Tuesday 29 January 2013

The economics of indiepop

There is no money in indiepop. The reality of the situation, that breaking even on a record is cause for celebration, will have swiftly disabused any idealistic young pup with dreams of a very big house in the country and a guitar-shaped swimming pool.

There are only two organisations that really make money out of indiepop:
  • the US Postal Service

  • paypal

  • Indiepop – actually, name your underground genre, it’s the same story, I’m using indiepop here because it’s the scene I know best – is a cottage industry that survives on enthusiasm and many labours of love.

    It’s one of many music genres that rely on word of mouth and on the goodwill of fans, bands and labels to survive. It’s made up of many small-scale (tiny, in a lot of cases) operations whose paying audience is both geographically disparate and, obviously, underserved by local record shops, who depend on mail order. As, of course, do the labels themselves.

    The way above-inflation rise in UK postage rates last year was bad enough, but in comparison to the US Postal Service’s near-100% hike this week it was a trivial inconvenience. Make no mistake, this rise is going to strangle the life out of a lot of small businesses, including record labels whose business sense is often no greater than ‘I love these songs so much I have to tell the world about them; how much can I afford to lose releasing them?’

    Jimmy of US indie Matinee told me today: “I’ve shipped 350 copies of the September Girls 7" so there are more than 100 left. I don't imagine they will be flying off the shelves now that the US Postal Service makes it $13 to ship one 7" single overseas. Ugh... this really could be the death of indie labels. I sold more than 300 copies of the new Northern Portrait 10" in the first week and exactly zero since the rates increased on Saturday. Postage is now twice as expensive as the record itself!”

    (Matinée has countered the US Postal Service rate increase by launching a sale in the label's online shop with releases discounted 10-50% to help offset the higher postage rates.)

    UK record buyers might have been puzzled at why records at gigs or events like the Independent Label Market are often more expensive than they are in shops. I certainly have. So I asked one UK indie label about this.

    They gave me these figures:

  • 300 7" singles, black vinyl, 5 test pressings, white inner sleeve, full colour sleeve and label: Manufacturing costs £730 (unit cost £2.43)

  • 500 7" singles, black vinyl, 5 test pressings, white inner sleeve, full colour sleeve and label: Manufacturing costs £870 (unit cost £1.74)

  • 1000 7" singles, black vinyl, 5 test pressings, white inner sleeve, full colour sleeve and label: Manufacturing costs £1296 (unit cost £1.30)

  • Cargo [the main UK indie distributor] give you roughly £2.30 for a each sold less a distribution fee of 20%. - so that comes in at roughly £2.07 for each one sold. This is for a 7" single that should retail at £4.

    I'm upping my prices in future so shops will be selling the 7" singles at £5 or £6 - which should lead to me breaking even with Cargo. But I've not tested the water on that theory yet.

    Unless you're Fortuna Pop and/or can hire press/PR you won't shift more than 300 copies of any 7" these days. I used to be able to sell 500 fairly easily. Not any more. I've never pressed a 1000 7" singles. [I should point out here that Fortuna Pop claims to have lost £100,000 – I’m sure Sean of Fortuna Pop would never let the truth get in way of a good story, but I’ve no doubt that he has lost many tens of thousands of pounds.]

    Cargo take on a sale or return basis. I seem to get charged warehousing etc for ones they can't sell, too. But I don't fully understand how that works. My last statement had me owing Cargo money for returned stock (from shops). I've tried to get this explained to me but I don't think I've ever got to the bottom of it. [disclaimer: this is one label’s experience; I am not a hard-nosed investigative journalist and didn’t ask Cargo for comment. Should they read this, I’d be delighted to publish their response.]

    The only way to break even that I can see is selling at gigs and people buying direct from my website.

    Trouble is, for a lot of labels now, especially in the US, their mail order market has shrunk to just the domestic market thanks to postage price increases.

    One solution for desperate import buyers is to use small online distributors like Pebble and Soft Power. You’ll find, of course, that sometimes no online distributor has picked up the record you want. So if you really want that new record, you’re going to have to pay a fortune for it. God help us if there’s a recession. Oh, wait…

    Bek from Soft Power very kindly answered some questions about the finances of distribution, and running a record and tape label.

    How much does it cost to get tapes dubbed?
    It doesn’t cost us anything but time to get tapes dubbed as we do that ourselves, I think the going rate is around £75 for a hundred, but that’s cheating isn’t it? We really like actually making the tapes, which is done in real time, and after the initial outlay for materials – tapes, cases, card, ink, stamps etc. there aren’t any additional costs which allows us to keep the unit price as low as possible, which we can then pass on to wholesale customers, it tends to be the price of postage that’s more of an issue, so we always try and keep that as close to actual price as possible.

    Has the expense (and low demand) of 7" singles deterred you from releasing more?
    A friend of ours once said that you have to sell a lot of tapes to put out a vinyl, and that’s very true. We would like to release a lot more records, but yes the costs are restrictive, it’s a lot easier putting out vinyl too, you just send it away and it comes back done. Making tapes is much more labour intensive. I’ve heard there’s a bit of a dip in sales of 7”s but we haven’t felt that, our last 7” sold out pretty quickly and we’d done a run of 500, whereas previously we’d only put out 300, frustratingly/obviously enough – the more you press the lower you can wholesale / retail for but getting the initial amount of money up is a bit more of a slog.

    If vinyl pressing was cheaper, would you release everything on vinyl or is the tape format close to your heart?
    We definitely have plans for more vinyl, but I think that we have such a fondness for making the tapes now that, we’ll probably do each future vinyl with a limited tape release as well. If it was cheaper then yes, we would have a lot more things coming out.

    It’s very frustrating sometimes, hearing great bands that we’d put out in a second if money was no option – but, as it is – we just have to live with that, our only (monetary) intention when we put a release out, is to recoup the costs, if that’s done and there’s a bit of profit, it just gets put straight back into the pot for the next release.

    Does selling other labels' merch help defray your label costs, or is it all a labour of love?
    It did for a while but we’re actually in the process of closing our shop /mail-order, but yes any profits made through that were ploughed straight into the label, which worked fine initially for us, as we’d split the money between buying new stock for the shop and the label, as the label grew, it began to take up a lot more of the resources, so we weren’t able to take as much new stock as we’d have liked, and that pretty much slowed up the shop so much, it wasn’t worth doing anymore. But it was good working with other small labels and our customers were generally really nice as well.

    When it comes down to it, I suppose you have to call it a labour of love, the things you end up doing for either a loss or to end up breaking even, are basically ludicrous – I don’t think that can be helped though, as it’s also one of the most satisfying / addictive things we’ve ever attempted.

    I think that Bek’s last paragraph sums it up: records are an addiction for both labels and fans. It’s a vicious circle, though: we’re going to see records pressed in even more limited quantities, making the unit price higher still. Don’t be surprised if labels start pressing 7” singles in runs of 200 or even 100. The basic break-even price on that is about £6. Plus postage. And if they ever get distributed to shops, they’ll be around £12. You have been warned.

    We’ll be seeing more tapes released; perhaps they’ll overtake the 7” as the underground’s dominant format. They are a lot cheaper to make, yes, but crucially they’re a hell of a lot cheaper to post.


    1. Somehow I don't think this issue is going to gain much traction among regular people who will probably wonder why we feel the need to possess this music on a vinyl artifact that is made from fossil fuels? Or they'll say that you can download it and avoid paying any postage. I just looked at the petition to repeal the postal accountability act which is what's behind the USPS increases and and not even 2000 people have signed it.

      Even though the vinyl medium has seen a resurgence, it's still a niche market. Buying your music on the vinyl is way more expensive than any other format and that's before you even add in shipping expenses. If you also add in the expenses of a descent turntable set-up vs a cassette or cd player it's even more money. It has become a format for people addiction problems or with a lot of disposable income, everyone else is streaming or downloading. With the USPS increases I have a feeling a few more just moved into that latter category.

      1. I agree, it's a fait accompli; no postal service worldwide is that bothered that their increases will affect cottage industries across the board. This move targets the big shippers, particularly Amazon (in the UK it's direct mail and Amazon that are keeping the post office in business).

        I know that a lot of music fans don't buy (much) music. They certainly don't own turntables. I'm trying, as part of the Hangover Lounge, to give away 500 picture discs. Someone complained at the launch gig that the free 7" didn't come with a download code. You really can't win.

        I've only ever bought download-only music on two occasions (hello Charles Latham, twice). If more music that I love was only on download I'd buy more. But if it was on a physical format, then I'd only buy that.

        I wonder, though, as the prices get really silly, I won't buy them at all - I like to get things new and right now. Once it gets old, the impulse passes. There'll always be something new when I have the cash, right? I hope so. I know I (and you) are in a minority.

    2. being someone who's lost 30% of their income in the past 2 years due to pay cuts in Greece, i will still be buying records in the face of postage rise, just like i did up to now. i'm being smart about this, i have my ways, i do combined orders, i look out for bargains etc. maybe i won't be pre-ordering or buying on release day, but i'll still be supporting for as long as i can afford it.

      people should be realistic. why would USPS care if indiepop dies? if anything, indiepop fans don't seem to care more, if we are to judge by record sales up to this day.

      i blame people/fans and only them for the situation you're describing, not USPS or Royal Mail. this will be just another excuse for them not to buy records.

      1. Fans are to blame in that not enough of them buy music. You know why there are so many indiepop clubs and indie DJs? Because they can DJ off CDs or music they've downloaded. Perhaps if there's a time when there's no more small labels then they'll have moved on - got old and dropped out of the scene. It is selfish, but they won't care then because they don't care now.

        Bloggers who give away new music are to blame, too. Sure, they get loads of hits when they give away new music - records that have cost the bands and labels a lot of money to make - but it's self-aggrandising grandstanding by the bloggers. One label I contacted for this post said, "I do mind that blogs give away my records for download - when it's one song from a 2-track single, I lose sales."