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Indie Record Shops Aren't Necessarily Getting Gutted By Their Distributors

A-1 Record store in New York City.
Spencer Platt/Getty Images

A-1 Record Shop in New York City.

Reports this week of a storm headed for indies may have been overstating the impact of a long-in-the-works change in policy.

About three years ago WEA, the distribution arm of Warner Music, announced a new set of parameters for the stores it sold music to, telling clients they must maintain $10,000 in business in order to be able to maintain an account with the company. That translates into about 55 albums a month, or about 650 vinyl album units a year, from WEA, at an average wholesale cost of about $15 a vinyl unit, Billboard estimates. Stores that haven't met that threshold have now been barred from direct buying. The mandate -- which also impacts labels going through the company’s indie distributor, Alternative Distribution Alliance -- has resulted in about 100 stores being dropped from direct-buy status.

With overall physical sales volume dropping -- even accounting for the steady rise of vinyl over the past decade, which hasn't offset the compact disc's decline -- physical distributors of music are required to constantly re-evaluate their operations in order to remain profitable. All of the major, and most large independent, distributors have long applied volume thresholds to the stores they sell direct. According to sources, about a third of the stores affected by WEA's change hadn’t made a purchase from the company so far this year.

Sales and distribution executives say that there are about 1,500 indie stores still left in the U.S., and that the large majority of them aren't allowed to buy direct. Most must purchase their units from wholesalers, likely Alliance Entertainment or Baker & Taylor, the two largest (and practically last) one-stops in the country. 

"WEA proudly supports hundreds of independent vinyl retailers across the country with direct distribution, and many more through other channels,” a Warner Music Group spokesman said in a statement. “Last week, in accordance with our long-time policy, we recommended that a limited number of retailers would be better served by working with one of the many vinyl wholesale partners that carry all of our artists' releases.”

Greg Glover, a morning DJ on alternative rock station 94.7 FM KNRK in Portland during the week, also operates the weekend-only store Commercial Astoria, where he sells jewelry, makeup, t-shirts, animal leashes, turbans, tarot cards -- and vinyl. Glover had tried to place a $1,400 order through the company's website this past weekend, but ran into a wall online before being told by the company's phone help line that he no longer had an account. "I never heard about it [the $10,000 threshold]... the least they could have done was give me 30-day notice. It was handled really poorly. If I'd had notice, I could've placed one more WEA product order."

Still, Glover is pragmatic towards WEA's move. Getting cut off by WEA "might be a blessing in disguise, and its not the end of the world," he says. But considering the way they did it, he thought he should speak up because "some other merchants might need the heads-up." Usually, when a distributor cuts off accounts because of low volume (or other reasons), they informally share which accounts are no longer being sold directly to wholesalers. But in this case, two wholesalers tell Billboard, WEA is acting more secretive, not sharing that information.

At mid-year, WEA and its indie distributor arm Alternative Distribution Alliance (ADA) -- which distributes Epitaph, Sub Pop and Beggars Group, among others -- had a 21.9 percent market share. If a mainstream music store is selling $10,000 in WEA music, it follows that that store is ordering about $50,000 a year in product -- below the dollar threshold most stores need to maintain accounts with most large indie distributors. With a 35 percent mark-up, it's also implied that the store is only doing $67,500 in business annually, well below the $200,000 or so in volume needed for a somewhat viable record store.

Furthermore, if WEA and ADA-distributed labels only account for 10 percent of a store’s volume, a $10,000 minimum implies that the store is only buying $100,000 per year, leading to an overall music sales volume of about $135,000 -- typically below the threshold to be a direct account with most large indie distributors. 

A sales executive with an ADA-distributed label tells Billboard that press reports of the move were initially concerning, but found no key indie accounts were dropped, characterizing the change as "much ado about nothing." That executive also points out that ADA's key indie labels, like Sub Pop, Secretly Canadian, the Beggars Group, Domino and Epitaph, are not reliant on WEA/ADA to reach indie stores since they each sell to some key indie accounts directly. If a low-volume client was dropped by WEA/ADA, it could still buy directly from most of those labels, according to that executive. Moreover, most of those labels also work with boutique distributors who specialize in indie music.

According to indie labels and distributors contacted by Billboard for this article, most large indie distributors typically sell to around 300 key indie stores directly. WEA/ADA still sells to around 500 indie stores directly, sources say. Moreover, about 150 of them had been added over the last few years.

“If you are not doing $10,000 a year alone in just Sub Pop music, you are not much of an indie store,” says one indie merchant -- who is still buying directly from WEA.

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