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International Marketing > Distribution > Case Study.

- By Anonymous.

Section 1: Distribution in Canada

i) Overview

Distributors comprise those organizations involved in distributing product from the labels

to the retailers or sub-distributors known as rack-jobbers. They generally obtain rights to

exploit catalog for a product for a defined period of time, and market and sell the

products. Their role is to market and sell the products to maximize the financial returns.

Among functions a distributor may assume include: advising and guiding labels on

matters ranging from artistic creation to marketplace development and promotion.

Recordings are also distributed by licensees, like Columbia House - which sign a license

agreement with a record company, direct mail, and television advertisers. These

agreements allow the licensee to manufacture and distribute recordings, as opposed to

buying and distributing goods manufactured by the record company.

The chief advantages of using a distributor is that it is organized to handle the time and

costs of financing and administering the production, manufacture, marketing and

distribution of recordings. It can also better absorb any financial risks, and has greater

leverage in collecting from retailers and wholesalers. Additionally, a distributor may have

a reputation in the retail community for a certain genre of music aimed at a more narrow

and focused audience, such as jazz or electronica.

"(Independent labels or artists) need an organized distributor with enough (sales) volume

to do all the basic stuff, and is healthy enough to grant credit. That's the basics of

distribution. But indie distributors don't have the manpower to do the things that need to

be done." ALEXANDER MAIR, PRESIDENT, MHL COMMUNICATIONS

"We are in the age of pricing and positioning. I can afford to put Faith Hill within 10 feet

of the door in any store in this country. Can an indie label do that with their product?"

STEVE KANE, SENIOR VP/MANAGING DIR., WARNER MUSIC CANADA

"We are with EMI out of necessity. We don't have what it takes to fulfill a (sales) rep

network on commission, even though we handle 40 labels." PETER PIASECKI,

MANAGING DIRECTOR, NAVARRE CANADA

"(Labels and artists) have to deal in terms of clout with retailers. They pick from two

evils--major or indie distributor. The only other option is putting a record out themselves,

maybe sell 5,000 copies, and getting a >buzz' so someone will pick it up. Maybe."

BRIAN CHATER, PRESIDENT, CANADIAN INDEPENDENT RECORD

PRODUCTION ASSOCIATION (CIRPA)

Canada's music recording market has existed for over 100 years--beginning with the

Berliner Gramophone Company opening in Montreal in 1898. The recording industry

thrived here until the depression of the 1930s, leaving only Compo Company

(distributing Decca), and RCA Victor surviving. Still, the U.S. major labels saw the

emergence of the Canadian market as being beneficial for their recordings due to its retail

similarities to the U.S. As revenues of the U.S. majors climbed following World War II,

the market for music in Canada also grew.

Today, music distribution in Canada is dominated by five foreign-owned multinationals,

and by a handful of key independent distributors who all derive most of their revenue

marketing foreign product.

"Distribution is the dirty end of the music business. It widgets. It's moving one box from

here, and out the door." IAIN WALKER, PRESIDENT, FAB DISTRIBUTION

"We don't make hits. We are a distributor. As distributor, we are a glorified shipper. Our

job is to make sure record stores don't run out of our product. We also try to make sure

we get prime locations in the stores for our releases." GEORGES TREMBLAY,

NATIONAL SALES MANAGER, DEP DISTRIBUTION EXCLUSIVE

Whereas the multinationals generally provide mass products for a mass audience or a

wide range of products for different groups of consumers, smaller record companies may

concentrate on a limited product or genre. Thus the majors and the independents operate

as two distinctly different strategic groups within an industry.

There are generally two types of independent record companies operating in Canada's

music industry.

First, there is a tier of independent companies which distribute their product with

multinational or independent distributors by way of licensing or production and

distribution deals (commonly known as P&Ds), often accessing the national sales and

promotion provided by the multinational or independent distributors.

Second, are "grassroots" independent labels operating through a network of localized

distribution contacts. Many of these labels have developed around specific artists or

styles of music being ignored by the mainstream music market.

To fully compete nationally at mainstream retail, a Canadian independent label has to be

distributed by a major label or a major distributor capable of selling their music.

Canadian independent distributors and retailers interviewed indicate it is difficult for acts

on Canadian independent labels or Canadian acts that release, promote, and market their

own records to enjoy sizable success nationally. They are hampered in the mainstream

retail marketplace by marketing costs associated with retail advertising campaign

programs, and in-store positioning.

This is in sharp contrast to 1988-1996, when Canada's major retail chains HMV Canada

and Sam the Record Man--coupled with substantial boosting by MuchMusic, CBC-

Radio, and college radio--provided national springboards for many indie--distributed

grass-roots acts, including Sarah McLachlan, Loreena McKennitt, Cowboy Junkies,

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International Marketing > Distribution > Case Study. - By Anonymous. Section 1: Distribution in Canada i) Overview Distributors comprise those organizations involved in distributing product from the labels to the retailers or sub-distributors known as rack-jobbers. They generally obtain rights to exploit catalog for a product for a defined period of time, and market and sell the products. Their role is to market and sell the products to maximize the financial returns. Among functions a distributor may assume include: advising and guiding labels on matters ranging from artistic creation to marketplace development and promotion. Recordings are also distributed by licensees, like Columbia House - which sign a license agreement with a record company, direct mail, and television advertisers. These agreements allow the licensee to manufacture and distribute recordings, as opposed to buying and distributing goods manufactured by the record company. The chief advantages of using a distributor is that it is organized to handle the time and costs of financing and administering the production, manufacture, marketing and distribution of recordings. It can also better absorb any financial risks, and has greater leverage in collecting from retailers and wholesalers. Additionally, a distributor may have a reputation in the retail community for a certain genre of music aimed at a more narrow and focused audience, such as jazz or electronica. "(Independent labels or artists) need an organ ...
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