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[seriousfun]

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Most of that waste going to exec pay, perks and overhead.

+1

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Returns are not a cost to the artist.  Plus, once an artist gets the advance, they don't pay it back from their pocket, the only way it is paid back is though sales

Still a cost to the artist. Thread drift, but it's always been arguable (and negotiable) that returns should be at the expense of the marketer/distributor instead of the artist.

[trock]

why in the world would the artist be held accountable for someone else deciding how many and where to ship units to? i would say that would be on the companies end if they make that mistake.

i would think the artist is busy touring at that point or doing something and is certainly not on the phone to wal-mart asking how many units they need. don't they have people who's job it is to try and calculate supply based on perceived or hoped for demand?

[compasspnt]

Tim, the artist cannot, and should not in most cases, be making marketing and distribution business decisions...they have "better" things to do.

The point is that the artists are not paid on units that do not sell through to the end user.

They are, after recoupment,  paid for units sold (shipped, in many cases) with an approximate amount withheld for possible returns of shipped goods (based on past experience with distribution).

If the units do sell through, they are paid on those in the following period's statement.  If the units do not sell through, the artists are not paid on them, because there was no revenue generated from those units.

If more units are returned than expected, IOW, for which the artist HAS been already paid, the label does not "take the money back," but treat it as a furhjer advance against future sales/returns, and deductions are made accordingly at a later date.

[trock]

oh, got it now. i guess its actually pretty complicated since you have to guesstimate not only the real demand from real fans who will buy but then also off the cuff purchases from the people who might just walk buy and see the CD and say "oh i like that song" and snag it.

how long does a store keep a CD before they decide "well this isn't selling" and then ship it back??

and doesn't a store buy those CD's up front and then mark them up for their profit? in other words if wal-mart buys 50K units of an artists CD shouldn't the artist get paid on those 50K units even if wal mart doesn't sell them all?? i mean the record company got paid what they are selling them for anyway correct?

or am i missing something here.

wouldn't it make it more accurate and easier for all involved if the end store bought what they wanted and could not ship stuff back justbecause it didn't sell?

it seems to me that the store's have the easy part in this and all the issues fall back on the record company and artist. i mean if i buy a box of 50 nails and only use 30 of them i can't take those unused nails back. i would think if the record company calls up the store and says buy 10K of this artists cd, and the store says  ok, then thats it, the artist just sold 10K CD's, the record company just sold 10K cd's and the sotre, if they did their homework makes a nice profit IF they estimated correclty

boy the artists gets it coming AND going!

[Bill Mueller]

trock wrote on Tue, 11 December 2007 15:40

oh, got it now. i guess its actually pretty complicated since you have to guesstimate not only the real demand from real fans who will buy but then also off the cuff purchases from the people who might just walk buy and see the CD and say "oh i like that song" and snag it. how long does a store keep a CD before they decide "well this isn't selling" and then ship it back??

Hello Tim,

It can be as little as six weeks.

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and doesn't a store buy those CD's up front and then mark them up for their profit? in other words if wal-mart buys 50K units of an artists CD shouldn't the artist get paid on those 50K units even if wal mart doesn't sell them all?? i mean the record company got paid what they are selling them for anyway correct?

No the label is in the same boat with the artist. There are one way sales (no returns) but these are made at a very reduced rate.

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or am i missing something here. wouldn't it make it more accurate and easier for all involved if the end store bought what they wanted and could not ship stuff back justbecause it didn't sell?

See above.

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it seems to me that the store's have the easy part in this and all the issues fall back on the record company and artist. i mean if i buy a box of 50 nails and only use 30 of them i can't take those unused nails back. i would think if the record company calls up the store and says buy 10K of this artists cd, and the store says  ok, then thats it, the artist just sold 10K CD's, the record company just sold 10K cd's and the sotre, if they did their homework makes a nice profit IF they estimated correclty boy the artists gets it coming AND going!

Retail square footage is the MOST expensive property on the planet. The retailers must pay the landlords who had to pay top dollar for the land and buildings. Small retailers are an endangered species, because big box stores can SELL merchandise for LESS than the small retailer can BUY it. The entire pipeline is tight. That is why a company like Wal Mart can grow so fast once they get the momentum at the top.

Best Regards,

Bill

[rnicklaus]

In a way, a record company sells records on consignment to a record store.

The store gets up to 90 days to pay the label, label credit for unsold CDs that get returned and money from the record company to advertise the record.

In today's world, stock moves very fast from label to retail, back to the label and then back to retail.

[Mike O]

Bill Mueller wrote on Tue, 11 December 2007 20:52

Retail square footage is the MOST expensive property on the planet. The retailers must pay the landlords who had to pay top dollar for the land and buildings. Small retailers are an endangered species, because big box stores can SELL merchandise for LESS than the small retailer can BUY it. The entire pipeline is tight. That is why a company like Wal Mart can grow so fast once they get the momentum at the top. Best Regards, Bill

Not to mention that the big box guys like Wal-Mart work the same way as described above for CDs with much (most, all?) of their other product. Wal-Mart for example provides shelf space for vendors of products to sell their goods. Anything not sold is returned to the vendor/mfg. Hence their generous return policy. The vendor eats it; not WM.

OT alert - Per more than one WM vendor on a plane: It gets even more interesting (worse?). Let's say for example you sell 'handbags' to Wal-Mart. The vendors are now required to do rather strange things like providing all costs of the product they sell to WM. That's right. Shipping, handling. mfg, sub-contracting, etc. So the vendor/mfg is required to show his margin. And give WM information needed to negotiate with the next vendor of similar goods.

Who manages the inventory? The vendor; increasing his cost; and to be fair, increasing the vendors opportunity to keep the shelves full and available for sale.

Sorry for the diversion...

[RSettee]

rnicklaus wrote on Tue, 11 December 2007 15:04

In a way, a record company sells records on consignment to a record store. The store gets up to 90 days to pay the label, label credit for unsold CDs that get returned and money from the record company to advertise the record. In today's world, stock moves very fast from label to retail, back to the label and then back to retail.

Yep, you're right. Thankfully, we've sold at all the stores here that we've had stock at, but the way I see it, the stores have a bit of a loan--because if they stock your cds and most of them sell within that timeframe of 60 days or 90 days (depending on the store's contract), then they have that money in the meantime for operations, and then they just advise you to restock at the end of the contract time. Consignment is a bitch, because they don't always get back to you when you're out of stock. That happened at one store, and I happened to call them that week to check back on the inventory because I stay up to date on that, and a few days had elapsed with no stock, but also no phone call to replenish it. But then again, they've got alot of releases to deal with, too.

In that case, you never know if someone walked into the store to buy your release, and then bought something else because there was none or they couldn't find it. It's kinda cool to do a bit of distro, because it gives a good insight into what goes on. And getting a rapport with people there is sometimes hard, because one place, I dealt with, I think, four different people to sign consignment contracts with, over a period of maybe 8 or 9 months. Having a good rapport with likeminded people at those stores gives you a bit of an edge, too, because then they can recommend the release to customers who like the same thing, so when they leave, you're back to square one again. In this day and age, your product has to be less of a number, and any way that you can gain an edge with some sort of personalization is a great thing.

Unfortunately, I never dealt with anyone named "Guy Hands" before. Girl Hands, yes, but Guy Hands, no.

[rphilbeck]

In summary, he's going to run the label like it's an actual business.  

[RMoore]

rnicklaus wrote on Tue, 11 December 2007 22:04

In a way, a record company sells records on consignment to a record store. The store gets up to 90 days to pay the label, label credit for unsold CDs that get returned and money from the record company to advertise the record. In today's world, stock moves very fast from label to retail, back to the label and then back to retail.

In a way the (physical) record business works like a giant Ponzi or pyramid scheme in that ,in most cases, the record label (or whoever  financed the pressing) is extending credit to everyone else further down the line: distributors, one stops, retail outlets..

In essence - financing these other business operations by advancing them the 'product'.

When things go wrong in that system eg: non or slow-payers, bankrupt customers, declining sales - the whole house of cards comes tumbling down..

Which brings us to where we are today...

[RMoore]

This EMI discussion is very interesting,

Curious to see how this will pan out - if the sound businessman's approach will be the way or not..

I can sympathise with his point about artists basically needing to work harder and be rewarded for actual concrete results - that seems like a good idea to me..

I can't see much wrong coming from artists trying harder, striving to make better quality music (hopefully) etc..and not just being obsessed with gleaning a giant advance up front.

Its also a matter of company survival as well ..

A UK label which gained a Worldwide reputation for being #1 in its genre went bankrupt this year due to a decline in sales,bankrupt distributors - and the final blow was one of their artists who got a huge advance & then never delivered the promised album, thus killing their cash flow. The end.

I know 2 of the principles from the company so heard it all 1st hand.

[rnicklaus]

<<ANOTHER ONE BITES THE DUST: Guy Hands is putting one of his recent Investor Board appointees to work. Mike Clasper, who knows a lot about airport terminals but not so much about record companies, is going to have to learn fast, because he’s been named EMI Music’s interim COO, replacing Ian Hanson. "With his experience of running international businesses at a very senior level, Mike will ably support the EMI recorded music business,” Hands said of Clasper, who was previously CEO of BAA, which operates airports. Meanwhile, the boss gave Hanson a warm send-off, saying, "We thank Ian for his contribution and wish him well in his future career." (12/12a) >>

<<CANDLES IN THE WIND: When Hands looked at EMI’s books after purchasing the company, he was aghast by the extravagance of previous regimes, according to a piece by Emily Dugan that ran recently in U.K. publication The Independent. As examples of executive excess, she cited the expected sale price of

[RSettee]

RMoore wrote on Wed, 12 December 2007 04:34

Its also a matter of company survival as well .. A UK label which gained a Worldwide reputation for being #1 in its genre went bankrupt this year due to a decline in sales,bankrupt distributors - and the final blow was one of their artists who got a huge advance & then never delivered the promised album, thus killing their cash flow. The end.

Yeah? Which label? That's rough, man.

For some reason, I keep on thinking about the Sex Pistols' song "EMI" when I read this thread!

[bigaudioblowhard]

rnicklaus wrote on Wed, 12 December 2007 10:54

<<ANOTHER ONE BITES THE DUST: Guy Hands is...(edit) Apparently they don’t do those kinds of things in the private-equity game. (12/12a)>>

Kinda seems ridiculous doesn't it. Let us not forget Eric Nicoli LOST $560 Million in his last year with the company. A couple of years ago the "dream team" Munns & Levi paid Mariah Carey $50 Mil. to buy her out of her 6 album deal after delivering a single (flop) album. Why didn't they just make her do the next five and shelf 'em? At least there'd be a catalogue?

I think they should have just handed her the keys to the Capitol Tower and taken the 1041 Exchange. (joke) But the final price tag on the Tower was around $50 Mil. Not to mention the $ whatever Andrew Slater got for being fired only 5 months into a 5 year, $15 Mil. contract. Coulnd't they have just strung him along for the 5 months? Was he in demand elsewhere? Were they worried about losing him? I don't think so.

Its hard to imagine that after doing business in the Tower for over 50 years, EMI basically gave it to just two people.

Lets hope Guy Hands, coming from a modest(South London) and non music business background can motivate the new and remaining staff at EMI, and the music industry at large to see it his way.

bab

[RMoore]

RSettee wrote on Wed, 12 December 2007 19:30

RMoore wrote on Wed, 12 December 2007 04:34 Its also a matter of company survival as well .. A UK label which gained a Worldwide reputation for being #1 in its genre went bankrupt this year due to a decline in sales,bankrupt distributors - and the final blow was one of their artists who got a huge advance & then never delivered the promised album, thus killing their cash flow. The end. Yeah? Which label? That's rough, man.

Out of respect for those (label) guys I can't reveal the name   - since they never went public about the unpleasant fact of getting royally scammed by one of their artistes.. ironically they made a point of bending over backwards to be a fair and honest label - far beyond the call of duty..
They were financed by a UK rock star FWIW.
He didn't want to put in any more cash to bail them out as he has his own problems nowadays

rnicklaus wrote on Wed, 12 December 2007 18:54

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