reorganizing.

The economics of what we were doing were simply not working. Everything cost us more because we were dealing in smaller quantities, and yet because the quantities were so small, it was difficult for consumers to find our records – and when you could find them, they cost too much money to buy anyway.

By this time I had gotten my manufacturing cost down to $1.23 a CD.  That included printing of a basic insert and tray card, and shrink wrap.  I would press 500 units, which would cost me $615, plus shipping costs that would bring it up to around $650.  I’d spend about $400 on sending out promo copies to various radio stations.  I’d spend another $500 or so on other marketing – copies, ads, posters, postcards, etc.  Throw in incidentals, and it was basically costing me $2,000 to get out a record.

Of the 500 copies I’d press, I’d give 50 to the band for free, and pull aside 150 more for promos, which left me 300.  I would sell the 300 copies at an average wholesale price of $5 each, which would bring me $1,500.

That meant I was $500 in the hole after selling out of my first pressing.

Essentially, I had taken a loss on every seven-inch except for cuppa joe’s busy work, and I had taken a loss on every CD except for the Mommyheads’ Flying Suit.  I felt reasonably confident that Footstone’s Lippy would at least break even, but even that might take some time.

Overall, over the course of Dromedary’s three years, we were seriously in the red.  Even factoring out Elizabeth, we had lost money.  It wasn’t a ton of money, but it was enough for me to realize that I had to make changes to the way we did things if I was going to be able to continue, much less grow.

First, we decided that we were going to write off the inventory of Nothing Smells Quite Like Elizabeth at the end of 1995 and take a tax loss.  That, coupled with the fact that we had bought a house, would give us a nice tax refund in the spring of 1996, some of which we would use to put out the next Footstone record.  The rest we’d use for home improvements.

Then, we decided that we needed to reduce the number of promo copies we were giving away.  It wasn’t going to be good enough for us to break even in the second pressing – we needed to figure out how to break even in the first pressing, since I didn’t anticipate that all our records would make it to a second pressing.

Third, we very reluctantly decided that we were going to have to change an important policy of ours.  When we started the label, we assured every band that we would never let one of their records go out of print.  By the end of 1995, we realized that was going to be impossible.  There was just no way that could make economic sense on records that didn’t sell quickly.  For instance, if it took us three years to sell out of a title, it was impossible to justify spending the money to press another 500 copies, just to keep it in print.  So we agreed that we’d allow a few of our titles to go out of print: Elizabeth, Footstone’s Wobbles From Side To Side, the Hopefuls’ “Allnighter,” and cuppa joe’s nurture.  We agreed to reserve the right to change our mind on “Allnighter” if that band ever hit, but by late 1995 we just didn’t see that happening.

Fourth, we decided that shows were going to have to be a bigger part of what we were doing.  I hated the idea of asking bands to play for free, but that was just going to have to be the way it was.  If we could do one show every two months and bring home $500 from each show, that would be enough to put out two CDs each year, just from the shows.

But the last point was the most important one.  It was the $1.23 that was killing us.  A dollar twenty-three per unit manufactured, plus the costs to mail out the promos and junk that went with them, and almost $2 was going right to the manufacturer.  With our standard deals, the manufacturer was actually making more money per CD than we were.

We needed to figure out a way to make the manufacturing costs go away.  Not reduce them; eliminate them.  I wanted to spend more money on marketing.  I wanted to work out deals with our bands where they could go on tour and we’d send them off with a little money and help them with tour promotion in exchange for a percentage of CD sales off the stage.  I wanted to be able to offer our bands health insurance like Dischord did – a lot of bands couldn’t tour because they had dayjobs, and their dayjobs were shitty, low-paying, and miserable.  They only had the dayjobs for the health insurance.  If I could give them health insurance, they could tour.

I couldn’t do those things if I was only making a buck-fifty a record.  I couldn’t even press the next record if I was only making a buck-fifty a record.

I needed a partner.  Someone who would make the financial commitment to press the records in exchange for distributing them exclusively to retail.

It actually made sense to me at that point.  We were no longer a bullshit vanity label.  We had eight titles.  The first one was a dog, but contained four out of 10 bands that had gone on to release more records with other indies or majors.  One of our seven-inches was a SPIN top 10 record of 1993, and the song was a single of the week in NME.  Our CDs did very well – one of them had sold almost 2500 copies with weak distribution and had received glowing reviews from virtually every publication out there.  Other well-known indie bands wanted to work with us.  With a company handling the manufacturing and distribution, that would free up time and dollars for us to increase our emphasis on radio and help promote our bands on tour, which would undoubtedly improve sales.

It made so much sense to me that I figured it would just be a matter of a few months before we found the right distributor.  I mean, we had looked for P&D deals before, but that was mostly pre-Mommyheads, and we were in a much different place by the end of 1995.

The first thing we needed to do was put together a nice package that showed who we were, what we were about, what titles we had out (and what level of success they’d had), where we advertised – things like that.  And obviously, we needed to include some information about what records we had planned.

Along with the package, we’d need a sampler cassette containing music from our upcoming releases, much like we’d done at the end of 1993 and 1994.

It felt like we had a great plan.

~ by Al on September 26, 2009.

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