Pitchfork

Perfect world: young, talented, rosy-cheeked musician-type slaves for months-- years, maybe-- cuts record, sells record with the help of kind grassroots label, earns enough bread to stay alive, and gets back to slaving. Rinse and repeat.

Real world: grassroots label has to answer to middleman distribution company, who in turn must answer to huge corporate mega-distro. Things like loans and credit and pay-delay periods crop up. Shit gets ugly. Suddenly young, talented musician-type is caught up in a precarious web of financial dependency in which one proverbial straw can break the camel's back. Suddenly the cheeks aren't so rosy.

For New York-based Studio Distribution and the dozens of electronic music labels beneath its umbrella (including Get Physical, Accidental, Crosstown Rebels, Fabric, Output, Peace Frog, Poker Flat, and Tresor) that dreaded straw arrived in January when specialty retailer Musicland Holding Corporation (which owns Sam Goody and Suncoast) filed for chapter 11 bankruptcy.

The bankruptcy in turn cost publisher and multimedia distributor Navarre Corporation some $12.7 million (based on a write-off reported in The Minneapolis/St. Paul Business Journal). Partnered with Studio, Navarre handled product fulfillment and a number of sales accounts for the distro-- and after posting the losses, Navarre pulled the plug on Studio.

Just like that, a nine-year old company was kaput, its employees suddenly jobless. Explained former Studio employee Jon Gray on an e-mail discussion list: "Basically Navarre, who handled our fulfillment and a lot of credit risk, got hit hard by Musicland going bankrupt," he wrote, continuing, "left [with] a large debt, [Navarre] decided that Studio was no longer a viable division, so abruptly stopped funding."

"There was no severance package available. We only have a week to get our shit and get out."

Former Studio employees aren't the only ones getting dicked over. The financial fallout from Studio's shutdown has been felt hardest by the over 40 labels for which Studio provided North American distribution, and their rosters. While some former Studio clients will still get distribution through Navarre, many were simply left out in the cold.

Worst of all, because there is roughly a three-month period between the delivery of a given record to Studio and repayment for that record, much of the money Studio owes labels will go unpaid.

For folks like DJ/producer (and Metro Area member) Morgan Geist, who runs Environ Records, this essentially means receiving no revenue on records released so far this year. As Geist told Pitchfork, "I can confirm we lost a lot of money, potentially a lot of stock [i.e., product], and the benefits of all our work and cash spent on our publicity campaigns for North America, specifically for the Kelley Polar album [Love Songs of the Hanging Gardens]. Ditto any sales payments for that album."

Geist is extremely unhappy with the way Studio handled things. Apparently the distributor's then-president Dave Watkins sent a mass e-mail to his clients at the time of the closure in which he declared, "I'm not going to get into the details of Studio Distribution's closing but we were certainly not expecting this."

"The labels who will go out of business because of this and the artists who will get no royalties because of this deserve the fucking details," said Geist.

"I can't imagine not paying my artists royalties and then saying, 'I'm not going to get into the details of why you're not getting paid for your hard work.' I would deserve a skewering if I did that."

Watkins initially responded to Pitchfork's request for comment, but did not respond to follow-ups.

Environ is currently looking for new distribution. A recent label e-newsletter implored North American fans to purchase Environ records, particularly Polar's, directly from the label's online store, and not from retailers-- since neither the artist nor label are likely to receive any portion of store sales.

Chicago's Hefty Records is in a similar position, having shipped copies of Eliot Lipp's new LP Tacoma Mockingbird on the eve of Studio's closing. Owner John Hughes III suspects Lipp, too, may never see any revenue for sales of this album, nor will Hefty.

As Hughes explained, picking up the pieces has been a frustrating process, to say the least. "There's no progress with reclaiming the money owed," he wrote to Pitchfork. "Nothing has been communicated about that from Studio. From our past experience and attorney's advice, we found that [the bankruptcy] will be reviewed by a judge who will decide what portion should be paid out."

Continued Hughes, "This could be a couple years away and we can only hope for a small sliver of what's actually owed. Odds are we won't even receive that because the labels are at the back of the line. From what we've been told, the debt owed to Navarre will be [repaid] first and then [that of] the secured creditors."

A recent article in Billboard revealed that Studio had a line of credit with Navarre-- unknown to many of Studio's clients, including Hughes. "It really rubs me the wrong way," he wrote, "that all of these indie labels' records were used against that line of credit without us knowing."

Also complicating the matter is !K7, the German techno label that created Studio in 1997 to be its North American distributor. !K7 parted ways with the distro it started effective January 1 of this year; it has been suggested that they were better informed of Studio's precarious financial situation. The same Billboard article also mentions Navarre writing off a $4.1 million balance to an "unnamed label," which some suspect to be !K7.

UK-based label Global Underground also left Studio around the same time.

!K7's U.S. manager Jennifer Masset declined to comment on !K7's reasons for breaking ties with Studio, but did express to Pitchfork her disdain for Navarre's actions. "I think the way Navarre ended things for them was about as cold-hearted as this industry can get," Masset wrote. "I would say that the seven years I dedicated to Studio Distribution were the most fun I have had in this industry and it is unfortunate to watch such an incredible company be killed by a corporation like Navarre."

The bottom line: A whole lot of musicians and the labels behind them won't receive the bread they've earned this year. And they may never know exactly why.

Geist's advice? "I'd warn other label owners to be [as] vigilant as possible about getting paid on time," he told Pitchfork. "But the truth is that even vigilance often yields nothing, no change in distributor behavior or cash flow."

"In many ways the business hasn't changed since the 1950s or 60s," he said. "We're still in the situation where you usually have to ship a new record in order to get paid for the last one. Labels have very little bargaining power against distributors. The debt can stack up quickly and really sting you when a distributor goes for bankruptcy and there's little you can do about it."

"It's terrifying right now," Geist continued, "because as a label and as a studio artist (that is, not a touring live band with revenue from shows), it's very hard to make money through record sales. But if a system evolves where traditional distribution is gone but artists and labels can earn a living, I'm all for it."

Acknowledging the loss taken by artists and labels, publicist Gamall Awad, whose clients include many artists once distributed by Studio, attempted to put things in a positive light. "In the end you have to take an optimistic look [that] good music and good business will out," he observed. "People with strong product will find a way to reach their audience."