On Thursday afternoon, I received the shock news that Amato Distribution was to go into liquidation. Amato was seen as one of the main UK distributors (especially for dance music) of CD, vinyl and digital formats for many top dance labels from the UK & Europe.
It wasn’t shocking news because i couldn’t see it coming (rumours were already rife at the ADE conference) but just shocking as it’s always a shame to see another company in the music industry go down. Especially a shame as it will affect many established labels such as Freerange, Buzzin Fly, CR2, Toolroom, Fat! and Riot. Its another potential blow for the dance music industry after last year’s closure Intergroove UK. Amato were trying to branch out from its traditional dance remit so smaller non-dance labels such as Cassette, Trial & Error and Herb Recordings have been affected too.
The closure throws up some interesting questions to those of us looking at the digital music industry.
1) Was the closure due to declining physical sales?
Stuart Knight of Toolroom Records provides a personal account of Amato’s closure over at Beatportal. In his analysis he is perhaps a little harsh in saying that the closure was due to poor management and running of the business. Not being close enough to the behind-the-scenes action I cannot say if this is necessarily the sole reason for its closure, although despite positive noises at the time, anecdotal evidence does point to difficulties after the merger in May last year of Unique Distribution and Amato.
In general however I think the closure can been seen as another stark warning about declining physical sales and the need for traditional music companies to adapt to new conditions and fully embrace the opportunities (and challenges) of digital distribution. Digital was something that Amato had only started to get serious about in the last 12 months and were only digital distributing a small proportion of their labels. Also digital revenues still aren’t at the stage where they could be fully replacing falling sales of physical sales for a traditional physical-based distributor such as Amato.
2) Is this another nail in the coffin for vinyl?
Stuart Knight again provides his opinion on this over at Beatportal saying that for them vinyl isn’t definitely not shifting big units but that it still does have legs as a niche and promotional product for DJ’s. However with the new generation of DJ’s coming through increasingly resorting to laptops and CDJ’s, I think we may be left with vinyl more as a collector’s item rather than the primary way music is bought and played. Personally i’ve actually found myself adding to my rather large, albeit shelved, vinyl collection with quite a few limited edition 7″s. Proof to myself that vinyl definitely still has a place in the music industry. Even if that place isn’t necessarily a money making one.
3) What will happen to labels’ back catalogue?
Reports suggest that labels might have a tough time getting their physical product back from Amato’s warehouses as the administrators move in (an experience i’ve had when trying to get one of my own label’s physical stock from Flute when Beechwood closed). What will be interesting to see is how this will play out in the digital world.
- will someone at Amato be issuing official takedowns for products? Or will products just linger on the sites?
- will labels be able to collect their money directly from the digital stores? Or will some royalties just remain unpaid in the ether?
- will the digital stores be able to easily switch content and accounts from Amato to the labels (or a 3rd party that the label appoints)? Or will lengthy redeliveries have to take place?
4) Could digital-only labels become the norm rather than the exception?
i guess this one has already been addressed in point 2 above. But its interesting to note that i’ve spoken to several labels since Thursday which are now stating openly that they will be pursuing digital-only release schedules. It’s almost certain that labels affected by Amato’s closure probably need to release their immediately scheduled products as digital-only to capitalise on the hype they may have already generated but also to ensure a continued revenue stream in the short term. The big question is whether they will be able to stomach a return to the risk and upfront capital outlay of releasing physical product. My guess is that the higher profile labels will make sideways shifts towards other distributors such as Vital or to German-based specialists such as Word & Sound, but many will be revising exactly what product they will be releasing physically if any.
It’s certainly going to be interesting to see how this one plays out.
