Posts Tagged ‘alliance distribution’

h1

What’s next for independent music retail?

February 18, 2009

I was talking to the CEO of a well-known music distributor the other day, when the topic of the future of independent music distribution came up. He lamented to me that his business was down 25% in the fourth quarter of 2008, and continues to be down this year. He’s not alone.

 

Most music retail chains are having problems paying their bills – Q4 saw massive returns from retailers to distributors(for credit) so they could afford to take in new titles.  Many record store chains have already gone belly up. Circuit City, long one of the country’s leading CD retailers, is out of business. Borders is reducing floor space for music by 70% over the next 90 days. One of the few healthy chains left appears to be Best Buy…for now.

 

These retail woes have repercussions up the distribution chain. Distribution giant Alliance announced in January that it was laying off over 400 and shutting down a warehouse. Circuit City owed them some $16 million. Gulp.

 

In the face of all this bad news, everyone gets more conservative. Less acts signed, less product into distribution, less product at retail; what’s an independent artist to do?

 

The only record stores that appear to still be doing well fall in one of two categories:

 

1) The specialty record store. Usually a single store in a niche market, the specialty store caters to a local clientele. There are clerks who know music and can turn you on to cool new stuff. And perhaps most important, they sell other products besides new CDs – used CDs, T-shirts, DVDs, posters, bongs, magazines… They’ve diversified within their very narrow niche. Artists can get into these stores, but usually by going direct, and only in regions where they are local.

 

2) Online stores. Amazon is the big daddy, and CD Baby is the most prominent one for independent artists. These stores sell physical product online, as well as downloads, and other items. Anyone can join these stores, though Amazon requires a retail ready, barcoded, replicated CD, while CD Baby’s more artist friendly approach accepts any kind of CD.

 

Is it still possible as a growing independent artist in 2009 to get your product into bricks & mortar distribution? Unfortunately, the answer is probably no, unless you have a track record of 5 to 10 thousand CDs scanned and sold of a previous release. Distributors, with lower sales than ever, are less likely than ever to want to take a chance on a band they don’t know. Rather than think “they might sell,” they think “I’ll get returns.” And can you blame ‘em, really? After all, retailers are reducing floor space so severely, that there is no place on store shelves for up and coming bands.

 

So here, in my opinion, is how the future of CD distribution looks for independent artists:

·         Physical distribution to bricks and mortar goes away. No distributor with nationwide reach will want to take a chance on an unknown act. Artists will realize the futility of physical distribution through traditional channels, and stop aspiring / hoping / dreaming of a distro deal.

·         CD sales direct to fans at gigs will continue to be a major revenue generator for independent artists for years to come. Catching a fan when they’ve just experienced a great show is still a strong sales driver, and will always be.

·         The main nationwide CD distribution opportunity for independents will be online. A couple of megastores like Amazon will thrive, as will niche players like CD Baby (100% independent), and other stores in certain narrow verticals (specific genres or interests).

 

Of course, digital is where all the growth is these days, but I can’t help but think that this viscious downward cycle we’re in is creating a rapidly accelerating self-fulfilling prophecy that the CD is dead at retail – and thereby prematurely killing an important revenue stream for artists.

 

In fact, my distribution scenario above is already playing out across the U.S. and Europe. It’s just that the old dream of nationwide distribution dies hard for musicians.