Saturday Morning Coming Down

A few parting shots before I take the weekend off from this discussion. It's the eagerly awaited Royalty Statement Weekend where I get to work on spreadsheets for two days and write little checks for the little bands on my little label that happily, so far, don't have this dilemma presented to them. They and we would love to sell more records but thankfully none have demanded their CDs into Best Buy yet.

The most important thing that I'd like to say here, and I'm not sure that I've done a good job expressing this yet, is that we have this discussion out of love and deep respect for Merge, Secretly Canadian, Touch and Go, and Caroline.

I was trying to help talk a retailer off the ledge on Thursday and I was reminded about an amazing 2000 interview with a guy who has grown to be one of my heros, writer/editor/publisher Dave Eggers from McSweeney's Publishing. In this interview, he offers what I consider to be one of the most important treatises on supporting others who see the big picture and who are doing their best to make things better--people who DO GOOD WORK. There is not doubt in my mind that the folks at Merge, Secretly Canadian, Touch and Go and Caroline are good people doing good work and that they deserve our support and encouragement in that. They are also human and make mistakes and when they're big ones, like we believe this one was, then we also have a duty to point it out and open it for discussion but within a context of respect probably greater than came through in my initial diatribe.

I have heard some surprise from the labels involved at the level of anger and feedback that they received over their action. Obviously I don't speak for all of the retailers and other angered by this action, but for our part at CTD, the feeling of hurt and betrayal came because of our long respect and admiration for the way these four labels normally go about their business. As I said before, nobody is offended when the dog licks himself. I can't believe too many people felt mad, hurt or betrayed that Best Buy ran this promotion or surprised about some of the people in this coop. It is when labels and artists that you don't expect make such a move that people are hurt and that hurt comes out in anger. And that anger is understandable. But I think it's important to remember to try to express it in as constructive a manner as possible so that we can look at this, hopefully learn from it and move on and keep trying to do good work.

I made phone calls yesterday to most of the people I've listed to tell them exactly this and I hope that message got through loud and clear.

The last thing at which I'll take a poke is the third justification I've heard for the Best Buy coop. Like Roxy Music, it's a classic.

Everybody else was doing it.

This rationalization is usually reserved for those 16 and under, because most kids quickly realize that when searching for answers to parents and offering this up that the response is usually a quick cuff to the back of the head and off to bed without dessert. Unlike Eno, I'm not sure it works much better in the adult world than it did when we were all much younger.

Read Dave's interview, especially his answer to Question 11, and take it to heart. And while you're at it, buy one of his books. He needs the cash and he'll use it to do good work.

This feel good post is dedicated to Tiger Adams 3/16/97-1/28/06 who died very suddenly this morning shortly after it was originally posted. Thanks Tiger. You were truly a good dog and everybody who knew you (except possibly Rob Miller, who you liked very much) misses you.

Thanks Tiger

The arguments from the labels involved seem to boil down to something along the lines of "We have to sell to chain stores because our bands require it to hit certain sales goals."

I would like to reiterate that nowhere have I argued against chain sales. We all know the perils, like higher return rates, that come with those kinds of sales and the potential benefits. But last I checked, I've never seen Borders, Barnes & Noble or Tower put stuff out below wholesale cost, or as was pointed out, at half of normal retail sale price. I don't claim to know everything about what goes on in those stores, but am I wrong on that? I hazard to speak for our retailers, and from the hundreds of notes I've read over the last week it's obvious that they're all more than capable of eloquently and stridently speaking for themselves, but I doubt that very many of them would deny indies the right to sell there either. I'm sure they'd much rather everybody shop independent retail, but I don't think many can make a great argument that indie labels should never sell to chains. Could be wrong but I doubt it.

To restate again, the central arguments here are:

• first, against playing the coop game with a retailer that has a long, long history of predatory sale pricing that allows them to offset their loss, making a loss leader a break-even leader,
• and second, against selling large volumes of stuff to Best Buy (which is the only volume they know) that will later be returned at a rate over and above regular chains, as BB further expands their indie stock in their refound "commitment to indie music."

The coop argument is already in play and is how we all got here in the first place. It remains to be seen whether the second part plays out, but I'm waving a warning flag now. Beforehand.

The other part of the label argument seems to come back to the bands and what they are owed by their labels, which is sales, damn the torpedoes! As unfair as some of the labels seem to feel to have the failure of indies laid at their feet, which is a huge extrapolation of my point but whatever, extrapolate away, you will anyway, and it's your right as an American and a blogger, it feels unfair to us that the whole impetus for the Best Buy Evil Coop is being laid at the feet of the bands. And it struck me this morning at 5am, after the dog woke me up (thanks Tiger!), that I can't say whether this is an unfair passing of the buck or not.

We have heard from labels and distributors and man have we heard from retail, but we haven't heard from any of the bands involved. I don't know any of them directly, but obviously people visiting here do. I would love to find out if the bands were consulted on a coop deal of this size, and on this one specifically. And if they were, were they told the possible consequences of such an ad buy? That while you can't discuss sale price with BB, that they have historically lowballed their sale pricing? Do they know their stuff is selling in Best Buy at half retail? Do they know what that 50% split on the ad buy that will hit their royalty statement is doing to the retailers that put them there? Have Arcade Fire, Antony, Chan, and Broken Social Scene actually come and said to the labels that this is what they want? I wonder, and would I love to have some of them comment about this because if they were not asked, or did not understand, then I'm wondering how they feel having their labels stake their defense of this program on them and only them? Seems to me either they signed off on it or they are being used as human art shields.

Before I try to get back to some real work to start my day, I would like to say "Welcome" to the traffic that we've had from BestBuy.com over the last 24 hours. We'd love to hear your comments on this as well but I'm pretty sure we won't. As a new BB One Stop customer for your sale items, I'd also like find out if we can get off of Credit Card and move up to 60 Day Terms? Credit references available from people you know! And are new releases returnable at 60 days or do we have to sit on them for 90? As a distributor, shouldn't we get an additional discount, say like 10%? We could really Move Some Units with pricing like that! Please let me know. Also the New Store Smell in Best Buy #814 is awesome! You should bottle it. But work on that customer service a little bit. Thanks for a weird week.

Can I Go Home Now?

Wow. What a weird day. Heartening in many aspects, a bummer in others, and pretty overwhelming on all fronts.

Thanks to everybody who has flooded the Inbox here. I'll get back to all of you as soon as I am able but rest assured that you have been heard.

Thanks to Mac (and Paul for the email and phone call) at Merge, Nick (and Ben and Paul for the emails) at Secretly Canadian, Windy from Stormy, and everybody else for writing well thought out and reasoned responses to all of this and posting their comments here. If you have not read their thoughts, please do so on the comments links below and please feel free to leave your thoughts as well. I've finally got it set up so you can do that. Sorry if you tried earlier and it didn't work.

I think that our point of view on this was made pretty well in my initial letter/post, but there are a couple of points I'd like to try to clear up.

First, nowhere in our letter do we accuse anybody of selling to Best Buy directly at a lower price. What is happening, and perhaps many people didn't understand the mechanism here, is that coop dollars are being used by a gigantor retailer to offset their loss when a piece is sold below cost. Tons of stores do coops. In fact, many are partially kept afloat by the extra dollars that coop dollars bring in. In exchange for cash or free cd's ("cleans"), retailers promise "Price and Position" to labels. Releases are featured at end caps or other high visibility parts of the store, titles are usually put on sale for the time of the deal, and a picture and of the record and sometimes a blurb runs in the paper. Sometimes a listening post is included for customers. 90% of those listening posts are bought, not put there by the grace of the store owner. Usually (but not always), the bigger the store, the more this is true. There's your lesson on the Coop Monster.

I have not seen the text of the deal with Best Buy. Our titles do not sell well enough to appear on their radar. However, these sorts of deals are pretty standard around the industry with a little variation. The difference in this instance is that by now, everybody knows or should know that Best Buy does not use their coop dollars in the manner that most other stores do. They are (in)famous for predatory practices and lowballing titles, and in this instance, they really lowballed. So even without selling to Best Buy at a lower price than everyone, what has essentially happened with the coop is that a large bucket of money was put in the corner that nominally had nothing to do with the pricing of the record on the invoice from ADA or RED or whoever. But for anybody in the chain of action (from artist to label to distributor) to claim surprise when that weird bucket of cash that just happens to be sitting in the corner is used by infamous lowballer Best Buy to offset their losses on selling it below wholesale cost, well, it seems a bit disingenuous to us here. Forgive our cynicism on that point, but we're from Chicago where the City That Works feeds itself on mysteriously appearing, large buckets of cash. But here only the Mayor can pretend he didn't know what it was for. (I'm shocked. Shocked!!) In the instance of the Best Buy coop, it may not be ruled illegal under US law, but that does not mean it is not wrong.

It also seems somehow to have been inferred that I was suggesting that selling these titles at Best Buy for $7.99 for one week was somehow going to kill the music industry and put every indie retailer out of business, perhaps by this Sunday. I didn't and obviously it will not. The first round of the Best Buy Merry-Go-Round (pre-MAP), happened over the course of about 3-4 years in the mid-90's. It didn't happen in one week, or one month, or even in one year. But over the course of their spree of lowballing titles and stocking large amounts of indie music, the momentum grew. Stores started dropping. Millions of dollars of returns started happening from Best Buy. You may be able to debate the direct causation of indie store closures to Best Buy pricing, but the correlation is there. What you cannot debate is the hit that every label and distributor who put titles into Best Buy's expanded music section took when the stuff just didn't sell. Pick a reason for it not selling. But it didn't. And it came back. And it hurt. A lot. And payment terms were extended and then extended again. And people went away. Labels went away. Distributors went away. (Remember Feedback? Say what you want about their management team, but their biggest customer was Best Buy and they got pounded into the ground...with the music publishers putting in the final dagger.) And now I hear that after 5 years Best Buy is again "committing to music" and expanding their music section. Great.

Labels and distributors may not tell retailers what prices they can set for their artists' work, but they can choose to play or not play the coop game with them on a case by case basis, based upon all the available information that they can muster and the short and long term ramifications of their behavior. And while labels may not be abandoning indie retailers, they can kill them just the same. Giving them water while you salt their ground will still kill them no matter how much water you pour on their poisoned earth. At some point you're wasting your water. And all that will be left is the Label and the Gigantor. Then try and grow your little bands.

So the whole point of this exercise for us is to raise some consciousness on this issue, perhaps with a spur from somebody who has been there before, has seen and felt the pain, and fears for the good of the industry that we've all helped build, big distributor down to 16 year old intern paid in records. Tons of people before us have busted tail for no money so people could hear music that wasn't filtered by the major labels and their work has led directly, for better or worse, to what we have today. And dysfunctional and dazed though the system may be, it still mostly works. And some of those people, people who I have admired from the moment I became aware of them, are a part of this mess with Best Buy. When we started CTD, one of our rules was to always examine what the people at Revolver, Mordam, and Touch and Go were doing. We did not commit ourselves to emulating them, but rather to a constant course of study and questioning of their actions and the reasons for them because they were run by people of wisdom and experience, people with their values in the right place who still managed to succeed in an otherwise abysmal hell hole of an industry. In our early years, we said over and over "If Touch and Go (or Mordam or Revolver) is doing something, then we'd better damned well know why and then decide if we should follow suit or not." And if we chose to go a different way on something, then it would not be in ignorance, but in understanding, followed by making as educated a decision as our pea brains were/are capable of making.

It pains me, pains me, to be spending my time and energy on this, questioning people for whom I have serious doubt that I could hold in any higher esteem. Some of the players in this I can mentally write off as long ago Lost Causes, succumbing to the natural way of things and growing to a point where they are beholden to others to an extent I can only imagine. Several here are not Lost, not even close, but their behavior is nearing that of the Lost. My hope is that this will at least stir some discussion in indiedom on all levels. Of course labels will still do what they will do, but at least it will not be in ignorance, their own or anyone else's, but in plain view. And others can take actions based upon those decisions that are plain to see for everyone. And perhaps, not probably, but perhaps, by dragging this ugly step child out from under the stairs, the basis for future decisions for large labels and distributors will change as the ramifications of their actions are taken into account, if for no other reason than for good old self-interest. And no one can say that they didn't know. That they weren't warned.

I've been called the Greek Chorus before, frequently not in a nice way, but in Greek tragedy the Chorus is usually ignored at the protagonist's great peril.

I'm pretty sure I'm right on the present situation, but I sure as hell hope I'm wrong about the future. You know people will ignore the warning sign that you place beside the cliff, but you put it there anyway, just in case somebody looks up and pays attention. And is not Lost.

On a more minor point, I really hope nobody seriously thought I was comparing any of us, or this mess, to MLK or the Civil Rights Movement just because I quoted him. I was no more doing that than I was comparing anybody to William Burroughs just because I quoted him as well, though a good game of William Tell does ring pretty close to our situation here, doesn't it? The point that MLK was making, as I interpret it, was one that I see as parallel to something like karma. That the arc of the universe bends toward the good, toward justice, very slowly, over time. I fear which side of this arc that we are on with this whole mess. That's all.

Metaphors for sale cheap. Below cost even!

Patrick

More Thoughts on the Indie Best Buy Sellout

I have to say that I while I knew people would be upset about this, I had no idea that I would get this kind of response to my rant, which has been kindly called an essay by a few overly generous souls. So thanks for all the words of support and encouragement. Yesterday was a bad day around here because of this whole thing and it helped tremendously. Obviously, we feel the sting and sense of betrayal right along with all of our retailers and fellow distributors.

A point of clarification on MAP. This stands for Minimum Advertised Price and was a program instituted by the majors to actually fight the loss leader pricing by the big boxes. You could only get major label coop dollars if you promised not to sell titles below a certain price. This worked to the indie stores benefit. While they still usually could not quite meet the new release pricing of Best Buy and others, they could come close enough for it not to be an insult to the consumer. Then a federal investigation decided that MAP was actually price fixing, collusion and racketeering and the majors were forced to pull their MAP programs, which led us to the current situation.

I have been asked a few times why Merge, ADA, and RED were not called out by name along with the other labels. Well, Merge was just an oversight on my part in the heat of the moment. They were copied later when this was pointed out to me. As for ADA and RED, well we have no direct dealings with them and frankly this kind of behavior, while disappointing, does not strike us as entirely out of character for them. You expect the teenager to wreck the car and the dog to lick himself. It's just what they do.

I've also been asked about solutions with recommendations ranging from law suits to boycotts and just about everything in between. Lawsuits are expensive and time consuming. Boycotts hurt the other bands on the labels, the vast majority of whom are not participating in this suicidal exercise.

I have no magic wand for a solution, but for the moment, I think something along the lines of a group intervention is the best way to go. Or as one sage called the method a long time ago, better learning through humiliation. If we spread the word far enough, publicly enough, and then focus that back to the labels and bands doing these coops, perhaps maybe possibly they'll get the message and change their behavior. Probably not, but maybe.

I have also been asked if I'm not nervous that we'll be cut off from these labels for speaking out. The thought never once crossed my mind until someone asked last night. I cannot imagine that we would be cut off. We have done nothing offensive or wrong, at least in this instance. We're just the ones pointing out the behavior and yelling "jackass!". If that gets us cut off because egos have been bruised following a really bad business decision, then I think that will reflect much more poorly on the label than on us and I'm sure they'd hear about that as well. Honestly I can't imagine that any of them would stoop to that. It's not how the operate on a day to day basis, which is one of the reasons why this whole episode is so disheartening. This sort of behavior is expected of some, but not by these folks, at least not by us, and from all of the email we've gotten on it, not by most of you either.

We offer our blog as a space for public commentary. It's not doing anything else right now anyway.

Best Buy BS

Link to Latest Best Buy ad mailer 1/24 Street Date
Best Buy BS


Pick one:

1. A bad dream that returns every time you close your eyes, no matter how many pages of your book you read in the middle of the night to try and shake it from your mind.

2. A portrayal of the myth of Sisyphus, doomed for eternity to roll his boulder to the pinnacle of a mountain with great exertion only to have it roll back down into the valley so he could begin again. Forever.

3. Real life karma in action, actually visible to the naked eye, where past acts affect future lives and where sins are punished into eternity until a lesson is learned from them enabling you to move on.

4. A manifestation of Martin Luther King, Jr's quotation about the Arc of Justice. "The arc of the moral universe is long, but it bends toward justice."- Dr. Martin Luther King, Jr.

We have been here before, and it was awful. In the 90's, labels hungry for sales (and who isn't?) rushed into deals with Best Buy, and other big box chains now since defunct, that allowed Best Buy to sell below cost with a minimum amount of pain, if any, and then make money off the folks lured into the store on their toasters and TV sets (now iPods and Xbox). Soon, indie stores all over America started going belly up. Pier Platters. Go!. Final Frontier. Rockaway. On and on and on. Remember, this was when file sharing still consisted of a chrome C90 without the holes punched.

After freeing much of America of their indie retailers, the accountants for Best Buy and the others realized the age old maxim, you can't make up for a negative margin with volume. Their margin was hurt even more when the returns started piling up. Millions of dollars of returns. Why? Because of their size, they were and are unable to pick and choose what might sell at their stores. They have no in-store culture to support indie music sales in knowledgeable floor staff, in-stores, magazines, a comfy couch, upcoming show listings, or a cool kid behind the counter to play the new stuff and talk with customers not only about what's new that week, but what's coming out next month and recommend that cool record by the Slits you might really dig if you like Bloc Party. You like Antony? Check Jeff Buckley or Van Morrison or Current 93's "Earth Covers Earth." At Best Buy, the single most frequent employee comment is "When's my next break?".

The combination of poor buying in huge quantities and their lack of ability to sell through eventually lead to so many returns that Best Buy stopped carrying indie music almost entirely. The huge racks at Best Buy that had housed music were suddenly empty, and then shortly they were gone, slowly to be replaced over the next few years by discounted DVDs and video games.

In the wake of this prolonged disaster lay cities all over the country without record stores, labels either driven to bankruptcy or crippled for years by 50+% returns on titles for which bands were already paid and saddled with enormous pressing plant bills, and a public who had finally realized that maybe music wasn't worth what it always had seemed. Maybe $16.98 was too much for a CD. Maybe $8 was the right price. That's what the labels and their complicit artists were telling them. And this dent in the collective music consciousness came at the dawn of broadband internet service and file sharing. If it wasn't worth $16, maybe it wasn't even worth $8. Maybe free was the way to go. If the stores, labels, and bands don't value their music enough to sell it at a decent price, why should the music fan feel any differently about it? So the whole industry had unwittingly conspired over three to four years to torch the value of an album at just the right time for the Best Buy shell game/Ponzi scheme to collapse in on itself, leaving an opening for Napster to tap the wired music junkie on the shoulder and take advantage.

Fast forward through rampant unchecked file sharing/piracy, MAP, oops! not MAP that's illegal, RIAA lawsuits against music fans, the boom of iTunes and Spitzer investigations of price fixing.

Why are we going back there again? Voluntarily even? Why are labels AGAIN selling to Best Buy at rock bottom prices and then buying into coop programs (billable back to the Artist of course) that allow Best Buy to break even selling their cds so cheaply-not only below retail cost, BUT BELOW DISTRIBUTOR WHOLESALE COST? At prices even below the album price on iTunes and others! So now you're all devaluing not only your packaged goods but your digital ones as well. If it's worth only $7.99 with package at Best Buy, why is it worth $9.90 at iTunes? Consumer answer: IT'S NOT.

When a distributor can buy your stuff with tax at Best Buy cheaper than from you directly, something is wrong. Very wrong.

And even better, I have heard that Best Buy is not only planning on targeting 10-20 of the hippest titles, but greatly expanding their indie offerings. That's great! They've set this up for a complete repeat of the mid-late 90's. Drive the final nail in the coffins of the remaining independent retailers, at least those savvy enough to have staggered through the first round and survived unlike their bankrupt counterparts across the country. Mortally wound the labels and their thin margin distributors with staggeringly high return rates a year or two or three down the road. Leave the bands without stores, labels or distributors to support them. And then, finally, when the bean counters with the short memories at Corporate figure out that it's not working for Best Buy, again, they slash their music sections back to a Top 40 and go back to ignoring it. Except this go round, it is entirely possible that there will not be enough of an independent music industry remaining to survive and bounce back. What's left? A rush to cash in on high volume for a few frontline hip titles leads to the elimination of the entire culture that nurtured the baby bands to the point where anybody even paid attention to them in the first place. Where they were suddenly cool enough to move out of the zines and blogs to get featured on the OC or VW commercial or the latest Farrelly Brothers movie, and then get big enough where it actually seemed to make sense to somebody that this might really sell at Best Buy. Cash in now and simultaneously salt the fertile earth that allowed it to happen in the first place, killing any chance of it happening again.



Worst case scenario? Fear mongering? Maybe. Except probably not. Because WE'VE ALREADY BEEN HERE. Sisyphus HAS rolled this rock up this very same god damned hill. Unlike Sisyphus, however, we are not doomed to hell for eternity to feed the Best Buy monster that will eventually eat us. We have choices. And we have history, RECENT history, from which to learn if we will only heed it.

And here is the saddest thing to me. Everybody in management at Touch and Go, Caroline, Secretly Canadian, even Matador, and yes Best Buy, has been at this long enough to know better. The difference is that Best Buy doesn't care. It doesn't have to. It will be around in 10 years selling, uh, whatever, HD HUDs for wireless iPod video and other consumer electronics, and if this unsavory practice continues, you and we will not be. And I guarantee you that if they even notice, nobody at Best Buy will care.

"He gives the American people the finger and barks out: 'I got mine, fuck you! Every crumb for himself.'"-William S. Burroughs "The Western Lands"

In the meantime, I'll head by Best Buy Stores #323 and #814, (aren't those great names!) on the way home tonight so I can buy their stock on titles we carry, give the kids who come in an empty shelf to look at hopefully driving them to an indie store and putting them off from the hassle of returning for future sales, sell them where we can and then return them to you at a profit.

Thanks for a great Tuesday. Thanks for your foresight. Your check's in the mail.

Patrick Monaghan, President
CTD, Ltd./Carrot Top Records, Inc.