The dominating chatter this week in the indie sector is the gut-wrenching news from the UK about the fire at the Sony DADC warehouse set during the London rioting, that destroyed most, if not all of the stock held there by PIAS distribution. The list of the labels affected, who lost massive quantities of LP’s and CD’s in the fire, is a veritable who’s who of the UK & US indie sector – 4AD, Sub Pop, Domino, XL, FatCat, Matador, Secretly Canadian/Jagjaguwar, Warp, Memphis Industries, Chemikal Underground, Ninja Tune, Rough Trade, Setanta, Soul Jazz, Wall of Sound, DriveThru and SideOneDummy just to name a few. In fact, it may be easier to compile a list of indies that didn’t suffer losses. And some of the figures coming through are staggering – Beggars Group head Martin Mills stated they lost over 750,000 units of stock, and labels like Memphis Industries claim all they are left with was the meagre remaining stock they had on hand in their offices.
There is no argument that this could deal a crippling blow to many companies, who are already finding it hard to keep the doors open due to the overall slump in the record business, and could even signal the death knell for a number of indie labels. There is reportedly insurance coverage, though with possible questions as to whether the underwriters will enforce the typical force majeure clauses in their policies to escape from their obligations, with back up legislation in place for government agencies to foot the bill as a last-resort, but such payments would only extend to actual cost of product (of a dollar or two), and excludes the additional margins a label would make. So chances are that won’t guarantee survival of some labels, who are suddenly faced with a lengthy period with minimal cashflow coming in from physical sales, compounded by the need to spend cash to replace the stock, with any funds from insurance estimated to take a minimum of six months. In the meantime there are artist payments, overhead, salaries, marketing costs to cover, and often the smaller indies get by on a month-by-month basis. Labels could also have paid significant sums for marketing programs that now are worthless due to a lack of stock to ship to retail, and bands won’t be able to purchase stock to sell on the road, not to mention the sheer length of time and difficulties in getting vinyl pressed… The list of ramifications are extensive. Larger companies like 4AD, Domino and their ilk will be able to weather the storm, and some US labels could benefit by having stock they could ship from this side of the Atlantic, but there is no disguising that everyone will be impacted to some degree, and it may well become the proverbial ‘straw’ for any companies already teetering on the edge. And for a lot of the labels this week has constituted a double hit, after many, such as Sub Pop, lost money when Pinnacle Distribution went bankrupt two years ago. At that time, PIAS stepped in to partner with many indies that were caught up in the liquidation, the same indies who were just struck a body blow this week with the warehouse fire. Mind you, the elephant in the room is that for some companies it could be a blessing in disguise, as a warehouse full of dead stock (that they pay monthly storage on), which maybe was worthless and destined for the crusher, could suddenly be eligible for an insurance payout, recouping costs of manufacture – far more return than the label would otherwise receive. And of course an upside, if there is one, of the decline in the market for physical product over the last few years, is that at least the expansion of digital distribution has led to a viable alternative to the CD and LP, now accounting for a healthy percentage of sales, and the week’s disaster has not left labels with zero income opportunities. Ten years ago, that would not have been the case, and a tragic event such as this would more than likely have resulted in many more indie labels biting the dust.
- Cool Hand Luke