Vinyl record distributors are reporting declines of up to 60% in sales, a trend which is affecting dance music labels behind vinyl releases of house, techno and hip-hop.

More and more DJs are using MP3s in their work rather than expensive vinyl records, according to Siegfried Zahn, managing director of Neuton Medien Vertrieb in Frankfurt, who announced that his company will be filing for creditor protection on Monday (Dec. 8).

Since 1993, Neuton has been one of the leading distributors of vinyl with 60 labels and over 15,000 catalog numbers. It has 13 employees and total sales in the past 15 years of €65 million ($82.4 million).

Neuton will be filing an application with the Local Court of Frankfurt for the commencement of insolvency proceedings. "We want to wind down the company fairly and continue to offer our distribution partners a good service right up until the very last moment," says Zahn.

Zahn reports that a large number of the 50 vinyl distribution companies active on an international basis are in trouble as the most important markets - Germany, the U.K. and Japan - are increasingly eroding and many of the labels have discontinued their operations. U.K. vinyl distributor Amato and Japanese distributor Cisco ceased operations in the past year.

Zahn says that labels are increasing the number of releases each year in an effort to hold up total sales: whereas it was possible even just a few years ago to achieve volumes of between 1,000 and 2,000 units each for 10 releases, today 20 releases are produced but are sold in volumes of only around 400 to 500 copies each. The dramatic economic conditions are exerting additional pressure on consumer demand, forcing more and more record retailers to close.

Says Kai Fraeger, general manager of WAS Word and Sound Medien GmbH in Hamburg: "Sales are suffering from digital business and particularly also illegal downloads and digital promotion."

He goes on to say that this is due to the music industry's inability to arouse the enthusiasm of the target group as a whole for new music.

"When young adult music beginners are forced to resort to acts such as Bruce Springsteen, Bryan Adams or the Rolling Stones, in other words the music that their fathers or grandfathers were listening to in their youth, this says a lot about the absence of innovation. As a result, interest in music as a whole is continuing to decline," says Kai Fraeger, adding that this is being exacerbated by some companies' insufficient capital resources, amateurish management qualities and dubious business models.

WAS started in 1999, works with 150 labels and has 20 employees.