Thursday, February 3, 2011

Where did the CD section go? The 411 on where distribution is at

  I had an interesting meeting with our distributor the other day. We are getting ready to release one of our new artists CD. We know that traditional CD sales are down but we still wanted to try and have it distributed to retail stores in conjunction with our online digital download distribution. After that meeting it makes me wonder if we should pursue retail store distribution at all.
  Here's some history on us. We are a record label based out of Hawaii. Some of our artists are Jay.Keyz and Hot Rain. Our artist currently play several states in the continental US, been to Fiji, Australia, New Zealand, and Japan. We have a loyal following and do well in our genre of music. We are in the final stages of the CD creation process and have invested approximately $13,000 in recording, studio musicians, mixing and mastering. We are right on budget with our pre production planning. But in that equation we relied on some retail distribution. In our market our price point was $7.00 for every CD, and the average well promoted artist sales was around 5000 units, really popular artist were doing around 10,000 plus units. With those numbers we needed to sell approximately 1900 units to cover our production cost. Very possible with our artist, not including units sold at shows and downloads online.
  Now, in our meeting I discovered that retail sales are down almost 60%. Wow. Our price point dropped to about $6.00 a unit, and the distributor said they got two pallets full of returns in their warehouse.( note to all indie labels and artist - In case you don't know a CD is a 100% guaranteed item for most stores. That means they have the option to return whatever units they don't sell and get all their money back. So don't spend all the money from the check the distributor sends. You may end up owing some of it back.) Sorry for getting side tracked anyways all this happened over the course of only 5 months. In my own defense I knew this was happening for several years now. Ever since Metallica went after Napster. I just didn't expect the sudden drop in our market in such a short amount of time. Maybe I was just naive or not on top of the game. So I hopped in my truck and headed out to the stores to see for myself. Wow. Wal-mart reduced their CD section, same with Borders, and Best Buy got their CD section down to two short rows.  I personally still like to own a physical copy, I'm sure people still do too. Just not in the quantities we were used to.
  Now on the other hand say we don't use a distributor, we can keep 100% of our sales, but there's more work on our plate. We now have to approach the stores ourselves. Do some of the promo work our distributor was willing to do, and warehouse the products just to mention a few. So there lies the question to distribute or not to. I think for us we still will. It can't hurt to try, we just need to focus more and get more creative. Plus we have long term goals. We have committed ourselves to be in this business for life. Its what we love and what we want to do, so we will like everybody else adapt to new trends and try to create some of our own. We are also starting to look more into licensing our music to commercials, T.V., and movies. But that's a whole other part of this wonderful business we're in. I'll save it for a future post. I guess all in all no matter what direction you choose, we have the greatest job in the world. We get to create and share our music everyday with the world.
  I would love to hear your ideas, comments or strategies regrading CD sales and the future....Till next time


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