A record distributor's primary role is to put the right record in the right place at the right time in the right quantities, that is, to maximize sales of each record. If that doesn't sound easy, you're right.

Record distribution today is a minefield with completely new and different methods of distribution arising and with the base of once stable major retailers falling apart, including several on the verge of bankruptcy.

How did this happen?

The answer to the first part is fairly easy - rapidly developing new technologies. A look to the past provides some answers to the second. Over-ambitious expansion at retail causing additional overhead and low margins (in an attempt to win the market share battle and put the competition out of business) have been a recipe for disaster in the past and the continued lingering ill effects thereof still haunt the industry.

Major companies overbuilt their wholly-owned distribution systems in the '70s, leading to problems then and now. "This contributed heavily to the economic disaster the record industry went through at the end of the '70s," according to Larry Harris, a former senior VP at Elektra and CBS Records and the first head of Portrait Records. Fierce competition for increased sales and market share at any cost, and the notion that 'bigger is better' among major distributors led to too many branches and employees. "Increased overhead created a need to move more product through their systems to sustain them. This in turn meant pushing product into retail stores in excess of what retailers normally would have taken and what the market place could realistically absorb. But since everything seemed rosy, retailers went along with this push, contributing to a huge build-up of product that didn't sell," says Harris.

At that time the age of computers had not yet hit. Inventory control was basic. SoundScan didn't exist to verify real sales (does it today?), and a lack of sophistication at radio made it difficult to verify radio station airplay. Sales numbers were easily manipulated, exacerbating an already serious atmosphere.

We must view today's problems against this backdrop.

The industry's reliance today on computers is much more than what it should be and the costs of doing business have escalated dramatically. More companies today are part of publicly held conglomerates. Record executives are driven to think more in terms of quarterly profits than they ever were. No one wants to take a chance and, afraid to make a mistake, numbers dictate. Today record executives make decisions that may realize more short-term than long-term benefits, which may be mortgaging the future of the company, says Frank Mooney, CBS Records' former VP of Branch Distribution. "I would doubt that they see their roles as bringing music to the masses. An executive is supposed to be adroit enough to understand music but still have business acumen."

That mentality is widespread and in the process, executives sell their souls to the quarterly report, says Mooney. Thus, today's execs now work more on selling records than on artist careers, focusing on delivering a hit rather than on long-term strategies. Before, the focus went beyond the immediate record with a commitment to an artist's career both emotionally and financially, says Mooney.

Not surprisingly, major labels now push records from which they will profit the most immediately (sacrificing the investment in building artists and careers), and those are ones they own, not ones that are merely part of a distribution or production deal, and ones that cater to today's fads. Today, with the above factors and an over-crowded marketplace, the opportunity to break new artists is diminished.

Also, starting an independent label today is harder than ever because of costs and the limited and unsatisfactory choices for distribution. You can go through a major and be a very small fish in a huge pond. Or you can go through independent distributors, almost all of whom don't have the capital or staff to perform adequate promotion and distribution services. This hurts competition and the industry as a whole.

Ultimately, every success comes down to distribution, which is the core of this business. Record companies can make records and market them, radio stations can play them, but if people can't find them to buy, there is no business.

These challenges of record distributors - which affect every level of our business - will be the subject of the National Association of Record Industry Professionals' program (sister organization of Los Angeles Music Network) "View From The Top: Record Distribution in the New Millennium" with special guest speakers Jim Urie (President of Universal Music & Video Distribution, also this issue's feature interview) and Dave Mount (Chairman & CEO of WEA, Inc.) on August 7th, 2001. We will discuss successful strategies today to market and distribute records to maximize sales. Also, we will address the record distributor's relationship with retail, and in which areas they predict substantial growth, domestically and internationally. We will also discuss how Vivendi Universal and WEA will integrate their current distribution systems with MP3.com and AOL, respectively, if at all. Please join us (click here for details).

Tess Taylor
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August 2001