Monday, February 13, 2012

Who's The Biggest CD Distributor?

Anderson Merchandisers image from Bobby Owsinski's Music 3.0 blog
When you think of the largest CD distributor in the US, who immediately comes to mind? Many of you will think, "Universal Music, since they're the biggest record company." Good guess but you'd be wrong. Way wrong.

The fact of the matter is that 82% of all CDs in the US are distributed through Anderson Merchandisers after a deal where they purchase the distribution rights from Sony DADC (once one the largest CD pressing facilities anywhere). Knoxville-based Anderson now distributes for 3 of the 4 major labels, with Universal, Sony and EMI in the fold. Only Warner Bros. continues to distribute their own product, at least for now.

Anderson is already the country's largest music wholesaler, supplying Walmart, Sam's Clubs, Best Buy and the Army and Air Force Exchange Service, and believe it or not, they say that their CD sales have actually increased over last year on a retail level.

So what does this acquisition mean? A couple of things:

1) It's never a good idea for any one company to have a monopoly over a distribution channel, although the consequences aren't so bad for an industry sector that's declining rather than increasing. Still, it gives you some pause to think about the fact that if CEO Charlie Anderson wakes up one morning and decides that the CD business isn't cutting it any longer, the CD format can officially die in one fell swoop.

2) This is a typical business tactic that happens during the downward spiral of an industry sector. Companies that want to move on to bigger and better things sell their portions of the declining biz to an aggregator (Anderson), who then can run the remnants of the business with a greater economy of scale and still eek out some profits for a while.

The way I see it is that this is just another nail in the CDs coffin, but there are a lot of nails left to be pounded yet.

Interestingly enough, Sony DADC may be getting out of the CD business, but they're moving headfirst into the digital distribution biz since they just signed a deal with Warner Bros. to store and distribute their digital content.

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