A Major Music Distributor Has Stifled Vinyl Sales for Record Stores and Indie Labels, Sources Say

On November 7, Tegan and Sara announced the closure of their official webstore—a curious move for a band promoting a new album. At that point, many pre-orders for Hey, I’m Just Like You, released in September, still had not made it to fans. “We’ve asked Warner Records to shut down the Tegan and Sara online merchandise store,” the band wrote in a message on their website. “Their warehouse is experiencing a huge backlog that is affecting all Warner artist stores and there is no definitive answer about when remaining pre-orders will ship and this is just unacceptable to us. We have requested Warner not take any new orders for Tegan and Sara merchandise as we have lost faith in their warehouse’s ability to fulfill those orders in a timely manner.”

When asked about the Tegan & Sara fiasco, a spokesperson for Warner Music Group gave Pitchfork the following comment: “We are taking these customer service issues very seriously and working with our pick, pack and ship provider Direct Shot, as well as other vendors, to resolve this situation.” (Pitchfork reached out to Direct Shot several times for comment on the claims made in this story to no response. This story will be updated should they reply.)

Direct Shot is Warner Music Group’s distributor. Distributors are the essential but largely unseen part of the pipeline that gets physical music to listeners: After vinyl records and CDs leave a pressing plant, they go to a distribution center, which fulfills orders from labels and record stores.

On April 1, Warner Music Group announced that it was changing distributors from Technicolor in Nashville to Direct Shot, marking the consolidation of the stock of all three major labels—Sony, Warner, and Universal—into one location. This switch also extended to the indie labels that work with Warner’s Alternative Distribution Alliance (ADA), which has Sub Pop, 4AD, Matador, Rough Trade, XL, Domino, and Saddle Creek listed as partners on its website.

Warner’s April move to Direct Shot concerned some independent shop owners, who were less than two weeks out from Record Store Day, one of their biggest sales days of the year. “We were assured that there would be no issues, but approximately 50 independent stores and some big [record chains] didn’t receive their Warner Music Group Record Store Day releases,” says Record Store Day co-founder Michael Kurtz. “That was when we first knew—this was not going to go smoothly.” Kurtz estimates that between 20,000 and 30,000 copies of Warner-distributed titles didn’t make it to stores in time for Record Store Day. Another 10,000 records from Universal reportedly missed Record Store Day’s recent Black Friday promotion as well, according to Kurtz.

“We got a lot of promises [from Warner reps] that things were going to get better by July, then by September,” says Michael Bunnell, who leads the Coalition for Independent Music Stores. “These issues remain exactly the same as they were in April. Through no fault of our own, we’re losing the loyalty of our best customers. That’s very frightening.”

In addition to running the Record Exchange in Boise, Idaho, Bunnell collects and distributes sales information among the 40 U.S. shops that take part in the coalition. He says his colleagues have reported that orders previously taking between seven and 10 days to arrive now take between six and eight weeks. New releases barely make it to stores by release date and in many cases, simply don’t; it takes even longer to restock back catalog titles, he says.

Carl Mello, director of brand engagement at Newbury Comics, says that there’s “zero clarity” on how Direct Shot shipments are handled or when they’ll arrive. Orders are frequently incomplete or wrong, he says: A store that ordered 70 CDs might get seven instead; a run of 30 CDs that would have showed up from Technicolor in one box now arrives in 20 separate parcels.

Retailers say Direct Shot is better suited for those placing bulk orders, but very few indie stores have the money or space to handle larger shipments. With 29 stores in and around Massachusetts, Newbury Comics has more capacity to manage bulk orders; it’s the smaller establishments that Mello really feels for in this situation. “Imagine you’re an owner-operator and you’re being charged $60,000 for a shipment that came in, but only $15,000 of that stuff showed up,” he says. “If that issue isn’t resolved at speed, then that money is tied up for you.”

The label ORG Music, which has reissued titles by Billie Holiday, Nirvana, Sonic Youth, and Thelonious Monk, has experienced similar problems. According to ORG owner Andrew Rossiter, “We had at least four or five months where the majority of our back catalog was just not even available for stores to order.”

A former sales and production manager at an ADA-affiliated indie label tells Pitchfork that there were often problems with Direct Shot’s protocol for processing shipments from pressing plants. Orders arrive in boxes on pallets, which are stacked with 700 to 1,000 records each. If a single box is incorrectly labeled on a pallet before it’s checked in, she said, the entire pallet may be redirected to another part of the warehouse to be reviewed and corrected—and perhaps get trapped in a Bermuda Triangle of records. “[Direct Shot] lost an entire pallet of something, missing a street date,” she says.

That loss can trickle down to artists, who sometimes can’t reload their merch supply ahead of or during a tour because their labels don’t have their records in stock. According to the former production manager, a significant number of records got lost in the shuffle between the Technicolor and Direct Shot facilities; titles that had been abundant were suddenly nowhere to be found. “It was really sad and made us look incompetent to the artists,” she says.

Her label’s size afforded it the ability to weather those storms somewhat more easily, she adds; the company imported stock from the UK, transferred records from other domestic warehouses, and repressed an entire run of lost albums. But repressing even a modest run can cost tens of thousands of dollars, according to Darius Van Arman, co-CEO of the Secretly Group, comprised of Secretly Canadian, Dead Oceans, Numero Group, Jagjaguwar, and its own distribution arm.

The Direct Shot situation is made all the more dire because major-label artists dominate the streaming market, says Van Arman. “The smaller labels that are more niche-oriented, more tied to local culture, and have more diverse music offerings—their earnings are disproportionately more physical than digital,” he says. “When a supply chain issue like this happens, it threatens the viability of those culturally important labels and artists.”

So what’s at the root of Direct Shot’s problems? A number of sources claim that the company’s facility is understaffed and reliant on outdated equipment. “There’s just not enough people power to get the job done,” CIMS’ Bunnell told Pitchfork. “They seem baffled by the amount of product that hits their receiving bay.” Record Store Day’s Kurtz said, “They don’t have enough employees. There’s not enough management team there.” A source who visited the depot, located about 20 miles south of Indianapolis, says that a warehouse floor that should’ve been bustling seemed almost empty.

Over the summer, Direct Shot was acquired by Legacy Supply Chain Services, a much larger distribution network that extends far beyond the record industry. Multiple retail sources speculated that Direct Shot wooed Warner Music Group in order to increase its value ahead of the sale to Legacy. It’s also worth noting that, in October 2018, Legacy Supply Chain Services was acquired by Eos, a private equity firm.

Legacy’s director of marketing and communications, Kyle Krug, says the company was aware of Direct Shot’s problems as early as April and has since invested in new technology (particularly automation), as well as hired consultants. But Legacy has no definitive timeline on improvements for labels and retailers. “This is a strategic approach, not an overnight fix,” he says. “We know folks are struggling with this a little bit today, but there is a long-term, very bright future. We’re just in the midst of getting it there.”

The question of whether or not to stay with Direct Shot, given the time and money it might take to overhaul their distribution should they leave, is one that many indie labels may face. Rossiter switched his ORG Music away from ADA in September; he says he’s still missing what he estimates to be 20-30 percent of the stock he’d entrusted to Direct Shot.

Sources on the record store side claim that Sony, Universal, and Warner have only recently begun to pay much attention to the problem. On December 5, Sony held a conference call with members of the retail industry to discuss ongoing issues; a source who was on the call claims Sony executives promised that business would return to normal by mid-January and would be booming by mid-February, but offered no specific solutions. On December 9, Warner directed indie retailers, via an email (viewed by Pitchfork), to order all Warner and ADA-affiliated titles from one-stops through April 2020. One-stops usually function as a back-up option for stores—the extra stop in the production cycle creates additional costs that retailers say will eventually get passed on to customers. Warner has not responded to Pitchfork’s request for comment. A source familiar with the situation says Sony is directing its partners back toward one-stops, too, but the company declined to offer an official comment. Universal has also not responded to Pitchfork’s request for comment.

Anxiety abounds among the labels and shops with stock trapped in Direct Shot’s control. With streaming now accounting for 80 percent of record industry revenue, there appears to be little faith in the notion that major labels will help fix a physical distribution issue that’s hitting smaller, less powerful institutions the hardest.

“I don’t feel like anybody’s doing anything about it, but that’s not from paranoia,” Newbury Comics’ Mello says. “There have been little things done, but nobody’s really lifted a finger to solve the problem. And now we’re eight months into it.”

Originally Appeared on Pitchfork