When I was a performer, managing the consignment of records/CDs was a thankless chore. The longer the band stayed together, the less motivated I was to keep stores stocked and collect income. Best-case scenario: I’d burn an hour (plus gas) to collect $10. As titles aged, even those meager returns were rare. On the plus side, our local record stores offer great terms for hard working artists – their doors are open to all kinds of music, they let you set your own price, and take a miniscule cut in exchange. While these stores are doing you a solid by carrying your product and handing over most of the profits, they’re unlikely to stay on top of inventory for you. And if your title isn’t carried by a physical distributor they have no easy way to reorder, if they wanted to. So as The All Night Party enters it’s second year, we’re wondering if there’s a better solution to stocking local retailer’s with consignment products.
We’ve been stressing over national physical distribution since day one – there are plenty of distros out there who would love to carry our catalog, but frankly the traditional retail terms demanded are a poison pill (ask Touch and Go). Only in the music business do retailers operate with “borrowed” stock. Only music distros get away with returning previously sold inventory for full credit, months after the original sales are booked and closed. It’s an inventory nightmare that’s saddled the industry with unsustainable costs. While avoiding this money pit, we’ve worked the problem for on-label artists. Talking to our bands and local retailers has given us a some fresh ideas we’d like to discuss here with the scene…
I’ve noticed it’s far more productive to stock retailers when you’re carrying many releases, than it is for individual bands. When I show up to service at least 3 recent titles, I generally leave the store with a few bucks from completed sales, which in turn need to be restocked to keep it going. Retail, like licensing and booking, is about persistence and effort. Your music’s got to be wherever and whenever the fan’s in the store or you lose the sale (often for good). There’s a need for regional distro, and a means to pay for it if you can carry some critical mass of titles.
I discovered how important a band’s activity and visibility are. A popular local band that plays regularly can often sell titles to local retailers for cash, while a part time band of weekend warriors must consign inventory on spec. As noted, this isn’t necessarily a bad thing, at least in Cincinnati. A CD that wholesales for $6 retails for $10. If you only pay $1 to the store for consigning your title, you stand to make $9 for waiting to collect. Obviously $6 in hand beats $9 in your imagination. But if you’re working hard and visible, there’s some reward for waiting.
This brings up what might be the key to a good solution. Wholesale prices drive the system we call capitalism. Manufacturers leave roughly half of their potential profits on the table to incentivize consumer-facing partners to pimp their wares. By selling to all qualified buyers, competition controls prices for consumers. The music business, like all capitalist enterprises, has wholesale price structures. Unfortunately these structures are opaque and bespoke. Shake It might pay a different price than Best Buy for the same title. South American distros sell the same titles at different prices than Euro or US distros. What you pay has less to do with market forces than who you know and how you know them. The good news: Participation in this funky kind of distribution isn’t compulsory. Like ANP, you can do something different. Set a single fixed wholesale price, between 50-60% of the retail price you expect your fans will pay for the set, and use it as an incentive. Kick it old school, Capitalism 1.0.
From a set wholesale price, many doors open, starting with ANP’s. We’re here to help you sell music in all it’s forms. So let’s talk… Would you be interested in a regional consignment program with a single contact for pickups, drop-offs and collection? Would you be willing to redefine pricing to incentivize more sales, and open the door to more conventional retail terms? Could we buy CDs from you outright at these new wholesale prices, and act as a regional distro to make sure your work is always available at local stores? If these steps seem reasonable, ANP can provide solutions.
These are a few of our ideas for fixing some problems we’ve seen. We’d love to hear yours, and get some feedback in comments!
-d-
Good points all around – the chasm between losing time w/ consignment (or just-in-time inventory) and losing money w/ bigger distributors is frustrating, and even more so because it’s almost entirely a problem of economics – there’s just not a lot of money to be made distributing artists who only sell a few thousand (or hundred..) cds. So there’s definitely a void to be filled.
But the flip-side is that not only do artists and labels get screwed under the current system, but smaller distributors suffer as well – like you said, just look at Touch & Go. But if they can’t make money w/ 100x the stock and sales, how could you do better at a smaller scale? Still seems like we’re missing a piece or two of the puzzle before it’s actually profitable at that level.
As I mentioned, the key is to level the playing field. This has been worked out literally for centuries in other market contexts, like books, beer and guns. Rifle manufacturers don’t loan gun dealers stock, and beer distributors adhere to a market-driven price schedule to sell perishable products with no returns possible. Wholesale pricing and common terms have worked miracles for Starbucks, opening grocery markets to their perishable products. In entertainment, satellite and cable TV are also roughly standardized, yet flexible enough to allow curation and even repackaging (we don’t have the TV Guide channel, but do get their on-demand content from TWC in Cincy). That part’s easy enough, though it demands discipline our industry’s never been good at.
The harder part of the problem is physical distro. Someone has to stock the content, shop the content, deliver the content. While modern society has some killer tools for all of that, they’re not holistic so potential profits evaporates by nickels and dimes. UPS and the USPS can handle delivery better than any distro could directly, but that efficiency and flexibility costs, adding to the price. All of these nickel-and-dimers combine to erode margin.
ANP has tried to work out conventional distro deals and failed. The terms are too painful (or just flatly insane). This isn’t cheap either; it locks us out of many retail venues, but at least we’re not perpetuating a failed, unsustainable system.
I’d like to tackle this on a regional basis, and put our money where our mouth is. We could certainly buy content and handle REGIONAL distro for artists directly with merchants we already do business with. They seem to like the idea too. The trick is to grab the long-tail and hang on: we need some critical mass of inventory and titles to stock, to make it worthwhile to manage that inventory. Maybe we offer to buy stock outright from artists, on a cash and carry basis? We could consign the titles to local shops, and sell our own inventory on Amazon and Bandcamp to reduce risk, increase chance of sales.
This takes a little thought, but is certainly doable. We’d need to define a wholesale price, akin to Apple with iTunes. Then we’d subtract some cash/bulk discount from wholesale, and assume the responsibility of stocking some number of stores. The artist makes a sale, walks away with cash. We take on the challenge of selling CDs. When we’re successful, we come back and buy more to repeat the exercise.
Ideally, I’d want to sell CDs outright to stores, and pass along the sweet benefits of true wholesale pricing (they make a fat profit on each sale). Realistically, to achieve critical mass we’d be taking on titles retailers will only carry on consignment. Which is fine, as long as we only paid wholesale for that stock – if the CD sits in the bin for a year, we have the additional profits of local consignment terms to cover our risk/reward.
Whaddya think?