Todd L. Burns looks behind the curtain to find out why so many companies that distribute dance music are going bust.
But the news of Syntax’s folding and Amato’s liquidation is nothing we haven’t seen before. Over the past few years, a huge number of these middlemen who help labels get their records into shops have called it quits. The EFA logo used to be a ubiquitous sight on the back of CD and vinyl releases from Germany before it went bankrupt in 2004, while Watts Music closed in 2006 after more than twenty years of shipping America’s underground techno around the world.
Kai Fraeger, however, doesn’t see the situation as desperate. The Managing Director of Wordandsound, currently one of Germany's most successful distributors of house and techno, says business is fine, citing The Trentemøller Chronicles as a particular success, claiming that its “initial shipout of 4,000 copies....could not have been any better” in RA’s pages in December. But even so, the question remains: why are these distributors going under? And, perhaps more importantly, what happens to the labels once they are left without a distributor?
The first question has a number of answers. Every situation is different. Tom Cox, of the infinitestatemachine blog, has suggested that the closure of distributors is a market correction. The logic is simple: just because there are more labels than ever doesn’t mean there are more buyers than ever. The amount of music released in the last ten years has grown exponentially and, thus, there is less money to go around. Jon Berry, who oversees Kompakt’s CD distribution, concurs: “How much of this music can people listen to each week? How much money do people have to spend on this music every week? The answer is obvious. People don’t have enough money to support all of the music that’s coming out these days.”
This is where distributors have gotten into trouble. As sales have decreased and illegal downloading continues unabated, distributors have been forced to take on more labels to make up the difference. With their resources spread thin to maximize the amount of music they can put out, distributors aren’t able to give each release the proper attention it deserves. Instead of treating each release as a major priority, distributors are forced to pick those that they think will do well and focus their energies.
Often, distributors feel as though they can make the records themselves, which leads to even greater problems. Joerg Heidemann, who worked for six years as EFA’s export manager and now owns MDM distribution, which distributes labels such as A Touch of Class and Huume in Germany, told me that one of the reasons that EFA went under was its financially unstable in-house label. “Many times distributors want to put out their own records and very often these in-house labels are not financed separately. Distributors finance the label with the money out of the distribution cashflow, so if their record isn’t doing that well, they have simply burned the money from the labels that they’re working with.”
What might’ve been the death knell for a distributor like Amato, however, was a simple case of mismanagement. “Turnover-wise, the last year had been fantastic,” says the former head of label management at the company Leon Oakey: “It had turned over at least twice as much in previous years. We had attracted more labels, with better quality product and a lot more album based labels, and sales were excellent.” But, even so, the collection of missteps that followed Unique’s purchase of the company in 2006 proved to be disastrous. A legal battle with New State, a warehouse that sold for less than expected, important shops closing in Japan and England and a budget far smaller than expected to acquire new labels are only a few of the problems that led to the distributor’s demise.
The labels that Amato distributed each had slightly different deals with the company. Some such as Rekids were both produced and distributed around the world exclusively, others like Kompakt were simply distributed in the UK. When a distributor closes, the former is hit harder. Rekids, in particular, had the bad luck of releasing two of its biggest records in the months leading up the distributor’s demise. Aside from Beatport, who Rekids works with on their own, the money from sales of ‘Bell Clap Dance’ and ‘No Sleep (Part Three)’ all went straight to the administrator, while the label was stuck paying the manufacturing bill.
Similarly, Damian Lazarus posted a note to his personal website late last year, stating that “thousands of copies” of Dinky's Get Lost 3 mix and two upcoming singles for Crosstown Rebels “have been locked in a warehouse in the north of England until further notice.” Rumor has it that one of those tracks was Sasha’s ‘Mongoose,’ which has since been released on Sasha’s own label and been called by Beatportal “one of the biggest tracks of the year.” Unfortunately for Lazarus, this wasn’t anything new. Crosstown had also been signed to Intergroove UK in 2006 when that distributor also closed down.
Both labels are good examples of what can happen when a distributor closes down: all of the money that is owed is lost forever; while releases are often returned to the label, but only after months of legal wrangling after which labels must start again from square one—or worse.
The most famous example of “worse”, of course, is Force Inc. When EFA went bankrupt in 2004, it took the label down with it. But Jon Berry, who also used to work with the company as its North American office manager, cautions against making many comparisons between Amato and EFA. “The closure of EFA was much slower. I also feel there was a lot more damage involved with it. Just because the state of the market was much stronger and sales were much higher. A lot of people just had more riding on them”, Berry told me in an interview late last year. The news of Amato’s liquidation, however, “hit like a ton of bricks." Indeed, reports of the company’s demise were posted online before its employees were even notified.
The end of Syntax, which distributed labels such as Rong Music and Escort, on the other hand, seems to have been a slower process caused, in many ways, by the weakening of the American dollar. Imports from Europe are not cheap and as shipping costs have steadily increased over the past few years, its profit margins did the opposite. Selling records at competitive prices is rarely a lucrative venture in the United States for artists outside of the country, aside from the exposure that it brings to their music.
So: what can we learn from all of this? The watchword for distributors these days is responsibility. While talking to Berry and Heidemann, they each stressed the idea multiple times. Heidemann likened his work as that of “a kind of teacher” to labels that don’t know exactly how much it costs to do every release with “fancy artwork and special colors”. Each talked about doing the proper legwork for each release and its importance.
Every artist wants their release to be put out immediately after they’re finished producing it. The longer the distributor can work with it, however, the easier it can accurately ascertain exactly how many copies it should produce. These sorts of decisions, in this day and age, are not to be taken lightly. It’s the difference between selling every copy of your record and having 1,000 pieces of plastic wasting away in a warehouse. It’s the difference between a distributor settling its accounts each quarter quickly and easily and closing its doors, owing its labels thousands of dollars.
So, sure, more distributors will close, vinyl will continue to be a niche product and the future will remain uncertain. But people will always want to dance. And people will always want to make music. And people will always want to hear something they’ve never heard before. As such, only one question really remains: how much will they pay to do so?
Comments loading