One Reason Music's Hottest CDs Are Out of Stock: Manufacturing Has Moved to Mexico

Guadalajara, Mexico
Claudia Pelayo/EyeEm/Getty Images

Guadalajara, Mexico

During the last month, four hit titles issued by UMG have been swept off the shelves by fans and put on back order, or, in some cases, weren't even in stores on their release dates.

Newbury Comics head of purchasing Carl Mello says that his Northeast-based chain has been having a strange problem lately: It can't keep in stock "those CD things that supposedly nobody wants anymore."

During the last month, four hit titles issued by Universal Music Group (UMG) -- Eminem's Kamikaze, Lil Wayne's Tha Carter V, Lady Gaga and Bradley Cooper's A Star Is Born soundtrack and Greta Van Fleet's Anthem of the Peaceful Army -- have been swept off the shelves by fans and put on back order, or, in some cases, weren't even in stores on their release dates.

The shortages are due to a convergence of many trends, from unexpected demand, to record labels being more conservative in managing their CD inventory, to artists issuing "surprise" releases or going all digital.

"While we've experienced some capacity issues at one of our suppliers, we've been able to tap into our network of alternative suppliers to meet consumer demand," says a UMG spokesman.

But another factor delaying deliveries has been the recent shift in CD manufacturing to Mexico -- a shift driven by factory owners rather than the major music companies.

In 2015, entertainment-goods maker Technicolor bought Cinram, which made discs for Warner Music Group, and in 2017 announced it would shift CD production to its plants in Guadalajara. Sony Music and UMG, meanwhile, had their CDs manufactured by Sony's DADC division until Technicolor took on UMG's inventory. Sony then closed its U.S. operation and gave its CD business to Bertelsmann's Sonopress, which also makes CDs in Mexico. The Mexican plants place music on the discs, which are then shipped on spindles to the United States and packaged in this country.

Sources say that CDs weren't directly affected by the recent tariff war between the United States and Mexico -- which has ended in a trade deal. But relying on Mexican manufacturing plants requires an additional shipping step, with packaging assemblage remaining in the U.S., and that means that additional lead time is needed, sources say.

When the Mexican plants are at capacity, the major labels can utilize the 10 or so independent U.S.-based CD manufacturers, including CDA Impressing Solutions. But stateside, the low unemployment rate is making it hard to find experienced CD manufacturing and packaging workers, which then adds to delays. Many of the workers that were once hired on a temporary basis ahead of the end-of-the-year CD sales crunch have found other full-time jobs and moved on.

"A year ago, you could order CDs to be manufactured and get them delivered in two or three weeks, and if you had a hot title, you could get a quick [turnaround] within one week," says a sales executive. "Today, CD manufacturing now requires four to eight weeks of lead time, while the quick turnaround on a hot title now takes at least 10 days."

Other factors are also impacting CD availability, too. "We are seeing labels being more cautious on the front end and ordering more conservative numbers of CDs to be manufactured for new releases," says a salesman for a plant that manufacturers CDs. "But as a result, we are also seeing more surprises, when sales are better than expected" resulting in a scramble to catch up with demand.

The surprise-release strategy embraced by so many artists has compounded the logistics problems.

"All of this requires a longer lead time when preparing a title to be manufactured by CD, but that is something that is not available in the case of secret releases," says Alliance Entertainment VP of purchasing Laura Provenzano. "Some CD titles have been [hindered] by the last minute secrecy."

That's what happened with both Eminem's Kamikaze, out on Interscope, and Lil' Wayne's Tha Carter V, via Cash Money/Republic. While some merchants got the title in time to display those albums by their Friday street date, some stores didn't get their allotment of the title until the Monday after.

UMG executives agree that the surprise nature of the Eminem title played a role. According to sources, the label didn't tell the CD plant that it needed an Eminem CD until 3 p.m. PST on Aug. 30, six hours before it would be available digitally. "We got the album out a week later, with a tremendous turnaround, but we weren't able to build any excess capacity on the title."

By mid-October UMG had caught up, shipping about 120,000 CDs on the Eminem title. So far, Nielsen Music reports that the album has moved 897,000 album consumption units, including the CD sales of 68,000 copies, while sources say that the vinyl version of the album should be available in early December.

Lil Wayne's album suffered from a similar issue. The title, which had been on hold due to litigation between the artist and the label, was announced Sept. 25, three days ahead of its digital release date of Sept. 28.

With a three-day head start, Republic was able to begin planning for the physical release. However, the company was planning for a single CD package and when the album was finally delivered, the label was surprised that it was a double album, according to sources, which meant that some of their preparation had been in vain.

Nevertheless, the company was able to get the album shipped to its biggest accounts a couple of days ahead of the Sept. 28 street date, although some smaller accounts didn't get their copies until Friday afternoon, sources say.

The A Star Is Born soundtrack experienced a different kind of surprise: a much better than anticipated reception by fans. So far the album has moved the equivalent of 480,000 consumption album units, including 111,000 CD albums. It's been in and out of a back-order position since its release.

That album isn't pop, so the label was expecting first-week movement of 75,000 to 100,000 units, but the title dramatically outperformed to the tune of 231,000 album consumption units, retail sources tell Billboard. While the company had a lot of data for the title, "it can't tell you how the music will impact people emotionally," says a UMG source. "This is where magical... shit happens and [a title] takes off."

Another UMG title that also had a stronger-than-expected first week is Greta Van Fleet's Anthem Of the Peaceful Army, which debuted at No. 3 with 87,000 album consumption units, according to Nielsen Music, 47,000 of which were from CD sales.

In all four instances, CDs continued to flow to stores, even if the full allotment ordered didn't arrive when they were supposed to. Consequently, even though the manufacturing plants were scrambling to keep up with demand, only a handful of stores appeared to have suffered out of stocks on some of the titles.

Even so, music merchandisers worry that cautionary inventory management approach employed by the labels may further hurt the format's long-term prospects as well as current sales.

Adding to the pressure is the the holiday selling season. While Christmas doesn't have the impact on music sales that it once had, CD sales still are stronger in the back end of the year, due to a stronger release schedule. Consequently, "when August hits, CD manufacturing can get pretty chaotic, says the salesman for a CD manufacturer." On the plus side, he adds: "It's not yet as bad as manufacturing vinyl."