Indie companies worry as major labels intervene in vinyl and CD distribution

Vinyl sales surged by 13.2% in the first nine months of 2023 compared with the same period last year, according to new statistics from the British Phonographic Industry (BPI), fuelled by releases from Lana Del Rey, Taylor Swift, Blur and Kylie Minogue. This 16th year of growth is made possible by the physical music distribution businesses responsible for getting records to shops and consumers in the UK. But disarray in one of the UK’s biggest players means that smaller acts are missing out on chart positions. This is affecting consumers and independent retailers already struggling with small profit margins during the industry’s pivotal fourth retail quarter.

One British independent label saw one of its biggest acts miss out on a Top 20 album placement when the UK’s leading physical music distribution company became mired in chaos during a warehouse move. Additionally, nine months of work and thousands of pounds of investment were undermined when part of its stock for a September release was temporarily unable to be located, said a senior executive from the label. “It put a crack through the middle of the campaign. It could mean a knock of 50% off sales.”

The company at the heart of the controversy is Utopia Music, which in September 2022 took over the biggest physical music distribution company in the UK from Cinram Novum to save it from insolvency. Having also acquired the distributor Proper Music Group that January, Utopia now has an estimated 70% share of the business of getting records to shops and consumers in the UK.

Drew Hill, VP of distribution services at Utopia admits there were issues during the site move, explaining it was a process that should have taken 12 to 18 months but had to be squeezed into six. He says these transition problems affected everyone equally and is emphatic that the majors were not given preferential treatment and didn’t have their stock prioritised. He says that 27 trailers of stock “were loaded without being properly manifested”, resulting in an unloading backlog. “Nothing went missing or got lost,” he says. “This has been a very unfortunate situation brought about by the speed at which the move was forced to happen by the lease end date [for Aylesbury].”

The Switzerland-based company called in the liquidators for its Utopia UK (R&D) operation this summer. For the separate distribution arm of its business, UDS, it sought financial assistance from the major labels Universal Music Group and Sony Music Entertainment (to fund the move of its warehousing from Aylesbury to Bicester, as reported by music business title CMU), leading to fears of an unhealthy level of influence over the independent sector. Hill already admits: “Part of me wishes now I hadn’t gone to [the majors] to say: ‘Do you want to come along for the ride?’”

A music fintech company, Utopia Music has run into multiple problems recently. Aside from calling in UK liquidators, it also had to divest several companies – including publishing tech company Sentric, Absolute Label Services and music analytics platform ROSTR – after an acquisition frenzy in 2021 and 2022.

There is concern among some independent labels that the bailout by Universal and Sony could be the first step of a takeover by stealth. “Of course, Universal and Sony releases will be prioritised,” says the indie label executive.

UDS rebuts this. “Sony and UMG have no control over operational workflow on site,” says Hill. “I don’t think they’ve got any desire to get back into something” – physical distribution – “they spent years trying to get out of.”

The Association of Independent Music, the trade body for UK independents, also dampened down panic. CEO Silvia Montello says she understands why “there’s a nervousness within parts of the independent sector” around the Sony/UMG loan.

“Everything that we are seeing and hearing does not point to the fact that the major labels would want to take over the distribution again,” she says. “This is about maintaining physical distribution for labels within the UK and making sure that there is a good, robust future.”

Hill argues that Utopia threw Cinram a lifeline and thereby saved UK distribution. “It would have gone to the wall,” he says. “There was no one else waiting in the wings to step in and fill the void. If it wasn’t for Utopia, then physical distribution would be in an absolutely dire place.” He adds: “The project to buy Cinram, to upgrade the business and move it to the new warehouse is a multimillion pound project. I’m not at liberty to discuss the size of these loans [from major labels], but they’re pretty small in comparison to the amount of money that Utopia has pumped into the project.”

Kim Bayley, CEO of the Digital Entertainment and Retail Association, says that consolidation in any sector is a worry. “There will always be concerns, but the big picture is that music is an ecosystem which needs big players and independents,” she says. “Retailers, more than most, know the implications of a shrinking pool of distributors, but with streaming now accounting for more than three-quarters of the music market, that was inevitable.”

The two biggest majors might be helping financially support UDS through its relocation, yet if Utopia decides to divest its distribution arm, it is the majors who are the most likely, and most able, to buy it out. For the indies, it could spell dystopia.