, my next
goal is to find an even tighter version of Cash Money, with owners who
won't lose their minds when the money comes, so this opportunity can be
sustained into an empire where those in the power seat don't choke, but
flex real ownership and real power with a willingness to use the newfound
power and strength to create change in the status quo in both the
entertainment field and in life for all people of color. Do I ask too
much?? Fuck a Rolex and a Lexus, real ownership and economics is what will
cause change for Black folks.
This series will continue in every issue of
Murder Dog and will contain information on pressing, street teams,
distribution, foreign licensing, overseas distribution, artist
development, flow of product, retail and radio, artist imaging and more.
Each issue will also answer two specific questions sent in by our readers.
Although questions can not be answered individually, they should be
directed to Rap Coalition at 111 East 14th Street, #339, New York, NY
10003. And remember, if you don't own your own shit, you're just a
sharecropper.
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