Lordi’s U.S. Label Looks Into Getting A Facelift
The hard-rock label/CD distributor The End may have Eurovision winners Lordi on their roster, but that doesn’t mean that money isn’t tight for them:
When Tower Records folded in October, The End lost a major distributor that was more friendly to indie labels than are mainstream giants Best Buy (Charts) and Wal-Mart (Charts). The fallout was immediate. “Suddenly all the big chains got very tight with their budgets,” [The End CEO Andreas] Katsambas says. Sadly, he can’t count on small record stores to pick up the slack. Hundreds of those have closed in the past several years, he says, “and you don’t see any new ones opening up.”
Meanwhile, back in Brooklyn, expenses are through the roof. The move from Salt Lake cost $30,000. His $6,000 monthly office rent is twice what he used to pay. Internet access is considerably more expensive in New York, taxes are higher, even trash pickup is an extra $200 per month. “Every month I sit down with my accountant,” Katsambas laments, “and she says, ‘Things are tight. How do we make it work?’ “
To help out Katsambas, Fortune brought in three “experts” to give him advice. It’s a pretty interesting read, even though the panel gave him pretty standard tips–blow out the label Web site with more artist information, look into licensing music for TV shows and commercials, try to get into revenue-sharing agreements with newer artists so that the label can profit from merchandise, and go digital:
Back in The End’s plywood-paneled conference room, sparsely decorated with a Salvador Dali beach scene print, [former MTV Interactive CEO Nicholas] Butterworth asks, “Out of total sales for the label, what percentage are digital?”
“One percent,” says [John] Cariaso, the sales guy. “Metal and hard-core fans would much rather buy a full CD. They want to be able to read the lyrics and listen to the whole album.” That’s a mixed blessing, replies Butterworth. On the one hand, it means The End is less vulnerable to digital piracy than the major labels are. Then again, digital sales generate 10 percent of total sales at a typical major label – not just singles that go for 99 cents on iTunes but also licensed ringtones that can sell for several dollars a pop.
“I think you should continue to investigate digital sales,” says Butterworth. “The fact that digital hasn’t taken off among this audience doesn’t mean that it’s not still going to be meaningful.” He suggests experimenting on The End’s own Web site rather than waiting for iTunes to figure it out.
Maybe the solution is digital content not available on CD, he suggests, or digital prereleases available one month before a new CD hits the streets – but only to preferred customers. “Your first, best customer is somebody who already likes the band,” Butterworth explains. “But then I’d rather market to somebody who already has records from The End and knows the label.”
While we see the value in experimenting with digital sales–hey, who wouldn’t want a “Hard Rock Hallelujah” ringtone?–we’re also curious as to whether or not Cariaso’s claim that digital penetration in the metal market is low is true, and why that’s so. Is it the relatively lousy quality of commercially available digital music, and the way it makes metal songs’ crunch brittle? Or are metal fans, like their brethren in the indie-rock world, some of the last true believers in the concept of the album?