U.K. independent labels’ representatives have consulted a lawyer through trade body AIM after independent distribution company Pinnacle went into administration on Dec. 3, roughly equivalent to Chapter 11 bankruptcy in the U.S.
Around 60 labels were represented at the meeting today (Dec. 4) at AIM’s HQ in Chiswick, west London, along with authors’ collecting society MCPS, iTunes and Pinnacle’s digital management partner Consolidated Independent.
The mood was described as “very serious” by one attendee, although Cooking Vinyl founder and managing director Martin Goldschmidt tells Billboard.biz, “It’s a horrible time but the meeting was very productive.”
At least 300 physical release labels are affected and even more digital labels; U.S. acts affected include Sub Pop’s Fleet Foxes, licensed to Bella Union in the U.K.
Label bosses consulted with barrister Philip Flower, a specialist in corporate insolvency. It has emerged that many labels are unhappy with the terms offered by the administrators BDO Stoy Hayward regarding the return of stock.
Goldschmidt says Pinnacle is holding stock across the Cooking Vinyl catalog, which includes artists such as the Charlatans, Billy Bragg, Black Francis and Nitin Sawhney. “It is a logistical nightmare,” he says.
The offer from the administrator for the return of indies’ stock was a payment by labels of ten pence (15 cents) per unit plus storage fee, according to Goldschmidt, who says he wants the administrator to “abide by the terms of the contract.”
BDO Stoy Hayward declined to comment on the terms it had offered. A spokesman said the company is still trading and looking for a buyer.
Cooking Vinyl is owed payments for part of September as well as October and November, Goldschmidt says, declining to disclose the amount. How much of that the company is likely to receive is, he says, “pure speculation – there will be a payout [of some pence] in the pound.”
It is understood that Pinnacle has around 2 million units in total supplied by indies at its warehouse in Sidcup, Kent.
Apple declined to comment on suggestions that, based on its contractual obligation, it is continuing to pay Pinnacle’s administrators for the digital releases handled by the distributor.
“It is quite clear that this is an extremely serious situation for the labels caught by the sudden collapse of Pinnacle,” said AIM’s chairman and chief executive Alison Wenham in a statement.
She added: “In the run up to Christmas everyone is acutely aware of the need to move as quickly as possible to resume trading and to restore confidence in the retail market. AIM will continue to advise labels on both an individual and on a collective basis to ensure that losses are mitigated, and trading can recommence as quickly as possible.”
Goldschmidt says that despite the problems, it has a ready contingency plan in the launch of its Essential Sales and Marketing operation, with distribution through Cinram – who distribute Warner Music and ADA – starting on Dec. 15. Lance Meade, former sales manager at Sanctuary, will head up the new sales division.
“We had anticipated this [Pinnacle], we just didn’t think it would happen now, we thought it would happen next year,” says Goldschmidt.
Mike Chadwick, formerly managing director of Vital Distribution, and Goldschmidt founded Essential Music & Marketing in 2003 as a comprehensive one-stop service for indies requiring distribution, label management and marketing. Essential used Pinnacle as a U.K. distribution partner. Independent Online Distribution Alliance (IODA) handles digital distribution.
Essential has signed up U.K. and U.S. labels: its clients include New West, Megaforce, Shout Factory, Daptone, William Morris Agency, Koch, The End Records and Cooking Vinyl.
“We are talking to some more Pinnacle labels,” adds Goldschmidt. “I think we might be able to offer a home to some quite significant labels.”
The overwhelming feeling among the laid-off Pinnacle staff was one of anger, reports one of the 94 employees let go on Dec. 3.
“Management came to see us on Wednesday and said ‘you can go home now, we’re only paying you until today,'” says the source. “People were told ‘hand back your mobile phone’ and ‘give back your car and leave — we’ve arranged a taxi service for you.’ It’s been disgraceful. We were just called in to see some guy in a suit who we’d never seen before who said ‘fill in this form and go home.’
“Some people have been held back to sort out what’s been left behind; all the accounts people are there, trying to get the money that’s owed to Pinnacle by the people who we shipped stock to, and the label managers are there to sort out what the labels are going to do with the ‘frozen’ stock in the warehouse. This could drag some of the smaller labels down.”
