ATTRACTING AND WORKING WITH DISTRIBUTORS

At a time in music business history when there is more product being manufactured, promoted, and distributed than ever, the role of the distributor, and their relationship with labels is an increasingly important one. The purpose of making a record is to (hopefully) sell it. The following information is intended to introduce the role of, and the relationships between Independent Distributors, and Record Labels.

Background Information
To begin with, there are several different kinds of distributors in the US.

One-Stop Distributors carry a wide selection of major label and select independent label product, and sell to Chain Stores, Independent Stores, and misc. other retail outlets that sell recorded music product.
Rackjobbers are companies that rent or lease space in large department type stores, and other mass marketing retail outlets. They usually carry only the best selling commercial product available, concentrating on major label product, and some independent label product with a strong regional presence.
Independent Distributors are distributors of Independent Label product either on a regional basis, or more likely, as national distributors.

The primary job of a Distributor is to get CD's, Records, and Tapes into retail outlets. They do this by working closely with the record labels to promote and market their CD's, Records, and Tapes. Most distributors regularly publish catalogs listing the labels they carry, and the titles available. They accept product on a negotiable billing schedule of between 60 to 120 days per invoice. They expect to receive a negotiated number of "free goods" to be used as incentives for retailers to carry the product, and also need "promotional copies" to be used in-house, as well as to give away to contacts in the media, and at retail. they can also arrange for "co-op" advertising, wherein the costs of media ads are split between the record label and a retailer.

The primary job of a record label is to attract the attention of distributors by having achieved a modicum of success on their own, by selling product on consignment, or at live shows, and through various mail order and direct sales methods. Having gotten their product accepted by a distributor, the job of a record label is to work closely with their distributor(s), providing them with information on successful airplay, print media support, and live performance successes. In addition the record labels create "Distributor One Sheets", or fact sheets that include promotion and marketing plans, and list price information.The record labels also provide the distributor with "P.O.P.'s" (Point of Purchase) items, such as posters, flyers, cardboard standups etc., that can be used for in-store display.

Basic Information
The National Association of Independent Record Distributors (NAIRD) has an annual Directory available that lists Independent Distributors operating in the United States.

The CD is the preferred format for recorded product in most cases, with vinyl and cassettes appropriate for certain "niche" musical genre. The music should be professionally recorded. A good measuring stick is to match the sound quality of the independent recording with the quality of the material played on the radio.

A Record Label wishing to have their product carried by a Distributor must have the following:

Its own trademarked name
Catalog numbers on each release ( usually a 3 letter abbreviation followed by the numbers, i.e. CJK415).
A Universal Product Code: The Barcode on the back of the product. This is required because most retail sales are now tracked through the Soundscan technology that monitors retail sales. Note: For information on obtaining a UPC code, contact the Uniform Code Council, Inc., 8163 Old Yankee Rd. Suite J, Dayton, OH. 45456 (513-435-3870).
What A Distributor Wants To Know About a Label's Release
Has the artist had any success with established mainstream labels?
Does the artist have a following, if so, how well known are they?
If the artist is unknown, what specific promotion ideas does the label have?
Are there any well known "guest" musicians on the recording?
Does the recording, and artwork meet the standards of the musical genre?
Is there any current airplay on commercial or non-commercial radio?
Will there be independent promotion on the release to retail and to radio?
Has the artist hired a publicist, and/or what is the publicity campaign?
Will the artist be touring in support of their release, and is there a schedule?
Does the label have the financial resources to provide "co-op" advertising?
Does the label have the financial resources to press additional product?
Does the label have a salable "back catalog" of proven sellers?
How much product from the label is already out in the stores?
Does the label have other distributors selling the same product?
What are the next releases from the label, and when are they coming out?
Other Requirements
The shipping charges are usually the burden of the label, but may be negotiated after a label has established itself as a customer. Most national distributors require an "exclusive" arrangement, making them the sole distributor of a label's product.

Many distributors have monthly newsletters, and/or update sheets, as well as catalogs. They may require labels to advertise in them, with the costs of the ad deducted from a particular invoice.

The Distributor One Sheet should be 1 sheet (8 1/2" x 11") and include:

Label's logo and contact information
Artist Name/Logo
Catalog # and UPC code (Barcode)
List price (i.e. $15.98) of each available format
Release Date (to Radio)
Street Date (for Retailers, if different from Release Date)
A brief Artist background description
Selling Points (Discounts, Marketing, and Promotion plans)
All "Promotional" product should have the artwork "punched, clipped, or drilled." This is to make sure that they are not returned to the distributor as "cleans". "Cleans" are the name for regular product sold in stores. Many people who receive "Promos" have friends in retail or at distributors, and can exchange "cleans" for CD's they personally want.

Labels sell their CD's and Tapes to distributors for approximately 50% of the list price of the release. For example a $15.98 list CD might be purchased by the distributor for $8. An $9.98 cassette would be purchased for $5.

When an invoice becomes due for payment, the distributor may not necessarily pay that invoice in full. For example, let's say a label has billed a distributor for a total of $5,000 worth of product. Let's assume that $1,500 of this product is still in their warehouse. This means that $3,500 worth of product is out in the stores, some of which is probably still on the store's shelves, unsold. The distributor is responsible for paying the $3,500 worth of product placed (less a reserve of 15% to 20% for the label's product which may be returned to the distributor by the stores.) The distributor would hopefully send a check to the label for about $2,800 to $3,000.

How "Co-op Advertising" works
Co-op advertising is a way for record labels to pay for media ad space with product, and is an effective way to use their inventory to promote sales. For example, when a label wants to promote a certain artist's concert, they approach a retailer through their distributor. The label will pay for the cost of the ad, the retailer can deduct their agreed upon "buy-in" of the label's product from their invoice with the distributor, while the distributor then deducts the amount from their account with the label. In return for this, the ad features the artist's release, with a mention of the concert. The retailer, in addition to carrying the product (the buy-in), also agrees to give it good placement in their store(s), and put the product on sale for a limited time. Basically, this arrangement is a win/win situation for all parties involved.

Returns
It is a standard practice that 100% of any defective and overstocked product can be returned by the stores to the distributors. They insist that every label they deal with accept this policy. If a specific title from a label is deleted from their catalog, the label must notify the distributor, and it can take up to one year for the distributor to get deleted product back from the larger chain stores. These larger chains will withhold up to 20% of their payables to distributors as a reserve against returns.

Shipping Instructions
A packing slip must be enclosed with each order sent from a label to a distributor. This must include details on what was ordered, what has been shipped, the number of cartons in the shipment, and the Purchase Order number from the distributor. All product must be shrink wrapped. In most cases, for CD's, the jewel box is the standard package.

Invoices are sent separately, through the mail. The invoice should include an Invoice Number, invoice date, a detail of what was shipped, a ship date, unit prices of each title/format sent. The distributors PO number, and the total amount due, should also appear on the invoice. Each shipment must have it's own invoice.

Summary
The distributor's job is to make the buyers at retail outlets aware of a label's product. They use their sales tools; promos, one sheets, airplay, press, and live performance reports to try and convince the buyers that they should stock the product they carry. If a specific title sells, it is the job of the distributor, in cooperation with the label to provide the retailers with a continuous flow of the product. It is essential that a label have a consistent, professional, and mutually respectful relationship with their distributors. Selling recorded product is a team effort, and that fact should never be forgotten. In the business of music, no one is an island.

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