[Andy Allen: An In Depth Look at How Distributors Work]
George Howard: Um, I’d like to step back a little bit. We have such a range of students here, some of whom are seniors and will know the answer to this question. Others who, uh, who may not. Can you give a thumbnail sketch of what a distributor does?
Andy Allen: What do we do? Um, the primary function is, uh, we receive the master and artwork from a label, uh, and manufacture it for them, so in the basic, in basic terms, we take the last step of the creative process, which is finalizing the art and the music and turning it into something that is carrier driven. In this case, these days mostly CD’s, although we do quite a bit of vinyl as well. Um, the second thing is we then solicit that to, um, the remaining stores that are in, and we only distribute in America, so that’s just U.S. based. Um, uh, we got out and present the music to those that buy the music for the stores, those people that determine what the stores carry. And of course, that’s a presentation. It’s not different than building a case for a client or, uh, you know, you’re getting your day in court. The industry still puts out about seven hundred full lengths a week. Um, most record stores have fewer than thirty thousand titles in their store. If you do the math quickly, you’re all probably better at this than I am, seven hundred a week roughly equates to thirty-six thousand titles a year, and the average stores only carries thirty-five thousand titles, so you can see that you have to make a case to be there. SO that’s the other part of it. And then the rest of it is actually just the warehousing, the shipping, the invoicing, the billing, um, rendering statements to the actual labels, and then, of course, paying.
GH: So you act as a wholesaler, for wrong term (?), between the label and the retailers?
AA: Yeah. Um, the label determines what the price is gonna be. Um, we get a distribution fee. Um, it varies per label, and then we sell it to the retailer. The retailer generally buys it from us at about thirty percent less than what the suggested retail is… thirty-five… thirty-three to thirty-five percent less. So, um, you know, a $15.98 list record will sell for, I don’t know, I think it’s like $8.40 or something like that. And the retailer decides then what they’re gonna charge the consumer. In some cases, they’ll charge the consumer $16.98, and they keep the margin. Uh, in some cases they may charge literally what they buy for it or even less, determining, uh, determined by what their business model might be.
GH: So you’re selling to the store, record store at $8.40, and you’ve paid what for the record?
AA: Well, I haven’t paid for it, because I don’t, I actually never possess or own it. The music is always owned by the label. The, um… I have some manufacturing involved in it, you know. I’m sure you’ve all read the Rolling Stone articles where they break out what, you know, why is a CD fifteen dollars when it ultimately, raw materials wise, is only thirty-eight cents. So from my standpoint, it’s thirty-eight cents, you know, whatever it cost to make it. Um, of course the answer to that question is the vast amount of money that it takes to market the artist is what determines the price.
GH: Um, one thing that I think is lost on the population for sure, and unfortunately a lot of people in the record industry, um, is co-op. Um, I think, you know, my contention is that co-op and what you mentioned regarding shelf space has far more to do with the difficulties that the record industry is facing than downloading. Um, can you speak on co-op a little bit?
AA: Well, co-op…
GH: Describe what it is?
AA: Well, the term doesn’t… you know, I’ve been in the business for thirty years, and I don’t know when it was actually co-operative, but it’s short for cooperative. Being that, you know, we go to a retailer and say, “Hey, we’ll give you twenty dollars if you kick in twenty dollars and we’ll both spend forty dollars then and we’ll try to sell this record.” Well, in thirty years, I’ve never seen anybody actually kick in. It’s all driven by the money that comes from the labels, and so it’s not cooperative really. It’s really a subsidy, um, for advertising. So, for example, how it may work is, in probably the best and most visible, um, advertising you might see is the Best Buy Circular. The Best Buy Circular goes in I don’t know how many newspapers, it goes to I don’t know how many people, but it’s in excess of seventy to eighty million people see that circular every, um, week. It has ten or fifteen titles in there. Um, those ten or fifteen titles are paid for by the distributor, which ultimately then is paid for by the label to be in there. It’s a highly selective process. You have to make huge case to get in there, to be able to spend the money to be in there, and then they advertise the project. So why do you do it? Well, it reaches eighty million people, so if you’ve created demand for the record and then you wanna reach eighty million people, that’s one vehicle to use. Um, uh, a more grassroots example of co-op might be a listening station, so you go into a, uh, a typical indie store, you put on the headphones. Uh, in order to do that, we’ve paid for the slot thing, really, to get into the station, which actually pays for the technology that allows you to listen to the record. So in a way it’s really us just subsidizing for the retailer, um, the ability to help promote the artist to the end consumer.
GH: You said something important. You said, uh, you know, you can get into these programs potentially, um, and if you’ve created demand, then it works.
AA: Yeah.
GH: And this is lost on a lot of people.
AA: Yeah.
GH: In fact, I’ve run enough labels and worked with enough artists where they feel that once they have distribution, that’s the Holy Grail. They can then kind of sit back and get the record in the stores. Um… is that true?
AA: Well, uh, we have a guy in common, this guy Joe Regis, and Joe Regis…. Uh, we have a rule in our company, and it’s the Joe Regis Rule. And the rule came from, “Hey Andy. I can’t find my record in any store, so nobody can buy it,” and the answer was,” Joe, you haven’t created any demand for the artist, so the stores don’t want it there, so nobody’s coming in asking for it, so I can’t get it in there.”
He’s right, of course. You can’t buy it if it’s not there. The problem, or the dichotomy, in that whole situation is you can’t get it there unless there’s demand for it. So, it’s a bit “chicken and the egg.” What it really comes down to is—and I talked about the stores before—there’s thirty-five thousand titles in a store, there’s thirty-six thousand titles coming out every year, there’s gonna be choices made. And generally what happens is the promotion and particularly the pre-promotion of an artist is gonna determine whether the store brings the record in, how they display it, and how prominently it’s displayed. So, you earn your ability to be featured, basically. And there are some labels that do it wonderfully, and there are some labels that don’t do it quite so well, and those that do it wonderfully do great, and those that don’t are gonna have to learn very quickly or they’re not gonna have retail space.
GH: Who does it wonderfully and what do they do that makes it wonderful?
AA: Well, I mean, in our world, and I’ll speak in the ADA thing, Sub Pop, for example, is a company that has been around a long time. They’ve had their ups and downs. Uh, obviously famous for having discovered, um, the Seattle scene and captured that so well. Um, but, you know, Sub Pop had a very typical indie history. Um, did well, uh, found some, you know, truly life-changing artists. Uh, sold the company, um, lost touch with their audience. Uh, spent money excessively, made a lot of mistakes, nearly went out of business, scaled way back, re-entrenched themselves to the original ideas that they had for the label and are now probably doing better than they’ve ever done before. Um, they work way ahead. Um, we get music, um, probably four months before that record’s in the street. Uh, retailers get the music, writers get the music. They listen very carefully to what people say. They may elect after putting it out not to put it out, I mean, once they get a consensus opinion from somebody. They’re very artist driven. They listen very carefully to their artists, and they’re, they’re really committed and passionate about their music. They do a great job. Um, you know, you mentioned Better Than Ezra. Um, interesting story and slightly off the topic, but it’s worth, it’s worth talking about the differences in just how music can be discovered. In that case, that was actual Electra, um, found this band that had done about 25,000 units on their own in this area just kind of traveling, selling out of their trunk, doing things like consignment. They actually signed the band with the idea, “Okay, they’re not really ready for prime time yet, but let’s sign them, put it out through ADA, give them some chance to grow, and we’ll see what happens.” And the very first thing that happened is that song—I can’t remember it now, somebody’s gonna know—“Good.”
GH: “Good”
AA: Gets on a station, gets on another station, goes on another station. Finally gets on KROQ in LA, which is to this day still probably the most influential, um, station in the country. And before we could even ship the record, um, it was a hit, and it was our first platinum record. But it can happen that quickly. It more typically happens in the way that Bright Eyes happened, you know.
GH: Years and years.
AA: This is the fifth record from a guy that’s twenty-four years old. Literally was starting, you know, playing, you know, doing stuff when he was not even in college, um, with a band of friends that just kind of hung out and did what they did, and found an audience and it just expanded on that audience over the years.
GH: Two Questions: A. Does, do you ever consider individual artists, or do they have to be with a label? And I know that gets blurred. And what does it take for either of those, a label or an artist, to get a deal with ADA?
AA: ADA is primarily distributor of labels, meaning that we won’t partner with a label unless there’s a label there. We are not a label. We just do distribution. We don’t have the inherent functions of promotion or publicity or any of the rests of it. We do all that are the distribution functions that I described earlier, but we are not the label. And as a result we’ve done few label-direct type deals.We did do a deal with a band called—
GH: I’m sorry. Artist-direct or label-direct?
AA: Artist-0direct type deals. Um, most artist know exactly what they wanna put on their record, but have a very difficult time trying to figure out who the audience for that record might be, and frankly that’s what the label’s job is. We need the label in place to tell us what to do, because we don’t conceive of marketing plans. We act out the marketing plans that come from the label. There are some labels that are really, um, artist-driven, and we talked about Ani diFranco—
GH: OAR…
AA: OAR is one that we worked with, um, that frankly were so impressive that I broke the rule, and they basically were, you know, and again guys that came out of college. They were originally from the Baltimore area, went to school in Ohio. Literally toured Ohio, or as far as they could get away from school on the weekends and get back for class. They were superstars in Ohio. I mean, in, you know, you put out a record there, they put out a record, and it would literally debut in the top five in Ohio and nowhere else.
GH: Yeah, I tried to sign them, too.
AA: Um, young guys, smart guys, driven to perform, driven to do something different, broke the rule. Um, we sold just a little under eight hundred thousand records with them.
GH: Eight hundred thousand records.
AA: Um, most of which was below the top two hundred. Most of which was just them out touring all the time. Now of course they’re out of school. They’re touring constantly. They’ve become a huge band in the, that world of performance-driven music, and, uh, and it’s all been done basically without a hit. And if you can survive in this business by finding an audience without being driven by a hit record, you’ve got a career, you know. If you’ve got a hit record, you’ve gotta survive that hit record on an audience, you know. You’ve done a hit song, um… A good example in my life was Hall and Oates. Hall and Oates, uh, was—somebody loves Hall and Oates here? No. I don’t think so.
GH: I do.
AA: I kind of like them, actually. But Hall and Oates didn’t sell any records unless they had hits on their records. If they had hits, they sold platinum level records, million sellers. If they didn’t have a hit record, they didn’t sell anything. You know, then you’ve got the other side of the coin with Ani, who, you know, can regularly do three or four hundred thousand records. Bright Eyes, a good example. OAR, now a good example. Bands that can actually reach an audience without mainstream media, without a hit, that’s a business, that’s a career.
GH: In the catalog, too… I don’t want to ask you to give proprietary information, but if you’ve got an artist that’s sold a good eight hundred thousand, do you pay monthly or quarterly?
AA: We pay monthly.
GH: You pay monthly? So what’s a monthly check going to OAR from you guys look like?
AA: Um, well, it’s whatever they sold that month, minus my distribution fee. My distribution fee for those guys is probably about twenty percent. So they’re getting eighty percent of what the retail price is. Um, which a hell of lot more than if they were signed to a major label and getting twelve points, minus deductions, um, and advances. So, um, they’re making a lot of money.
GH: Would it be fair to say they’ve made over a million dollars?
AA: Oh, each.
GH: Yeah. Just trying to get some range of what can be done on your own.