Let's Make A Deal Part 3 - Be Your Own Distributor

In Part 1 of this series, "Let's Make A Deal", we explored the ins and the outs of the proverbial record deal.  I gave you more information than you could ever want but certainly need in considering whether a record deal is for you.  But, let me sum up your chances with these demographic statistics.  Current world population:  7 billion.  Number of artists signed to recording contracts across all major labels worldwide:  about 4000.  This means that you have about a 1 in 1.7 million chance of getting a record deal.  Now that’s still better odds than winning a lottery (currently running about 1 in 175 million).  You do have a better chance of being struck by lightning than getting a record deal (1 in 700,000 in the US).  Depressed yet?

Take heart, weekend warring daydream believers!  If you followed Part 2 of this series:  "Making Your Own Record" then I offer congratulations!  If you have produced and duplicated a CD, you are now technically an Indie Label executive and are probably already functioning as a sleezy weasel (no offense to honest hard working weasels).  According to the RIAA, music industry revenue in 2013 stayed flat at $ 7 billion dollars.  The good news to Indie weasels like you is that the independent label portion of that big pie was an astounding 32.6%.  That’s better than the big guys are doing like Universal (23.9%), Sony (22.5%), and WMG (14.8%).

Now I know that maybe you’re feeling a little non-creative with all these big numbers and percentages flying freely.  Now that you are a label suit, you must be able to sling them effectively to impress girls at the bar and reassure your grandmother who fronted the money for your first indie CD.  Nothing gives you swagger with the chicks and protects granny from foreclosure any more than putting dollars in your pocket from sales.  In this article, we will investigate some solid outlets to generate CD and digital sales to keep Weekend Warrior Records in the black.

Now that you have 1000 CD’s scattered across multiple boxes in a corner of the Weekend Warrior Records warehouse (AKA the living room of your apartment), what’s next?  The first thing a label weasel has to do is calculate how many he has to sell to break even.  Let’s say that you were able to record and duplicate your first record for $5000.  To recoup your expenses at a per CD cost of $10 (by the way – with a retail sales price of $16.95, this is about what a major label makes per unit after distribution and duplication), you have to sell 500 units.  Wow, this record mogul thing doesn’t look as lucrative now.  Still, that means you can potentially make another $5000 of clear profit.  At a profit margin of $5 dollars per CD, selling more than 1 CD per hour is still better than a minimum wage job at McDonald’s.  Look who’s talking success now, big label guy! 

PHYSICAL SALES

There’s really no better marketing or sales technique than selling hand to hand at gigs.  Always have a merchandise table at your gigs with the best looking girlfriend in the band hawking your CD. If fans like your music and they haven’t spent all their money on admission and beverages, you have a good chance of sending music home.  Here are some finer points of raising the potential for physical sales:

-       Have an eye catching attractive display.  Get a banner and buy a couple of floodlights to illuminate it.  Create a grid or something to get demos or banners up above the hot girlfriend’s head so people can see it.  They have to come to the table to make a purchase.

-       Hawk your CD from the stage.  Don’t wear it out but remind people that you have product for sale, specifically this music.

-       Always plan on going to merch table after the show to greet fans, sign autographs and personalize the experience.  The hotties will wait for you and you might be able to afford to buy a round from the sales.

-       Have a bank for the seller.  You need to have a bank with various denominations of bills to complete sales.  There’s nothing worse than missing a sale because hot girlfriend can’t make change (or even worse, can’t count).  Make it easy on customers (and hot girlfriend).

-       Get yourself a Square Up account for credit card sales.  I coordinate merchandise sales for my band.  On any given night, our sales increase by 50 to 75 percent if I offer the option of using a credit or debit card.  Square Up is a service that allows you to use your iPhone or Android phone as a card reader to process credit transactions.  They send you a free card reader that plugs into the headphone jack of your phone.  If you have 3G or 4G service, you have a ready to go CC terminal in your pocket.  They charge 2.75 percent per swipe with no long term contract or fee and the funds are transferred into your designated Weekend Warrior Records bank account within a couple of business days.  Swipe and cha-ching – easy.

-       Always keep a few CD’s with you.  Of course, there’s nothing more annoying than some dude always trying to sell you his latest CD.  But, you can’t sell them if you don’t have them with you.  Be sensitive, be thoughtful, but be a good self-promoter.  If nothing else, go to your local screen printer and get a short run of baby doll t-shirts displaying your artwork for all the girlfriends to wear.  Nothing is beneath you now that you are a label weasel…

DIGITAL SALES

In 2013, digital sales or in other words products sold over the web either by physical product fulfillment or mp3 sales represented around 32 percent of total music sales globally.  The internet is an outstanding potential marketplace for the independent artist.  With the right marketing and promotion, you have an unlimited supply of potential customers and you are on the same playing field as Jay-Z or Justin Bieber.  Let’s look at some of the mechanisms for digital sales.

Artist Website – With the advent of services like Go Daddy or Web.com, building your own personal website has never been easier or more economical.  It will always be the best and most personalized portal to promote yourself and market what you do.  Most of these services have merchant and commerce portals to sell products from your website and have SEO (search engine optimization) features that will generate traffic to your site from web crawlers like Google or Bing.  If you don’t want to have to package and fulfill orders for your products, there are even fulfillment services like Merchmo that you deliver a few of your CD’s to and they handle all the commercial transaction, collection and shipping for a percentage.  Bottom Line: don’t miss this obvious outlet for promotion and sales.  Pick the smartest guy in the band (usually the keyboard player) and designate him the webmaster for capturing your share of the market place.

Aggregators – Essentially, an aggregator is a company or service that takes your product and disseminates it across the large variety of digital retail points.  CD Baby is probably one of the most well known of these aggregation services.  You create an account, send a few copies of your CD to them and they go to work for you.  Not only do they sell your CD’s on their well- trafficked web site, but they also distribute your product digitally to services like iTunes and Amazon.  By having a physical web address associated with your CD (and a bar code), you are then able to get your tunes streamed through service like Pandora or Spotify.  Looking at digital distribution revenue by retail channel, it breaks down as iTunes with 77.4%, Amazon with 10.5% and CD Baby site sales at 4.5%.  That represents over 90 percent of the market that you are guaranteed to have a shot at by using their aggregation.  However, keep in mind that all of the aggregator services come at a price.  They take a percentage of your sales.  However, with commissions paid of over $50 million dollars last year, aggregation services like CD Baby are obviously doing something right.  Your portion of that pie might be sweeter if you share the risk.

Do It Yourself – So you’re a lone wolf label weasel?  You can do it!  But, let me add a caveat to this sage advice, my mogul friend.  It’s a dog eat weasel business.  Most label suits I’ve known have a hard time keeping a job (you’re king when your artists succeed, pauper when they fail), become alcoholics (business gets done over happy hours and it’s always five o’clock somewhere), and can’t keep a girlfriend (Maserati payments decimate your potential for Tiffany blue bagged gifts).  By the way, a Maserati makes a poor carrier for gear.  You can’t even fit a mic stand in the trunk.  But here are some pointers if you are a one wolf pack.

 1.     Get a UPC barcode for your new CD - Before you can sell "Greatest Hits And Near Misses" on iTunes, Amazon or in physical retail points, you have to place an imprinted UPC (Universal Product Code) code usually on the back of your j-card packet.  There are multiple ways to obtain this discrete code and all of them cost some of your mogul money.  Often if you work with your CD duplicator ahead of time, they can obtain the UPC and either include it in artwork they produce or get a jpeg file for you to supply to your layout artist.  You can find a slew of vendors for UPC codes online.  Typically, you’re going to pay about $10 per code.  Keep in mind that some digital retailers like iTunes require a separate UPC for the digital version of your project from the physical CD version.

2.     Get an ISRC (International Standard Recording Code) for each of your tracks.  Grab your head that is trying to spin around and settle down.  iTunes and most digital distributors require each track to be assigned this code that uniquely identifies that specific track for the purpose of tracking and royalty calculation.  You can apply for codes at the ISRC website (http://www.usisrc.org) for a fee of $80 that will cover 100,000 code assignments per year.  There are also ISRC management firms that will coordinate all of this craziness for an additional fee.  You did want to go it alone…

3.     Get a Tax ID.  Did you think that Uncle Sam was going to allow you to be a successful US label weasel without taking his cut?  If you are going to be receiving payments to Weekend Warrior Records, I recommend that you get a discrete tax ID for your new endeavor versus using your own Social Security number.  There might be a little more paperwork come tax filing season but it makes keeping up WWR revenue easier.  Go to www.irs.gov, apply and you can get your ID within minutes.

4.     Digital Vendors - now that you have paper, start hitting the big vendors like iTunes and Amazon first.  You’ll need to have product on these sites before you can approach streaming vendors like Pandora or Spotify.  Each of these vendor sites have easy applications and very detailed submission procedures.  If you’ve completed tips 1-3, you’ll be submitted in no time.

5.     Local Small Vendors – many local retail shops that sell CD’s will allow local artists to sell product on a commission basis, especially if you have a commercial looking, shrink wrapped  product with a UPC code.  Keep in mind that these locations are going to want stock of at least 10 CD’s and will want a commitment for several months.  There’s no guarantee that you’ll get endcap or check out placement but it’s still cool to have a local presence.

6.     Box Vendors – don’t even try to get your CD into Walmart or Target.  These type of vendors have distribution companies that coordinate stock.  Walmart uses a national company called Anderson Merchandising.  I had a record deal on an Indie label with charting singles and 50,000 units sold and still couldn’t break into Anderson’s roster.  However, the mixed blessing here is that you would have to drop off about 100,000 units of Greatest Hits and Near Misses at the Anderson Warehouse to get into the supply chain.  You would have to sell the Maserati.  Take baby steps, my indie friend.

Wow, that was a delightfully sobering overview of the dark side of being your own distributor.  Before we close and you take your antidepressant, it would be apropos to at least mention the back side of distribution / disbursement (or divvying up the spoils).  I know that it feels like there will be very little pie left over once you’ve paid the piper.  You need to have a strategy for how you will disburse your mechanical royalties from sales.  Obviously, make it a priority to pay off your grandmother who fronted the recording budget first if this is the case.  Then, most major record labels reinvest about 30% of profit into new artist development.  It might be good to stash some of the proceeds into a recording budget for the next set of greatest hits and near misses.   If there’s anything left, it’s also good to set aside a portion for subsequent CD duplication.  You might actually have a best seller and need more!

There is some potentially useful information in the paragraphs above.  But, there’s no guaranteed procedure for success in these types of ventures.  The key ingredient in any entrepreneurial endeavor is an undying belief in yourself and your product.  Get busy and proactive.  Sometimes even an Eskimo needs ice for his drink while he listens to your new CD!  Venture wisely my friends.

Chris Marion is an American musician best known as a member of Little River Band and for his contribution to the gospel and country music industries. Although graduating college with a B.A. in Psychology, he is a classically trained pianist and has worked in the music industry professionally for over 35 years. As a resident of Nashville, he is involved in the recording industry working in the genres of Gospel, Country and Rock. Since 2004, he has toured globally with the classic rock act Little River Band as a keyboardist and vocalist.  For more useless trivia and minutiae concerning Chris or to contact him directly, feel free to visit his personal website www.chrismarionmusic.com.