SECURING DISTRIBUTION

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.