Business

'It's a Total Nightmare': Problems at Direct Shot Distributing Have Made New Vinyl and CDs Scarce

Remie Geoffroi

         

Indie distributors are helping to fill in the blanks in physical product, but the problem could drag on.

It's early December and Matt Jencik can't find any copies of A Charlie Brown Christmas. The buyer for Reckless Records, which owns three stores in Chicago, says that at this time of year the Vince Guaraldi soundtrack would normally sell a few copies a day — but Reckless can't sell records it can't stock. "There are holiday records I couldn't get that have always been good sellers, like titles by Stevie Wonder, Bing Crosby and Dean Martin," he says. "We were at a holiday fair last week and barely had anything to offer."

Since April, record stores and labels have been plagued by a distribution bottleneck that began when Warner Music Group moved its physical product to Direct Shot Distributing (DSD). The change made DSD, which also has contracts with Universal and Sony, one of the largest distributors of physical music in the country. The problem became apparent on April 13 — Record Store Day, the busiest and most profitable day of the year for many retailers — when some stores didn't receive the exclusive releases they had ordered. Since then, the problem has gotten worse.

The problems are varied, complicated and occasionally absurd. Buyers are told their orders are lost or unavailable without further explanation. Albums arrive with box-cutter slashes through the jackets. Large shipping pallets are delivered, shrink-wrapped, but with just one box. New releases are late, essential catalog titles are unavailable, and indie-exclusive vinyl pressings — like the silver version of Beck's new album, Hyperspace — aren't delivered. Further complicating matters, around the time it switched its business to DSD, Warner began using a new business-to-business website that doesn't provide tracking information.

"It is Kafkaesque," says Jencik. "Paperwork that goes nowhere. Calling people that don't respond to you. It's a total nightmare."

David Swider agrees. The owner of The End of All Music in Oxford, Miss., is scrambling to source the January 2020 title for his store's record-of-the-month club, which has anywhere from 50 to 100 members throughout the year. Swider originally picked The Dank D-Funk Blend, a compilation of funk tracks from the Prestige Records catalog released by Jazz Dispensary in November. But Swider is unsure if he'll receive the copies he ordered. "I called [my rep from Universal] today and they still have 400 copies in stock," he says. But Universal can't guarantee that DSD will get them. "It makes zero sense," says Swider. "You're the biggest music company in the world and you can't send me 60 copies of something?"

On Dec. 9, Billy Fields, vp sales and account management at Warner Music Group's distribution arm, WEA, posted a photo of The Dank D-Funk Blend on Instagram. "Uggh we didn't receive any of these, cool to finally see it," responded Annie Skinner, owner of Indy CD & Vinyl in Indianapolis, under the store's account. Warner and Universal Music Group did not respond to a request for comment.

Some of the problems stem from the increasing complexity of the physical distribution business, according to Kyle Krug, director of marketing for Legacy Supply Chain Services, which acquired DSD in June. DSD, which used to ship bulk orders to big-box retailers, now sends more small orders to individual stores. At the same time, the volume of online orders is skyrocketing — along with the number of manufacturers involved. "The Warner onboarding sort of created the perfect storm of challenges for the physical music industry," says Krug. (Legacy Supply Chain Services had started negotiating to acquire DSD before the Warner switch, he adds.) Krug also says DSD has added staff at its Franklin, Ind., warehouse, which processes all of its physical music product. DSD's warehouse partner is also upgrading its technology, although Krug says he does not know exactly when retailers and labels will notice service improvements.

In July, Amoeba Music in Los Angeles hosted an in-store performance for artist Cuco, to celebrate his debut on Interscope Records. But sourcing product for the packed show became an onerous task, says Amoeba co-owner Jim Henderson, and they ended up with mostly CDs. "There are also countless issues with returns authorizations post shows, which impacts credits and payments," he adds. And stores remain beholden to contractual billing cycles — usually 30 or 60 days — whether they receive the stock they ordered or not.

The problem isn't just affecting major-label artists. Many indies use distributors — including Alternative Distribution Alliance (ADA), Ingrooves, Caroline and The Orchard — that funnel product through the major-label network and into the DSD warehouse. After months of headaches, some indie labels are telling manufacturers to ship large amounts of stock to their own warehouses or directly to retailers so that they have it on hand for tours or online orders — which in some cases violates the exclusivity provisions of their distribution deals. "We've taken the approach that it's better to ask for forgiveness than for permission," says one indie-label executive.

Retailers are going rogue too. When the metal band Baroness released Gold & Grey in June, stores formed a patchwork supply chain to ensure that albums reached every shop with a scheduled in-store appearance — each store shipped its leftovers to the next on the list. This holiday shopping season, many stores are stocking more nonmusic merchandise items like T-shirts and totes to help offset the losses from missing and late releases.

Until DSD's distribution improves, representatives from Warner have said stores should order from one-stops (third-party wholesalers) — although that costs more. Skinner says that's how, on the advice of Warner, she sourced most of her Warner product for Black Friday Record Store Day on Nov. 29. But she doesn't see this option as sustainable. Sources say the three major labels are providing wholesalers with discounts to pass through to indie merchants to help offset the extra cost, a situation that was put in place primarily for the fourth quarter but that could last through Record Store Day 2020 in April.

Amid the chaos, distributors like ADA are losing big accounts. In the past year, large indies like Beggars, Epitaph, Third Man and Secretly Distribution left ADA. In some cases, indie distributors are stepping in to help stores navigate shortfalls in lieu of a permanent solution. "The silver lining to DSD's fuckups," says Swider, "is that the indies are really helping us get through this."

After a quick analysis of December sales at Newbury Comics, which has 29 stores across the Northeast, brand engagement director Carl Mello says sales were split about 50/50 between the majors and indies – a figure that would have been very different if the supply from majors was better. "We ordered Led Zeppelin IV in August and haven't seen it yet – like 600 pieces," he says. "It doesn't matter to the customer why you don't have these things. All they know is that you are failing to satisfy what they're looking for."

Additional reporting by Ed Christman.

This article originally appeared in the Dec. 21 issue of Billboard.