Distribution Makes Strange Bedfellows

Warner Music created a unit called the Alternative Distribution Alliance in the mid-1990s to distribute cassette tapes and CDs. The unit, which has the connections to negotiate with retailers that otherwise might not even take an independent's calls, charges a distribution fee of as much as 25% of an album's wholesale price for the service. That opportunity for new revenue has enticed the three other major record companies — Universal Music Group, EMI Group and Sony BMG Music Entertainment — to start similar units...

"We know how different stores catalog different genres, we know which Best Buy executive likes what kinds of music," said alliance President Andy Allen. "Having a lot of employees only makes sense if you release a lot of albums. So we amalgamate independents under one roof and give them relationships they could never afford on their own."

The alliance also can handle mass merchandiser demands that smaller independents can't. Companies such as Best Buy, which accounts for 15% of the nation's music sales, require distributors to deliver CDs packaged according to specific guidelines and to stock large amounts of inventory in case an album is a fast seller.

"We rely on the indies to be the minor leagues for our major league teams," said Lipman of Universal Records. "The indies find markets we didn't even know existed, and then we can take the bands and make them huge."

"Calling us a minor league team is infuriating," Lombardi said. "That's the attitude that is ruining music. We're the ones who break the band, who actually care about them and their music and make their vision become real. We're the only ones who won't betray them for a dollar. If we're the minor league, then the majors should be torn apart."