on specifically, hence this neno. I wanted to brief

MEMO
Date:
To:
0ffice:
From:
0lfice:
June 23, 1988
Dennis white
President
Dave Kronenyer
Director, Business Affairs
Business Affairs Conference --
Sumnary
Subiect:
the numerous issues discussed at the recent Business
there ltere severaL that I wanted to brief you
conference,
Affairs
this neno.
hence
on specifically,
Anong
A.. l,latrix Excha@lge
litost of the tine in London was spent discussing issues
arising bethteen the US and UK companies under the uatrix Exchange
Agreem6nt ( "I{EAI ), the main one of these issues being base price.
ttre una spdcifies palment on actual. retail price. t'tost. cRI
price
artist co;tracts specity palment on suggested retair
( except for cDs), wherels- uf contracts unifonnly specify dealer
rrdealer
[As you knolt, the uK means sonethinq different by
irice. ttran
ile do; the best translation is our subdistributor
iricel
-
price . I
UEe of retai t price under the t'tE/A has lead to severaf
problems. First, it is a contrived anounti CRI recently
Lonmissioned a 9175K survey of retail outlets to find out what it
actually was. [r have asked o'NeiII for a-copy of this study and
an surpliseal th;t cEllA apparently ltas not involved - I Second,
conceplually, it bears no relationship to record conpany
company ' s
activity, att ot which is structured around the record
of
translation
a
host
are
prices t6 its customers. Third, there
the MIS leveL bethteen us and the uK when it comes to
irobtens atpalments.
renitting
Argunents in favor of retait price are as fol1ohts. First,
the artist connunity is used to retail price contracts,. and aand
the administrability
shift to deaLer pricing night undernine
processes.
Second, while
intelligibility of our-accounting
prices
so'
retail
or
nonths
cnange every six
dealer iricesltnanuficturert
rractuay )
to
opposed
as
suggestedu
s
(especiltty
irnairge nor6 slow1y. If artist contracts were based on lrholesale
prices, royalties payable ltould tend to creep upwards.
perspective is in line with the UK's on this poiltt f
think ie- sfrouta do away with retail prices as a contracting
device altogether. Under examination, both of the argunents
advanced in-their favor are flawed. For exanple ' as you knou, ste
have
don't have them for cDs, and several of our competitors
one of
Every
vteLL.
as
igiurations,
analog
conf
them
for
elininated
to
us
provision
enabfe
would
that
has
i
contracts
our artist
My
Signed:
口日国日
口日日回
口日日□
convert from a retail price base to a l^tholesale one, and the
problem has been addressed for cDs by applying the retail
percentages to an rrattributed'r retail price that is L308 of the
wholesale price (Iess a 259 packaging deduction).
The second point conceals a significant un-reserved royaLty
Iiability that will mature when rrsuggested list" suddenly is
changed Lo a higher nunber. we have been camouflaging the
overall economic effect of increases in |tdealer pri-cerr because
even our best-selting product constantfy is on deal . As dealer
price increases and approaches list price, the extent and
rnagnitude of such deals necessarily r^tilL have to increase in
orier to preserve custoner rnargins, rnaking it extremely difficult
for the record company to capture any savings based on using a
purposes. conconitantly, I
retail price for royalty accounting
suppose that eventuaffy a ttcritical massrr of lrholesal-e price
inlieases could be achieved, enabling us to nake the junp and pay
a higher royalty on a higher list price. At that time, hosrever,
in order to keep the price-royalty equation in balance' aII deals
srould have to clase -- an unrealistic expectation, given the
cornpetitive demands of today's marketplace.
Notwithstanding, both Berman and young reliably are reported
to be in favor of adhering to a retail price base for artist
contract purposes.
After much discussion it was decided
would continue to pay its artists holtever
royalties would be remitted inter-conpany
ba-se price. In order to preserve roughly
at present, the 198 l,!EA royaf ty obviously
adjisted, but the extent ana nlgnitude of
wasn't discussed.
B.
llatrix
that each territory
they wish, but all
on 1008 of a wholesaLe
same-pennies parity as
v.tilI have to. be
any such nodification
Exchange Agreenent: Sales Base
Attenpting to give sone allowance for free goods, discount
prograns, etc., tfre UEA nolt provides that palment will be based
on ioo* of units sold but at 9ot of retail price. rt generally
cost of
is perceived that this isn't enough to cover the ful1that
Ray
John
from
these inducements. Attached is a nemo
see paragraph B-(i) at p. 3.
attempts to analyze this problen,
rrautomatic
free goodsrr isUnfortunately thl discussion of
deals l'58 free
routineLy
confusing because it irnplies that CEITIA
John was tryinq
what
that
goods, wien in fact we don't. r think
(apparently)
differentfo say here i.s that because of our
accouirting practice of billing our custoners only for full-priced
units, wnerlas our competitori lapparently) recognize on their
statements the inplicil price distount effected by frees, it is
necessary to take sone kind of enhanced al.Iowance for frees frorn
our artists for roYaItY purPoses.
Following discussion, it !,ras aqreed to do away with the 908
of retail price concept and instead base MEA payments on 858 of
net units reported.
I then brougftt up the subject of discounts. I argued that
cEuA required greater marketing discretion to deal product. The
present cumbersome system of clearances produced delays.and
There vtas considerabl-e
deprived us of this needed flexibility. rrpreapprovedrt
alloe,ance
sentinent that even a li:nited form of
rnight derogate from each Label's proprietary control over its
owi repertoire, and this suggestion was rejected. However, it
was agreed that cash discounts Itould be applied to reduce the
wholeiale price base for }!EA reporting purposes. In other words '
we would report on a number somewhat lower than our
subdistribulor price, taking into account the effect of discount
programs. lNote this could involve some cost to the uK, as all of
tfreir contiacts apparently provide for payment of foreign
royalties on dealer price gross of discounts.l
C. fnter-Companv Joint Ventures
have been created by what have cone to
Significant problens
irinter-company
joint venturesrt -- hthere one
be referred to as
as
affiliate originates the act, but for various reasons. (suchtirning
lack of buclgei ) another funds it. Exchange differentials,
of palments, rois-atlocation of charges to i.ncorrect accounts, and
locll- issues such as tour support apparentfy have conbined to
create significant accounting difficulties.
Methods were discussed to solve this problen; for exanple,
thro separate, non-crossed deals with the artist- This was the
protoc6l adopted for Robert Palmer. Another alternative is a
contract in one territory but with a special override for the
originator, which is what happened with crowded House. The
Potts, hthom the tK apparently views as
activities of Sinon
Itpoacher,
came under special scrutiny. To soLve
somewhat of a
the problen, Bernan was reported to have agreed to a 5ol50 split
of all net revenues with Rupert Perry on acts that Potts
originates
.
this really ended up is that there are a number of
separate dells between Lhe various conpanies totally outside of
accounting conplexity and
the uEA. These introduce significant
rrstarting
pointrr for further
reduce the UEA to a kind of
The way
discussion on complex transactions.
D. other London subjects
other topics discussed in London incl-uded the fotlohting:
packaging deductions and special packaging costs, Tv-advertised
recoupability of re-nix
irroauct ( cornmon in the UK), record c1ubs,
foreign
licensees, controls
of
audits
edits,
for
diff,erent
Losts
treatment of cDv
payments
records,
delete
on
records,
on ex-fee
pal''nent. periods,
royalty
records,
lna
luaget
raid-price
DAT,
and
practices with regards to mechanicaL royalties, Personics,
restricted territories, rnerchandising rights and product
endorsenent rights, l-eaving menbers, video clauses, the best
forum for dispute resolution, reserving practices, distribution
deals, copyright aspects of digital saropling, record rental ,
California's 7-year ru1e, and cornputerization of data briefs.
Discussed with considerable discretion hlas the apparent
reluctance of some UK acts to contract with EI,IIR if capitol or
E!{IM is the US company. I firnly believe that any such concern
on the part of UK artist representatives is based more on
perception than reality. Still, tales of lroe spread by topseJ.ling UK acts such as the Pet Shop Boys inevitably carry some
influence. I spent considerable tine talking about cEl{A, Itho we
nere and vrhat hre were doing. The advent and growth of CEUA etas
perceived in the best possible light, because it indicates a
corporate cormi.trnent to marketing professional ism. The labels
are perceived to best concentrate on repertoire origination and
promotion. your personaL credibility snoothed the Itay to present
this case clearly and persuasively.
E. EEC Issues
The conference then shifted to Lake l.Ia jeure, a resort
outside of }!ilan. The US and IrK delegates were joined by our
counterparts from a nunber of other foreiqn affiliates, including
France, Gernany, ttolland, Italy, Canada and South Africa. It htas
pleasant to meet these people personally, Ithon I had dealt with
only by fax. Tradinq practices in each territory briefly Itere
reviewed with respect to issues such as free goods, reserves,
delete records, record clubs, royalties on sales of cDs, the
advent of DAT, synchronization income, nerchandising rights,
nechanical royalties and controlled composition clauses, video
exploitation, qDv, piracy, royalty paltt0ent periods and rerecording restrictions, record rental and blank tape levy, and
various trademark issues.
one of the nain points of discussion -- which struck ne as
being of the greatest interest -- ltas the abolition, in 1992, of
trade and tariff restrictions between countries that are menbers
of the European Econornic Connunity. This presents a number of
perils and opportunities for a company of El{I's qloba] stature.
To begin with, it is apparent that contractual provisions
which are sensitive to territory quickly wifl becone obsolete.
For example, if a contract provides for one royalty in one
territory and a lower one i.n another territory, it seens obvious
that sales wiII gravitate tohtards the loster territory for alnost
inmediate, duty-free trans-shipnent into all others. l,icensing
restrictions based on territory will becone'meaningLess,
particularly if they are based on a preroise of excl-usivity. This
in turn inplicates contractuaL devices such as so-called favored
nations clauses. There ltilL be significant copyright problens,
for exar0ple, if a title is out of copyright in one territory
(Holland provides for a bare 20 years) but still copyrightable in
others. Finally, alnost inevitabl'y, there will be novement
towards a single European Price.
rt seems to ne that it would be
in EI'{I'S best interests to
and
anticipate all of this by consolidating nanufacturing
facilitate
to
so
as
distriLution facilities Lhroughout Europe
continued local
central order fulfillment. while I can envision
perhaps
(
nost)
nuch
repertoire,
promotion
-European for local-language
Europe.
be
can't
lilhy
repertoire is English-Ianguage.just
us'
to
the
like
prornotion
regions,
divilecl int6 various
play? A Sogg
facilitate the procurement of maxinun radioproduct
should. not be
argument can be made that English-Ianguage
the
of
course
differences.
suiject to parochial territorial
the
of
history
cultural
and
conioluted political , economic
various Eur6pean countries nay render the pan-European. concept of
post-l-992 soirewhat problenatia, but it remai-ns an intriguing
vision nonetheless.
DEK:rg
cc:
Mansfield
McFadden
Pa■ acio
Va■ ■ot
Reyno■ ds
″
′
に
:鸞
卿
0ffice:
October 2■ ′ ■988
Dennis White
president
From:
Dave Kronemyer
Date:
To:
CONF
0ffice:
Subiect:
IDENTIAL
Director, Business Affairs
Washington D.c. Sales Meeting -- observations
on
I attended the washington D-c. District sal-estoneeting
on
report
is
nemo
October 13-14, l-988. The purpose of this
affairs
business
with
some of the matters that w6re discussed
apprised.of some or all of
i"dZ". Iegal irnplications. You may bepoint
of interest in and of
these issries from other contexts; one
to, and are
of
concern
are
itseLf is the extent to which they
I
am of the
Generally
discussed by, the fj.eld sales staff.
unnecessarilv
without
job
and,
to.selr'
their
iniL'it'.
;;;;i;;
to
do
too
rnuch thinking
a!r""""i"q iheir critical capacities, .not
from the
input
that
believe
anout it, Nonetheless, I firrnly
fieldiscriticalto(ifnotdeterrninativeof)thesuccessor
fail-ure of most projects. In no particular order,
A.
Orpheus Records
SomedegreeofconfusionattendstheEur-HuShtransactionre
Recoids. Apparently Elitl has.decided to funnel everythlng
wisdom of this strategy, EIIII
ini"rrqn f.". withoirt debating theprerogative
to call Dl'!s (and
the
also iants for Walter to have
going to lead
this.is
Inevitably
personnel ) direct.
="f.=
and
instructions
""""
possibly
confticting
io confusioir and
priorities.
to work against. it' an
Although EMr is striving nightity
I' just another distributed
is
orpheus
inpression iemains that
initial release
iii"r;rr relatively poor coordination on itsdone
nothins to dispel
has
book)
Novenber
tne
iir
?;:;:; ilii not perceive
of hits for
couple
a
take
will
it
that
iniJ neri"f. r
o6h";; io lecornl fully established as an independently viabfe
concept for the field.
Orpheus
B.
Solar
on'
Massive and unresolvable confusion as to what's going
ldith
The l-o-day rthoLdrr on Midnight Star and poor coordination
caused significant loss of momentum ' That
promotion-""iritn=t"nding,
qu6stions renain as to under v/hat label product
isgoingtobe-promoted;whetherornotsolarstillwillhave
proioti5nal respons ibi- lities ; r"hether the deal only is for
other sofar product' capitor prono
fi;ili;;; aa.r, b. for all
unable to answer these questions'
SiOmd:
r^tas
口日回日
口日日日
口日日ロ
My personal belief is that it would be a serious mistake to
ttdo a$ray withtr the solar identity, and that to some extent solar
will require its own promotional tearn. whil,e I could be rrrong, I
think that a lot of black stations add Solar titles "just
becauserr it's Solar, and they rnight be less receptive if it is a
Capitol promo man that comes calling.
C. EMI Pricing
At $9.98 nost EltI product is overpriced. This is
particularly
true in the case of ner.r artists such as National'
velvet. rrEvelyn King needs a 2oe deal to start moving.tr
EUI's trmeet cornpetition'r pricing is perceived to be
trerrnendously destabili zing for alt of the reasons we previously
have discussed. I have grave reservations as to whether or not
rra is in fact obtaining conrpetitive invoices, the necessary
prereguisite to rrmeeting competition. tr In fact' several- of the
people with whorn I spoke basicaLly laughed at ne when I explained
the necessity of competitive invoices, stating that their
customers would not turn over information like that under any
circunstances
.
Documentation aside, I perceive that Ira may not be close
enough to the narketplace to rnake correct judgunents as to when a
deal should be cut and when it would be rnore advisable to back
off. E.g. a recent Stanley Jordan deal for The wiz definitely
created a lessening of enthusiasm for this project anong the
fietd sales staff wtrife soliciting other accounts.
Et{I also has a concept of rrregional dealsrt which would apply
only in certain parts of the country. Given the interconnected
nature of the national narketplace ' I'n not sure the extent to
which this concept makes senset it could result in serious price
for custoners with outlets on
discrimination problems, especially
rrborders,rr
i.e. some get the
each side of one of the regional
far
more
sense deal product
deal and sone don't. To rne it rnakes
cornpetition'r
basis, rather
by type of custoner, or on a meet
parts
and
not
others.
country
of the
than in certain
D.
Other EMI Issues
l Johnson spoke of a lneltrr prornotional strategy he's
going to try with their sarah Dash project, which is soliciting
pl-ay but not reports. Query how rnuch good this does you.
about not enough EltI advertising. Ron
Also, big conplaints
rrchess
game.rr
The situation's particul-arly
it
as
a
described
sone hot product out, but
has
right
not
EMI
difficult because
to
support
there isn't enough advertising ttcocktailrtit adequately. E.g.
soundtrack has
extensive wEA advertising on the
the
back
of the store at nany
to
noved
Bobby
l,lcFerrin
effectivefy
r^ras
at
Sound
odyssey in chery
taken
attached
Iocations. Photo
varnel
Hil1, NJ and is illustrative.
From a loqistical standpoint, advertising is comnitted too
late. A lot of criticisrn, particularly in the case of print
medla which requi-res 1onger lead tines.
E. Distributed Labels
A big problen with too much product and not enough labe1
support. without exception it was felt that a system should be
adopted liniting the number of releases a labe1 could have each
rnonth, and requiring some rninimum sufficient level of performance
on previous releases before additional- releases would be
perrnitted. Specific problems for individual labels are:
1. Eniqma. we need to provide for a variance in customer
advertising all,ocations. Enigrrna apparently is taking the
position that if there is a discrepancy between the authorization
and the final bil-1ing, the differentiaL is on cEI.tA. It is
difficult, hor^rever, to adninister advertising with such
precision.
Enigrna also apparentl-y has been sending noney directly to
the districts for advertising hthich has not been reguested. This
results in ads running at the hrrong time, double placement, and a
slower and rnore tine-consuming auditing process.
Tour support and ticket allocation are completely bogged
donn, Enigrma is not responsive, resultinq (e.S.) in cornnitnents
being made for tickets to retail lthich don't naterialize.
EnigEna's classical line has too many titles by rrno namerr
artists. The releases are poorly paced with custorners being
solicited for nen titles in the lj.ne before they have sell-
through experience on previ-ous items.
2. Rhino. No re-orders being experienced on 3rr cDs except
Considerable confusion how and where to
for most popular titles.
display and seII this configurati.on at retail. This confusion
isn't unique to Rhino; e.9., previous A&M titles in the CD3
configuration also hit the waII. Probably there is a market for
sone of these titles, but not necessarily in the cD3
it was a novelty
configuration. There are too many titles; while
at first, custoners now are experiencing an rrerosion of
interest.rr Again, probtens with soliciting for new titles in
the series hrhen sell-through on previous reLeases has fallen
dramatically. Lack of adapter packaged r,rith cD has hurt.
Rhino's Billboard series now is being advertised on Tv with
Silver Eagle Records. I pointed out that while it may hefp to
support the product, we earn zero revenue fron rnail-order sales.
Query, does the spot say "available by nait order onl-yrr as with
nost Silver EagLe ads?
dt
o EITITT
r
series is expected to achieve zero safes.
Rhino's new rrone way Up' cornpilation series is perceived as
causing confusion in the marketplace, especially in light of
their other conpilations such as BiLl-board.
3. chameleon. Even one-stops no longer are interested in
chameleon product because it isn't being r,rorked by the label .
zero units
There is no consuner denand for nany of these titles.
are being sold in many casesi in others, 100t returns are
predicted. This ties in with earlier conplaint that hre are
putting too nuch product into the systern.
chameleon is percei.ved as being on its way to becoming
another Birthright.
The new Childrens Series is way over-priced and should be
offered at $4.98. Again, a problern trith sol-iciting the Novetnber
releases before the october ones even have shipped.
4. Apache. John Brannen j.s "having babies on the way
back.rr Zero interest in Ho11lrhrood Underground.
5. Allegiance. sane conments as with chameleon; deal- is
widely perceived as disastrous, no credibility in the
Rhino's
marketplace
F.
78-RPM
.
Angel Records.
Selling a lot of shottboats. Problem with unfulfilled back
orders apparently now resolved. Placement of product proving to
be critical especially in light of insufficient advertising.
wEA conpetition with Tel-dec and Virgin cl-assical lines is
connitting significant advertising and also
heating up. lilEA is
rrmeet
of
a
lot
competition'r deals to get the product into
cutting
the stores and placed advantageously. lilEA is perceived as
realizing that it's late in entering the narketplace, and is
doing everything that it can to catch up.
c.
BIue Note.
Previous dump nort has sold througtt. Lower price is key to
rnoving this line, especial-Iy in light of fact that custoners now
are used to lor^rer price point. Too rnany titles being offered;
e,g. only Tourer hrj.Il order fuII 1ine. Releases should be spread
out over l-onger tine period.
No stock on Eliane Elias despite many orders' This
in obtaining #1 reports as requested by
compounds difficult
Iabel.
Blue Note CDs need to go on deal to achieve any significant
unit movement.
H.
BiIIing Problens.
End-of-month ship dates are perceived as depriving customers
of 6o-day datinq. E.g. LI-22 street date is treated as November
business therefore invoice is due l-2-31- giving 39 days for
payment instead of 60.
Problems when $8.98 product is renurnbered (but not deleted)
for sate at $6.98. Returns are being refused at Jacksonville and
sent back to customer vrith no credit issued.
Tirning of transition to mid-price is sonetimes handled
poorly resulting in customer anirnosity because no opportunity to
stock balance.
New prefix system is percei-ved as being confusing. rn some
cases the identical product bears 3 different prefix numbers. To
the extent prefixes are being retied upon for billing and
crediting of returns, they are unreliable.
Big problern developing wi.th fail-ure to give deals at Central
Billing level, even though product is solicited wi-th deal in
pl-ace. Note, this also wil"L lead to a LoFI problen when it comes
to crediting any returns. It also has developed into a serious
custoruer relations issue at sone accounts. They rr/ant to talk
about billing errors before placing an order.
Picking and input errors, double shipments, and nrisallocation of charges are increasing at the Bethlehem Dc. Two
other current fulfillrnent problems are: incorrect drilling of
units as prono when they should be clean, and a build-up of
orders on Monday which rnakes it irnpossible to get through on the
telephone. Some have taken to faxing orders in, often using a
competitor account's machine !
cEl,lA Pricing/Trade Issues
I.
Every single salesman insists that his central warehouse
Retail-er customers get a subdistributor price. r said r don't
see how this is possible. Our nehl proposed Custorner
classification system will qo a long ways towards elininating
inequities and fatent price discrirnination problems in the way
our product presently is being sold.
Any reduction in standard free goods on 45 RPI{ singles
likely will kill the configuration. By the sane token, there is
trenendous account interest in the cassette single, which
on cassette
generally is being $rell- displayed. A better deal"
rtwe're
looking at
I
said
tingles would encourage the hold-outs.
rr
it.
Much ernphasis on contests at Toeter locations. we need to
rnake sure that other custoners have access to contests and
promotions on a basis that is ttproportionately equalrr to their
tontribution to our turnover. We can't just focus on Tower to
the exclusion of other accounts.
question as to the usefulness of repeated retail
esp. to non-custoner dealers. Sending 3-5
rnailings,
advisory
pieces of a single title to such accounts is perceived as being
wasteful , the product ends up being sold instead of listened to
and we earn zero revenue.
In light of previously expressed concerns re Billboard
reporting, should the sal-esman reviews have efficiency in
oblaining such reports as one of the criteria upon which they are
graded? This coul-d rnake it look as though we're condoninq
potentially questionable behavior. Sa1es personnel with lthon r
spoke expr-ssed that they frequently were uncomfortable with the
rrrhat goes on '
" ethicalrr aspects of
Some
J.
CEMA
label
.
"confidential"
currently avail-able 12'r product shoul-d have a separate page
in the confidential . AIso, there should be a section for l-2rl
catalog, to the extent such a catalog exists.
The confidenti.al also should feature a broader selection of
recent Distributed Label product, preferably broken down by
The confidential could be made nore graphically appealing.
Note, the l,laclntosh conputer is ideal for this type of exercise,
possibly it would be to our advantage to get one and inplernent
our own rrdesktop publishingtr systen.
The nonthly Distributed Label book was praised as the rrbest
on the street.tr The checklist for each label at the back of that
rnonth's offerings r^tas the onLy tool used by most to solicit
Distributed Label product.
DEK:rg
cc:
Mansfield
McFadden
Davis
Ron Hughbanks
〆
MTMO
To:
Decenber 1,9, 1988
Dennis White
0ffice:
Pres
From:
Dave Kronemyer
Date:
0ffice:
Subiect:
ident
CONFIDENTIAL
Director, Business Affairs
Atlanta District }teeting
Decenber l-5-16, L988
I attended the Atlanta District t'leeting on Decenber L5-I6,
1988, The purpose of this nemorandurn is to report on severalmatters of particular interest.
A- EMI Recrional Sales Staff
considerable uncertainty attends the precise role and
function of EMI's recently-instal led regional sales personnel .
Their efforts are perceived as being naive and uninformed at best
and, at worst, as confusing and destabilizing the rnarketplace.
ExampLe: a recent $3600 tine-buy for a 4-store Atl-anta account
that naybe will do 250 pieces on the project. Such activity
should be conducted, if at aI], only by knowledgeable cEuA
representatj-ves
.
Poor coordination aside, the EMI reps are seen as hanging
around with a lot of tirne on their hands, not really knor^Iing what
their job is, and having a poorly-defined function even within
the EMI group (as opposed to the nore problematic issue of
liaison with CEI'{A). rn ny opinion, the only possible utility for
a structure such as this is EMI'S energing aspiration to
establish a sales capability independent of CEMA.
Anecdotal reports also suggest that the reLationship between
Et{I pronotion and CE}IA sales is less facile than that between
capitol prornotion and cEuA sales, though I have no evidence to
corroborate this.
B. Mediocre Presentations
Perhaps reflecting Lack of repertoire this month, EMI's
presentation was embarrassingly poor, in rny view adversely
reflecting on its local credibility with the field sales staff.
In contrast, I thought that the Capitot presentation $/as wellorganized and upbeat.
c,
3rr cDs
As opposed to our national experience, nany district
territories are experiencj.ng strong 3rr CD sales. The success of
this fornat is seen as depending prinarily on effective retall
Signed:
口日こ
ロロ匡
口 ﹁一コ
merchandisinq, placing the product with CDs rather than singles.
D.
Sol-ar & Hush
fndependent marketing and pronotional- efforts by both of
these companies have created. confusion in the rnarketpl-ace. E.g.
requesting different reporting prj-orities than those established
by CEMA, especially when such requests are supported with
inducenents such as c]eans.
E.
Reqional Autonony
I briefly outlined our new concepts on custoner
classifications, pricing and returns penalties, which were weIl
received. To conplenent this structure, I believe we should
grant the DMs the flexibility
(in consultation with National
sal-es) to implenent deals with individual custoners on a neetconpetition basis. ft goes without saying that each rnarket is
different, sone titles are strong in certain regions whereas
others are not, the quality and extent of cornpetition varies, We
need to be in a position to react to these exigencies as they
occur in order to achieve maximun sales,
F. Priorities and Objectives
The main issue that concerns me after the rneeting is a
systems problem: how rnany different titles can CEUA effectively
selI? Many distributed label product presently is being thrortn
into the marketpl-ace with little or no marketing or prornotion.
Unfortunately, this also is true with sorne proprietary materia1,
as well. cl-earLy, not every record is going to be a hj.t, and we
need excess capacity to buffer the records that don't rnake it.
This efimination process is a natural and r,rholesome part of the
business.
However, it seens inevitable that eventuafly some kind of
rrsaturation point" is reached. Sal,es personnel get to the point
where they make no genuine effort to selI titles (or ]ines) they
perceive as underperforning. This in turn affects the outlook
of cSRs, who stop servicing the product. It quickly can become a
self-ful-filling prophecy as the customers pick up on cEllA's or,rn
attitude or orientation.
rf viewed in isoLation, this would nean onl-y the dernise of
individual titles (or, at the worst, labels). However, the
problem is that CEMA has finite capacity and efforts spent on
unsuccessful titles (or titles with no hope of ever becorning
successful-) detract from the quantity of effort r,/e can put into
titl-es with a good or even outside chance of rnaking it.
This is most dranaticatly illustrated by the related
problems of prj"orities and objectives. One remark f heard over
and over r,tas that there are rrtoo rnany priorities . rr We're trgoing
to the wef] too frequentlyrr and "call-j,ng in favors we're not
to get records sold, placed or reported. The sinple fact
of the matter is that if everything becones a priority, nothing
I think we need to seriously re-examine the
is a priority.
entire question of priorities, and l,/hat criteria are used to
In ny opinion, our continued
designate a record as a priority.
use of this terrn in inappropriate contexts is starting to have
adverse and potentially serious repercussions, detracting from
our efforts rrhen there reaLly is a genuine priority.
Another common cornplaint has to do with unreafistic
objectives. our recent discussions notwithstanding, there is
considerable confusion in the field as to l,/hether objectives are
out-of-the-box at street date, or if they perrnit a 3o-day postrelease sales window. That aside, the objective numbers are
Not only are
rrideLy perceived as being conpleteLy artificiaL.
they set without reference to the label's own marketing and
promotional efforts (actuaL or contemplated), but the number
itself j.s made up. rrwho says that 25 thousand units is the right
coverage, why not 15 thousand instead?"
To a Iarge extent these comrnents sinpl-y nay reflect the
natural orientation of a sales staff that, like aII sales staffs,
Nonethef ess, in rny opinion, they
\.7oul-d pref er to se1l the hits.
reflect a need to re-exarnine the criteria for setting objectives,
particularly if CEMA is going to cornmit itself to fulfilLing them
on sh j"prnent. lihat happens, e.9., if we don't?
owedrt
DEK:
rg
Mansf i e l-d
McFadden
Davi s
Brackenridge
1__l
,- a
-L-:
l,z \
Q
MEMO
Date:
To:
0ffice:
From:
0ffice:
Subiect:
February 15,
1989
Rusa Bach
President
David Kronenyer
Director, Business Affairs
clevefand Meeting
I attended the Clevetand Sales Meeting on february 9th and
1oth. The purpose of this rneno is to identify and discuss
various problern areas tthich were brouglrt up at the neeting with
business affairs inplications.
A. Returns Procedure
on L-27-89 cf:![A announced a change in its returns procedure.
No longer will it be necessary for the sales representative to
prepare a trReturns Authorizationrr or RA. Rather, the custorner
witL prepare its own list, settinq forth product designated for
return bt label , selection nunber and quantity. The sales
representative will review the listt approve it; and supply an RA
nurdber. lrhe custoner then will forward its approved 1ist,
together with the product being returned, to cEuA's Returns
center. Sinultaneously, the sales representative hti1l foruard a
copy of the approved list to the Returns center ' as a means of
cross-check.
-
If we accept the proposition that we now are able to budget
and forecast relurns (based on historical experience ) witb sone
high degree of accuracy, the inevitabl.e question is: hthy even go
thiough this intermediate step? In econornic effect, our sale of
recoraE to a custoner rea}Iy is a consignnent sale, in that the
customer can return whatever product rernains unsold for full
credit against its applicable price (subject to our systen of
purchase credits and ieturns charges). Given this, should cEltlA
ittenpt to act as a buffer or filter against product coning back
in?
An argunent can be nade that pre-approval serves sorne uEeful
function. For example, there is general- agreement that product
should not be returned within 90 days after ship date.
supply,
Furthernore, even though an account nay have sufficient
rrpriorltyn
product
we typically don't wani it to return so-called
Confidential).
The
1in practice, that identified as such in tbe
difficulties
issulnce of in RA nay assist an account with credit
to order nore producl; or perhaps even could be consideration for
sone favor, such as a store report.
I believe that all of these ltorthwhi le objectives could be
impLenented in better, rnore direct ways. For exanple, we sinply
could propound revised terms of sale to our customers that
Signed:
prohibit return of ttpriorityrt product (a previous but dated
customer letter set forth such a policy for product less than 90
days after shiprnent). credit and reporting probLerns should be
addressed forthrightlyi use of RAs camouflages the real issue and
introduces unnecessary distortions into our financial reporting.
In sumnary, again accepting the hypothesis that we do not
authorize returns as a means of budgeting or forecasting their
arrival , the nevr system may prove to be largely unnecessary.
sales
while an irnprovernent, it stilI requires signifi-cant
representative tirne and attention. Furthermore, j,t is
unnecessarily cumbersome for "smallrr returns (say, those of Less
than 5oo units). In such case, even the objectives identified
above are not being irnplemented, because the number of units at
issue simply is too smaLl to nake an irnpact. As a transitionalstep, hre night consider doing away hrith the envefope system for
srnall returns in this category.
B. Use of Dating
Present label pollcy, based on a recent review of cornpetitor
practices, is not to offer extended dating on ne!'t releases. Sone
question exists as to the sufficiency of that survey, as (so I an
new
apprised) several of our conpetitors do offer dating on
releases. If so, this coutd put us at a disadvantage j-n the
marketplace.
ObviousLy dating has to be examined in the context of other
inducernents being offered, for example, an invoice dj-scount. It
frequently is said that 30 days dating is the functional
equivalent of one discount point. If this is true, then a 78
progran shouLd be equaLly as attractive fron the customer's
standpoint as 68 + 30 days. Hor,{ever, there is a sense in which
the dating night seLL more records than a discount. For example'
on new release product, it would give a central ttarehouse
retailer rnore tirne to move the product fron its central warehouse
out to its individual retail locations. Furthermore, dating
gives the customer more time to pay in the expectation that label
pronotional efforts will be successful, during the extended
period, increasing the likelihood of se1l-through. For a title
with a proven sales history, on the other hand, I think that a
straiqht discount with no dating would be the preferable
alternative .
In either event, it is not strictly true that the tnto are
equivalents, and thought shouLd be given to (a) reinstating
dating prograns particularly for nel^r releases; or (b) giving
accounts a choice, if possible from an I{IS standpoint. E.g. 72
or 6* + 30 days.
c. Greenline Pricing
There is no sympathy in the field for a proposed price
There is litt1e doubt in ny nind
increase on creen]ine titles.
but that frorn a consumer standpoint, this product is pricedriven. The consumer does not go into a record store
Rather, he
specificalJ-y desiring to acquire a Greenline title.
sees it properly displayed at an attractive price, and makes an
inpulse purchase. civen this, i-n economic terms, if the
product's rnarginal cost significantly exceeds its (already
rnininal) rnarginal utility, consumer demand quickly will becorne
inelastic. The problen is exacerbated by inadequate repertoire
included in this series.
D.
7rt
Vinvl Sinqles
one aspect of the L-27-a9 policy letter was a change in
returns charges for L2tr disc LP
aLbums. Discussed in connection with the preparation of that
letter -- but not acted upon -- was the implenentation of a
system of purchase discounts and returns charges for 7tr vinyl
cEMA's purchase discounts and
singles.
7rr vinyl singles are notoriously unprofitable. on the cost
sj.de, our wEA Manufacturing price is 9.195 pl,us f igure about $.02
for a generic sl-eeve (co1or sl-eeves, which often are used, run as
high as $.05 each). Total manufacturing cost: approx. $.215.
Add in another $.Lo for rnechanical royalties and (approx. ) $.fS
for artist royalties, for a total of approx. 9.465 on each net
unit so1d.
on the revenue side, our bulk price is $1.29, but our
rrautonaticrr free goods policy reduces the bulk price down to
91.032 (91.29 x 80/100). The labels invariabJ.y authori-ze an
additional l-0? invoice discount proqram, further reducing the
price to $.9288. This leaves approx. $.4638 gross rnarqin on each
unit, before application of SG&A and other overhead cost centers.
A1I of this is fine as far as it goes, but it ignores two
critical- facts. Fj.rst, systern-wide, our 7rt pop singles returns
are approx. 46.12. lilhil-e rnechanicaf and artist royalties are not
payable on returned product, fabrication costs are incurred.
This actually results in a lower effective cost per unit:
Sol-d units:
9.465 cost x 53,92 sell-througX = $.2506
units:
= $.Oggr
$. 2L5 cost x 46.L2 returns
Total- effective cost per unit:
I .3497
Second, the 9.9288 effective pri-ce vastJ.y overstates our
revenues because much of this product is given away by the label-s
(for pronotional purposes ) or by CEMA (for, e.q., store reports).
while the true volume of this activity only could be measured by
a detailed analysis of units rnanufactured against net saLes and
historical inventory tevels, a generally accepted figure is that
about 5oA of the product sirnply is given away. This reduces our
effective revenue per unj-t to approx. i.4644 which, hthen the
total effective cost per unit of l-3497 is subtracted, leaves a
rrReturnedrt
gross margin of onl-y i.11-47 per unit. This rneagre rnargin quickly
is absorbed by other sG&A and overhead cost centers.
I beLieve, and contend' that our automatic free goods
progran, when coupled with massive give-aways of 7tr product, has
Lended to contaminate the narketplace. It has tended to deval-ue
the worth of the 7rr single, and pronroted a high level of product
obsolescence with associated costs. Vile considered this in
connection r^tith the discussions leading up to the I-27-a9 policy
letter, but basically decided to defer to the tabels, possibly
exercising moral suasion to attenpt to induce them to release
It is not clear to rne if this can or will
f er4rer 7tr iingtes.
work, and th; Iabels mj-ght be looking to CEMA to exercise a
leadership ro1e.
I therefore think we should re-exarnine the issue of a
purchase discount and a returns charge for 7tt sinqles, calibrated
ior break-even effect at some nutually-agreed upon point,
possibly as low as 25? returns. t doubt this would have much
ionsequln"e for the serious singles buyer (e.9., Mobile one-stop
in pi€tsburgh), whereas lt would tend to discourage use by the
very accounts where r.te don't want the product to begin with, e.g.
Hanllenan. Although I realize that for a variety of reasons the
labels can't simply do a$tay with the 7rr single at present,
serious consideration should be given to pl-ans (say) one year
hence. In that connection, Jack Reynolds recently entered into a
Iicensing deal wj-th a cornpany called Anerican Pie for 7r' singLes
on1y. The transaction cal1s for a significant advance and
royltty. our license margin on ?tr singles under such a scheme
weit rniqht exceed (I would say probably exceeds) the rnargin if we
do it orlrselves, and consideration should be given to this
approach for all 7rr product.
E.
changing Role of the csR
At the CEMA Convention hel-d in March 1988, a new CSR job
in. the
description was propounded (copy attached) - Experience
priorities
csR
that
hohtever,
dernonstrated,
hls
last r-z nonths
must be re-evaLuated in light of chanqing market conditions'
fn particular, csRs are spending way too rnuch tirne
atternptiirg to influence dealer reporting. Increased -ernphas.is on
this iundinental-l,y unnatural- activity has tended to detract from
other equally or lnore irnportant objectives. Our relative success
in influencing deal.er reporting also has created anonalous
sj-tuations where we have a record reported at a refatively high
chart position, which is unacconpanied by corresponding- retail
This in turn creates false expectations at the labels
activily.
(of sales which never naterialize), ultirnatel-y danaging cEIttA's
credibility.
Dealer reporting also has grown more difficult as we request
The inordinate
higher reports for relatively rnarqinal titles.
arnount of attention devoted to such projects may derogate fron
our potential success when a qenuine rrhitrt cones along.
Spending too much tirne on titles that aren't going to rnake it has
allocated to
tr^ro consequences. Not only is tirne inefficiently
the failed project, but also tine is not spent on projects that
stand a reasonable chance of success. As a result of this
diffusion of attention, other matters equalfy worthy of csR tine
are sfighted.
Biltboard's proposal to tighten up its chart methodology
(reference our 2-13-89 neeting with Noonan et a1 .) nay hel-p solve
on our part \',tould be
this problern. A possible interin strategytrhonestyrr
approach -to adopt what night be referred to as an
encourage the reporter to report the title exactly where it
should be, based on sales. Whil-e this rnight result in lohter
chart positj.ons for a while, it will solve both the inflated
expectations and the efficient use of tine problens. Such a step
undoubtedly would help CEMA to iruprove its custorner relations.
Finally, j-t would be a chance for cEl'lA to take the lead in trying
Like our
to reform what renains a troublesorne problen at retail.
action
can
company
stance with independent promotion, individual
make a difference.
Another cSR issue is displays. It is a weLl-known fact that
nany accounts are inundated wilh POP, sone to the point wbere
rules have been propounded governing who can put up t^that. other
than naking it availabLe to the right accounts in the right
quantities; too much cSR attention is being spent on displays.
Finally, an inordinate amount of attention is being devoted
trafternaiiverr
product. Part of the reason for this is
to
dissension between cathy LincoLn and Faith Henschel over who does
rrhat. The csRs are being asked to file reports on local activity
directly with each of then. This creates a confusing scherne of
alliances and loyalties, not to rnention overlapping and
duplicative effort. For exampLe, a recent conference call was
alleged to have lasted 4 hours, discussj-ng hthat essentially are
regional records incapable of being coordinated nationally.
another exanple, CSRS are being asked to devote considerable
effort on written conments and feedback re various narketing
proposal-s, which requires too much tine.
Alternative product has an important niche in the market.
However, the amount of cSR tine that is being spent on it is not
cornrnensurate with its contribution to cEIrtA turnover. This
activity needs sone review and evaluation, particularly with
regards to appropriate label functions as opposed to appropriate
cElr[A
functions
F.
Prograns
.
Perhaps the most comnon conplaint that I've heard is that
has too rnuch product on deal . This not only deprives the
Iabel-s of rnargin which othervrise rnight be captured and retained,
but also results in loss of irnpact when product does go on deal'
cElitA
If there are points of consensus, they are as follotts:
1. catalog deals (i.e., a1l titles by an artist) have more
impact than deal,s on individual titles.
2. cEIilA has too much variation in its deals.
consideration should be given, e.9., to putting out all new
releases on the same deal; or having one big program each
quarter, rather than a lot of sma11 ones.
3. As a variant of 3., deals are too confusing. They
wouLd be easier to seIl , e.9., i.f they started and ended on the
sane day, perhaps a Friday. Furthermore, there is poor
synchronization with customer open to buy, which typically
decreases as the month progresses.
4. There is poor synchronization with label- promotion on
many dea1s. E.g. the deal expires before any radio activity
occurs.
5. There is poor synchronization with the Dcs on nany
deals. E.g. product is soticited on deal- but then not available
for shipnent.
6. Consideration night be given to volume-tier deal-s
(real1y, a volune discount for purchase of a given nurnber of
units)l and regional dea1s. on this latter point, it almost goes
without saying that records happen at different times in
different places, and nore nargin could be captured by
basis
recognizing this phenomenon on a territory-by-territory
rather than one national deal . Possible trade regulation
problems with both of these proposals are resolvable.
DEK:Tg
cc:
Mansf iel,d
IrlcFadden
Davis
spitler
卿
0ate:
To:
0ffice:
From:
0ffice:
Subject:
April 18,
Russ Bach
1,989
President
David Kroneroyer
Vice president, Business Affairs
New_
Apri
York Label Meeting
I t3,
1989
The purpose of this note is to sumrnarlze rrhat
took place at
the Lab€r r'reetino-prlsent
s.onsored by .EMA rrtitn
her.d
in Ne; york on
Aprit 13, rssg.
on
"""
bahaii-o;-';E'A
were:
Russ
-oi;;-ir;;;y;;:..,
Bach, Joe
Mansfield, Joe Mc'adden, o"rr"-F"i".i" iia
.
present on behalf or capitol
r"i"i-n"n*i.carre11,
Bill lrreyerchak
-of"iiif' were
and Lou I'tann . pr€s€nt ir" *friii
:
Ron
Urban
, Robert
Snith and Ira Derfler.
I.
cEl{A oroanization
Ruse revj-eued CEUA
office and branch organization.
Particurarlv noteqrorthy hone
r"
in"-i"tt.il-(")
neps now report
directry to the sare6 l,ranager in"i""a'oi i.osales
tt"
niif,ir,'ilnug.r,
who consequentlv wirl-ue
i"-JJ"itI^"re. tlne to prannrng ano
narketing; (b) the o-f_ficeaSie
.["ri-n"r'iJfrrts.to
Adninistrative
Assistanti (c) the rms now-iep"i:i"ti-ilsenior an
Fr[R, and (d) the
i:Ti.";:H:i"ili$::. tras "o"if Jl-r ii"i reportins """io.'Ji6i r ity
An organization chart distributed at the
neeting !ri1l be
updated periodlcally.
fI .
DepartDent Reviehr
A.
particularll in
in::::itiVe′
::i:
ICRs
:ξ
b.
Of
at var■ ous
[::i:i: :iti::i;轡 :と:::]ti::iet′
Progran should b€ evaluated on
1
Signed:
④
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oppOsed to a pOtential 'ltraining ground.::
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受
I]:][i:iょ ::[:]:::せ :::i:iSR:習 t:]暑 :11::暑 i百 ]翼tξ I:ξ 113[員 [:l;i:[all:
3. pop Utitization: Al-locations bet$reen branches need
to be reviewed for nost appi6[riate
Research a].so
necessary as to hrhat type of Fop is coverage.
effective;
n""r-i.iin-i"'
propose a joint study rrith WEA. 1",, lli"n t" i"i"i.n-"-"oi|
of u.,
l'!cA study. considerations include, r""y accounts
producing
their
own POpt limited end-cap and counter_toi space;
sma]I store size;
and high cost to produci.
F.
: based.
Eiきin Minneapolis, will
service only fOur custOmers (Handleman′
gerittIFq¥Ii3こ
瞥
去
古
[
ut。
Ml10 1″ 1_"月 ヽ
β ,■ ″■ _^
n is [員 II 3`nIIII i3こ こ
ζ↓
]iruie:ぎ
普
iFl:lal121^_EEM全
^PPICepti°
better
custOmer satisfaction
thus mOre business。
G.
FMR
Job Description: a ne$/ one is in preparation.
v. 59_:98:
cEMA,s perception is that, for most
, l. 98.98
-99.98sel]s no more.
narkets,
than Sg.ge-, anA urrneces!"riiy"''
forfeits rnargin. country: stir.r
at se.6e, but shourd n"-inovinq
soon. Black: Iayout should not be
aifected with ;-a;.;; ;;i".
and hj-gher discount. cEMA reconmenas
arr exisiinn-S61 6,
repertoire be Left at that_ price p-int inat
untit
is reduced to
$6.98r most new releases shirulal b:, p;t out atitg9.98.
To the
extent customer resistance is encouirte."a, u ri.q". - ai.I",].,i
i"
the appropriate solution.
6.98 with cuaranteed Returns: This incentive
does not stimulate sal-es for new artists. cEMA′
s
recornmendation is that this progran be abandOned.
B.
structure
C.
L. Box LotlLooses CEI{A intends to replace its
present systen of customer classifications
based bn frrnciionar
discounts with a box rorlroor" p;i;;-;;iir.ui"-t"-"ri*"iJiJr"r,
regardless of r^rhether they are iuholesalers or retail,ers. This
rransition r4'iI1 take plac6 approx.
z_i_ig.
;;t-;;iv o,irr
"'
make cElirA conpetitive with tiri practi-es of This
other--rnij;;-'
distributors, but also addres" ir"t""[i"iry troutiesoie- r"q"f
questions which have arisen witir tne pi"."rrt systen.
cEMA
intends to retain the differentiaf lelween the loose prj.ce
and
the. box 1ot price to conpensate
it for iir. uaaiii"""t-riiiii"r
cost of fulf illing J-oose shiprnents,.
therefore, -rrrir-"i
labe]s wil]
be
"iesurt
accounted to on the basis of the box rot price.all
ir
in a neutral revenue effect to ttre-ianeisl wfrife p."p"riy- recogni. z ing cEl.lA, s actual- costs .
cEl'lA proposes the folrowing
pric" in"r3;".=P$ffi*+:t=tu=t: burk
or lowest
i; a;"-;;;-i5i-rii"3.iil,"""nt
"r'"i.=ii"-pii""
Suggested
List
Present
Bulk
LP/cassettes
6.98
8.98
9.98
CDs
Budget
■■ .98
■3.98
■5。 98
Sinoles
■ .99
2.49
4.98
4.03
5.22
5.79
4.07
5.23
5。 82
6.77
7.85
9.08
■0.24
6.85
7.85
■ .03
1.29
2.85
CEMA propOses
New
BOX― Lot
9.■ 3
■0.27
■ .03
■。29
2.85
to add a s.■ 5/unit ■oose Charge.
3.
should consider
implementation o
p:¥icy f含 ::ni:cti:1'wョ :員 Sibly We
I SyStem。
lower
EMI is
most
acqu■ re
momentum fOr
IV.
Sinoles
.,.,o
ol;r,.,r#;5tff*H#ir.il i::"ln:l rS.;:"::i, lilE."liEiilff
doubt as t6 wheth", tnil
independentty
sorne
=tiri"iJ'."
viable
it exists it-trti=-p"iit'onry
i., a., a.,"irruiy
label pronotionar;;;"fi.:''"nd
e.s. in the bra;j<
::flffii:Ir:"
marketr perhaps
.
B. Cassette SingleS: Definitefv the.trend
of the future,
air product shouLd ue-iElEasea-i;";;;:t""nfiguration
(sinuttaneously with z" tii"r.-"i.,vi, tir",r""ot.
c.
Licensino:''_Il: p":=ibility of Speciat
Markets
vinyl singres shouLd re'coisiaered for
.t-Lcensing 7r'
specj.arty
users,
e.
g. juke boxes.
D.
consensus against
this.
4-Color Sleeves: EMf no lonqer
. E.particularlv
doing. Capitol still
dolng,
for U.K. artists . ---Jnnecessari
ly expensive
and leads to obsol6scence problem.
still 10ab■ e′
:≡:量
on store reports.
二
旦
emented while
蓋
歯
景
景上
fIE告景
:tftti p:IRせ ld B:eimp・
y as tO impact
:責
they actually sel1 aJ- I
to better turnaround in
CEl,tA suggests
branch. position
labe1 . Russ Bach hril1
I.
rnirially
こa..y granted
out of
sranre.r Out
of the
rhe
"i';1i1"ui:ro*::"3".!:
t=言 ayVttei言 [ ・ ・
′
ize
produ員
fl・
::Iiv
fully the
せ
責
e n早 月
日
1lf′
十 O:h°
n_^ぃ ^_=^__、gpこ
FePSary in many Cases to rea■
be recO■
recOmmended
thき
lmendod by
h :′
Fhfr:TRl:IIaIIIttIIF:2
1y‖ :書 h :]::。 :t[e311i:
silξ Iこ ζ
こ
iIIistgi
き
"o.ril''.ttffi;
t!isr'5!:33:"o= that LoFr applv to all
ｎ
ａ・
■
Cassette Sinqles:
.^ 5:. - Oldies
l2-titte
test; EMr has 18 TIEres
developing a generic jackei. ---
V.
こ
cf::l[:: pI:::1き
1こ
sinsles
rolJ.ing
out
。cooperate
Dealer Reportinq
A. fnteraction Uith_Label-. promotion: fra Derfler: ,rThere
_ not
ls
enough raber promo staFi input-To estabrish
rocar
priorities'" possibiy
branch
meeting
schedure
around release of tocil-.ana
""".ia""ii5iJrii
eiirb;u.d-"i".t
numbers.
donsider
also, thoush, that rneeting
i" n"ra until all chart
positions (both locar
"h;i;-;;;
u"o-aiiibJi.A;;;:
in; and also, Friday
rneetings do not detract ero*
as much as r4rouLd a
nid-week rneeting.
"ii""-6fi"it.
B.
particularty
-u"counts in Iight of rhe
fact that Ei",-_E=rd"*:___r"9.:3.ing,
there are fewer infLu".r6"ubt"
and nore and
nore statj-ons are aoinq rheii-;;;-;;ii:"ur
research.
Biltboard: Agaj-n, considerable
tirne spent on a
. 9.
dininishing
nunber of infruenceable accounts wi-th proportionately
reduced effect. F.,IR tine devoted to this activity a.Lri"I.- t.o.
other important tasks-. cost of a #1 report is co;side;;;i;;
singles used to rube the rnarket eiiher ai=pr"-" i"qiiir.tJ'1"r".
or end up as returns.. consider giving
tne'reporiei-lir"-=i"qf",
only after it is conf irrned that fhe r5cord
ha; be;; ."p".[.d
"t
#L.
VI
.
Ner,/
Release Schedul inq
A. present Svstemt Mistakes have
because product
is scheduled too far in advance of actua.l resulted
release.
Labe]
presentations at sales rneetings have been poor because
the promo
staff i-tself hasn,t been apprlsed of the product,s essential
qualities in sufficient OeLlif.
B. Proposed Revisions
1. SaLes _Tools: The monthfy books (both for
.
proprietary
and third-party rabers; proLabry wiit le etininatea.
A r,/eekly publication will ieplace ihin,
arf ieieases
from whatever source (precisl format to ne
"orn6ini.,g
aeciaed;.
Among other
beneficiat consequences, this will result i; u;Jiti;""r"'i"ia-t:-..
and also permit greater scheduling frexibirity.
LJ;i-.;""pti""
to this was favorable.
2. Order Fulfil1nent: Instead of the present systern
.
where
proprietary product is shipped one week,
aislributed '
product another week, and Anger l-third week,'arr
witl
ship whenever it,s ready to !o. This qray product pr-auci
iequiring
reschedul,ing (for whatever r6ason) wirr srip onty a #""x-ii=t.uo
of an entire rnonth.
3.
Sales Meetings: Travel rneetings
.
not be held
routinery,
only when requirEd in light of 1ab6l r^/i11
release
scneaure.
Consider use of inexpensive video piesentations for better
.rnpacE. .
VII.
Programs
A.- Generally: prograns require better organization and
planning. .8.9., aI1 necessary busifress atiairs
approval should be obtained
in advance oc i:ommiime;[.--;;;;;"*=
should not be set at end of rnonth because of adve*. irpi"i-o'
DCs. . Consider prograns with options; e.g. 6? + 30
ze-, ,iri"n
permits greater customer ftexiuirity.
".
6ating
snout-a
granted. routinely, but nay be neces3ary if tie ;;i;;.;-;";;"
";i ;;during the I'ast week of the rnonth to pievent ri r r int- inet"iii"".
MatriT ExchaFge _Agreenent: Under recent revisions,
-8.bear
Iabe1s
entj.re cost of irees + aiscounts, unlesi -l""i"f
"
rnore advance
arrangenent
been negotiated in advance
the repertoire
proprietor.has
cElrA vri1l i.rur"-iri" necessarywith
business aifairs
approvals are in pIace.
VIIIo Mid■ ine/creenline
::::::暑 :F:
::: :i:::::r tO
C.
name at
Savers.“
a label-wide generic
-
^_!9n;i$er
trNice Price tt
CBS'
,
i[:じ T,i:::[li:l::i:::i::::::こ
XI.
WEA, s
rts;p;;
ま
:::Y!:]::首 li:il普 :I:i::tl::11:i]::i:
Advertisino
含ld atЯ FY89 c10sing′
surfaced
P員 ¥♀ ffhill° :3112EPl__
百
五ich
ficant issues
: Two
sign■
言 ere:
Minn:::と
1l S219 queStior e
::‖11[せ ::tw]せ1::[iξ Feffri:VIri:tp:rt°
::ζ
Sn:°
::尋::長::員
lrと :`。 FIIdζ
,n authorizatiOn.
B.
倉
r wi.. be
RecommendatiOns.
1.
position, which
focus.
lと i薔
せ
both
X: - CEI,IA intends to staf f such a
narketinq and an accounting
XII.
nd Other lssues
A. Distributi_An
On the basis of current
iguration mix. ocs leLtCrs:
nEiE-ic"p""iiv-"f
units,. a
'fstrainedtr capaciiy of zi'.iol-""iili'ii.i.,.a 21,_L//2tq
approx. 2zM units of
rnventory on hand. New High n;i;I'riJiiitv
plus the LA D.c. witl
store 25. lu units; an anciirait-;;";i;;y rlii-u."oofroil.I.l_rzron
nore. outside space, or couis6,-;;;;ii: significant
conf
ii'ii;n.'lJ';*;I"*';:+: :F;iff.;"1*:-
addirionat* ;;;;;;";Jiii,lil'rv
B. Generic CD Boxes: EMI rnust resolve mis_placed
-g!i".:..
bar
code' which fairs to, show-th.""glr"';;
a cEMA-wide generic box for *iJii.."cB:titf". cD boxes. consider
to be used in
connection with a new comrnon nane for tti.-ii""i;;pfi;i
ii.,,o
narketing departnents to coop"rat"- Iio "i".r:.
.
"r,
""
C.
CustOmer Returns
ef f ective.
L.
Present system:
z-r-ee.-xperTEiEE
sheet, which wil1 rc aesign-O
eyr:38xet::ele:吾
haざ
and furnished.
°
1:]uttec:3:]le
2.
titLe basis;
distributor,
ょ
use previous :::::。 i::rtii::;::: [I:::T:F:::!:::g:I:][::i::ilき
[
r own forecasting mode■
s.
:::l:::i::;r::i:￨:::::F:::!「
::8::::i:I:詈 :日
貫
:彗
i退 iiせ ISi:Eき
上
cust。 1と r a:還 七fittrf竜 延譴貸
exam■ 1よ ti。
:
::草:::i
li::::le:]::::!:]115:￨: as t°
tnII::r::T::TCepil::rlluti8RcaS
TremendOus cOnsolidatiOn among cEMA′
工
普
号
ith tte::〕 [a]y:[:le:こ
llil星
慧
lttl:。
nd under
318g[:1lbl:暑 :!舎 :iall::l:;::il:::ill:::i:[:::311せ I:n mttI::i::
XIII. NARM Review
含
pers。 iel f量
uld
詈
七
舎
ice:l°
be elim■ nated, a waste of prOduct and
llff[::ltvi:i:i詈 :i:::::::ldi:;:::F:::I::[I:i!ei:猛
XIV. Sales Manaoer/Branch Manaoer Meetin。
Scheduled fOr May 6-9′
■989
DEK : rgt
cc:
I'{ansf ield
McFadden
Pa.laci,o
■0
at Pa■ m springs.
:き ::I!:::i:[1.
s
MEMORANDUM
TO: Russ Bach
Pres j.dent,
CEMA
E. Kronemyer
Vice President, Business Affairs,
FROITI: David
CEMA
RE: Branch l.lanagers/Sa1es Managers Meetinq
Ylay 7 | l-989, Palm springs
DATE: May 13, L989
The purpose of this meno is to report on topics discussed at
the Branch lilanagers/Sa1es l.lanagers Meeting t hich t^tas held on May
7, :-9a9 at Palm Springs.
I. Branch sound and Video Equipnent
The current status of branch sound and video equipment is
being investigated by Dave Palacio hrith a view towards replacing
defective or obsolete iterns. Branch managers requiring dictation
equipnent are to submit their requirements to Dave P. Cassette
players should have a rrsearchrt feature.
II. Artist in Tosn Policy
cBl,!A's ttArtist in Townrr Policy exempts up to l-oo units from
RcRc; cEl,[A also pays freight on the return. The policy
originally was desi-gned to insure that goods were in the store
$rhen a developing artist lras on tour, it being felt that the
custoner rnight not order other$/ise. A secondary objective,
addressing the same concern, was to support in-store appearances
by developing artj,sts. Some branches use the policyt others
don't. Users felt that it aids in price + positioni.ng and helps
inplernent valid label product placement objectives. Two
proposals were discussed:
A. Among users, 1oo units was felt to be an insufficj.ent
quantity; consider raising this to 50o units.
B. Anong non-users, considerable sentiment for doing away
1
,./ith the policy entirely on the following grounds:
l-. Having been apprised of the fact that the artist is
on tour in his rnarket, it's the custorner's business to order
goods on CEl,lA's usual terns of sale. The policy unnecessarily
forfeits rnargin, and customers may cone to expect sirnilar
concessions on highly viable, front-fine product, thus breaking
dor,/n the fiber of our relationship with the account.
custoner dernand. If units are
Furthermore, it induces artificial
placed in the field beyond realistic coverage requirements, they
sirnply wil-I end up as returns. To the extent the policy
implernents a valid objective, it night be fulfilled better by an
appropriate rnodification to the RcRc systen.
2. Due to a number of factors (such as poor promoter
coordination w/ CEI,IA branches), the policy is difficult to
irnplenent with precision. It's difficult if not inpossible to
trailtr a tour in the manner which the policy suggests.
3. considerable doubt attends the use of in-stores as
a neans of sel-ling records (as opposed to valid promotional and
publicity considerations ) .
4. It appears that in sone cases, the policy has been
used with stores \.rhich are not cEl{A accounts. If so, this coul-d
irnplicate potentially serious price discrirnination issues.
Dave Palacio wiII quantify the nunber of units involved.
Branch managers will address their use of the policy in a
menorandun to Joe }tansfield. A decision will be taken follohring
review of these rnaterials.
III.
Branch 8O0 Nunbers
Each branch presently has an 8o0 nunber. Branch managers
are to evaluate its use in light of the following:
A. To the extent the 80o nurnber is used by customers, there
is considerable sentiment for having the customer bear this
cost.
B. To the extent the 8o0 nunber is used by field
personnel , will the proposed branch Vl,!X systens replace it?
c. To the extent the 80o number is used by label
promotional staff, is this an appropriate cEl.tA (as opposed to
label ) expense? Are \^/e allocating costs back to the labels nor^r?
D. consider use of a rrregionalrr 800 nunber, which is less
expensive than a trnationaltr 8oo number.
Listening Parties
ceneral]y felt to be ineffective, r.rith the cost outweighing
the benefit. consider requiring the labels to fund, if at all.
V. Branch Personnel Headcounts
Brancb managers are to devise new floor plans in light of
expanded branch staff, including Chrysalis, sBK and orpheus
promo reps and Capitol and Enigma sales reps. Several possible
outcomes for those branches with insufficient space, including
(a) leasing adjoining spacei (b) negotiating with lessor to trade
current premises for premises with more spacei (c) early
ternination of lease, if legally possible and financially
feasiblet and (d) doubling-up on offices for selected staff.
vI . Tower Records Inventories
Tower presently has 53 domestic storesi cEllA incurs
significant cost to inventory, lthicb Tower requires as a
condition of getting the order in rnost cases.
Terry Sautter reported that 23 stores are located within his
branch. Inventory clerks are paid approx. 96-$7/hour. It takes
approx. 4 days to conduct a cornplete inventory (including
classical , which takes approx. 2 days in and of itself); this is
done about once per month per store. cost of taking inventories
in FY89 was approx. $30K, paid for with label advertising funds.
Sales reps also independently check stock of advertised goods,
rrPulseri-advertised goods, tour support itens, new release items,
and priority items. The inventory nust result in an order to be
cost-justified; each store orders its own goods within parameters
established by its budget, open-to-buy, etc.
Fuzzy Shring erent on to observe that the CEMA catalog is not
usefut for taking Tower inventories, in that it does not
correspond to the layout of the typical Tovrer store (separate
sections for pop, jazz, eEc.). Conforming to Tor,rer operating
procedures should result in additional business. Fruzzy to
provide uansfield rrith copy of BIiIG catalog tthich etas re-formatted
with this problem in rnind. Michael Rodin to break down the CEMA
Iv.
catalog by section and develop proposed To\,ter checklist by
approx. JuIy Lst..
Consider compensating inventory clerks on a per-store basis,
rather than an hourly basis, thus rewarding efficient performers.
Query, though, if they rrould cut corners and do an incomplete
job.
Advent of scanners wilL automate thj.s task significantly.
Eventually it should be possible to match the store's actual
inventory against an tridealtr product layout for that storei and
then transmit the variance by computer directly to the order desk
at the Dc. This will be particularly useful in the case of
classical and other l-,s and 2's businesst it also ernphasizes the
necessity of naking sure that all goods properly are bar-coded.
Trade regulation inplications: the Tower inventory is L j,ke a
discount, and we perform this service for few other
customers. other customers, hohrever ' don't requj-re the
inventory as a condition of getting an order for the product not
in stock. Thus this phenonenon j.s unique to Tower and probably
witl stay that way in view of its specialized rnerchandising
focus.
vII.
l,lusic Video
to conmence distribution nid-Ju1y or thereabouts with
EI.{I's Queensryche conpilation. l,lusic video is to be sold sirnply
as another product configuration. Unlikely that CEMA will
distribute to video-only outletst distribute theatrical videoi or
take on esoteric product lines (e.9., Rhino video). It being
felt that these are not cEIr{A customers, and that some investment
in specialized personnel r^rouId be required in order to service
adequately. Consider pre-selling before nanufacture of finished
goods to ensure 1008 fill on release date.
VIII. Branch office Identification
Branch managers are to ensure that proper signage appears
throughout the branch, on directories, etc. Branch managers are
to advise vendors to bilt as CEUA, not Capitol .
Ix. Enigna singles
Enigtna has conplained re lack of spread and depth on 7rl
vinyl and cassette singles. BUs observed that while cEIilA was
CEMA
ttlabeL blind,rr its customers weren't, and that i-n many cases it
was felt that Enigma wouldn't prornote the product properly,
resulting in a srnaller order. Bl,ls also report that delayed
availability of cassette single in several cases has hurt the
project; esp. hrhen coupled with custorner's Lack of desire to take
in significant quantities of 7tr vinyl product.
x. credit
Joe Mansfield reported that central and Eastern credit are
being consolidated at the new High Point Dct Dennis wil-kins to be
in charge. New ideas and approaches re tbis inportant function
will be coming soon. A cornmon perception is that CEMA is low on
the paynents hierarchy, which will be solved by increased credit
and nore frequent travel to custoners.
manager visibility
Tilton: quicker turn-around is necessary on ner^I account
He's been receiving poor advice re
nunbers for chain retailers.
when affected customers are taken off of rrhold.tr Also, in
several instances a rrreferralrr customer has purchased goods at
program price, but approval is granted too late and the
nerchandise is shipped at full price. other B!'{s advise of a
related problern, which is when orders are rrpl-acedrr but not
rrenteredrr until after the progran expiresi and back-orders s/hich
are incorrectly charged at full price instead of the program
price. AIl of which results in considerable (and unnecessary)
invoice adjustnents.
This situation is to be addressed by inputtinq the program
to continue until close of business on the foltowing Tuesday in
all instances, thus perrnitting for delayed receipt of orders.
customers, of course, will be advised that the program expires on
the previous Friday.
XI . Branch l.{anagerr/Sales l,tanager Conpensation Package
Present split is 80* satary/Zot incentive. Query whether
compensation should be aI1 salary, or a greater incentive t;
discussion of pros and cons re various alternatives.
The former system of quarterly reviews for incentive
coropensation is to be discontinued on the grounds that it is
time-consuning and too subjective. It will- be replaced with a
nerr system of incentive compensation based on measurable
Bl.ls and Sus solicited for input re an appropriate
criteria.
rnechanisrn i leading candidate is actual v. budgeted contribution
Torn
nargin.
decide.
CEMA
Executive Cornnittee will- review al-ternatives and
FYgo budget distributedi considerable discussion re
i.dentifying and properly isolating relevant cost centers on a
branch level . BMs in significant disagreernent with al-Iocations
to contact Dave P. for resolution. In that connection,
a. rrProduct costrr reflects a mix between the distribution
fee to proprietary, joint-venture and third-party labels.
b. rrEastern and western stagingrt are returns whj-ch are redistributed to the branches using a ratio based upon BPI .
Product will contj.nue to be funnel-led through Eastern and
western staging until further notice. Dave P. wiII rnake
adjustments on a nanual basis until he can autornate the system.
consider adjusting on a monthly rather than a quarterly basis in
order to stabilize sales rep cornrnissions.
c. Query re irnpact of recent change in nileage allowance.
d. Query re proper allocation of cost centers betereen cEltA
and labels. Presently CEUA pays for a1I space, including that
occupied by label- promotional and regional sates personnel t this
not envisioned to change. Bl,!s advised not to get into arguments
over who pays for rninor items.
XII. concert Tickets
While CEMA presently has a budget for proprietary labels,
This is not felt to be
non-owned labels fund tickets entirely.
equitable. Therefore, funds budgeted for this purpose will be
reverted to the affected labels, and this function will become
wholly a label responsibitity. Russ Bach to advise Joe Snith.
XIII. Custoner Advertising
A new position of Customer Advertising Coordinator ( rrCAC'r )
will report to Joe Mansfield. Arnong other functions, the cAc
will devise, irnplenent and maintain uniform procedures aruong all
cEl.{A-distributed labels. Until the position has been fi1led, Joe
l,lcFadden will continue to coordinate a1I requests from the
branches for customer advertising funds. New allocation forms
are being devised; irnportance of obtaining advance label approval
emphasized in all instances, even if detays resuLt in rnissed
opportunities. Further front ptanning by each branch will result
in better execution and irnproved adninistration.
Advertising requests for cassette singles wiII be resisted
vigorously.
XIV. Photo Books, 7rr Title Strips
The photo books depicting product placement and displays
generally are not useful , too expensive, and too tirne consuning
both to produce and to review. Main usefulness is for artist
managers. Consider submitting pictures in an envelope without
the acconpanyinq rrarts and craftsrt activity.
7tt title strips are expensive to make and no longer widely
used. Branch Managers to provide an analysis in their respective
territories.
XV. Trade Reports
Bl,! trade reports are an inportant feedback mechanism to CEMA
Continue bi-weekly schedulei strive for high
home office.
quality leve1 .
d74ll,rQruz*e{--
MEMORANDUM
TO: Russ Bach
President, CEI,IA
FROM: David E. Kronemyer
Vice President, Business Affairs,
RE: Label Meeting
May 8, 1989, Paln Springs
DATE: May 15, 1"989
CEMA
The purpose of this lnemo is to report on topics discussed at
the Label Meeting which was held on May 8, L989 at Paln Springs.
Present r^rere representatives fron capitol , EMT, chrysali.s, sBK,
Enigma and Rhino, together with CEMA Branch Managers, Sales
tr{anagers, and Home office personnel . The purpose of the meeting
was to open connunication channels, thereby enabling cEllA and the
labels to gain a better understanding of each other's roles and
problems: the rrreality of the fieldrr contrasted with the itreality
of the label .rr It is envisioned that the neeting will be the
first in an on-going dialogue, which will continue on a regular
basis.
ct A Organization
Russ Bach distributed and reviewed the cEltA organization
both at the hone office and
chart, highlighting new developments
at the branches. The inportant trdotted-linetr reporting
relationship betqteen each branch manager and each label's
promotion staff was stressed.
II. Custoner Advert.lsing
Joe Mansfield led a discussion re customer advertising. The
present system affords I j-ttle discretion or flexibility to the
branches. This occasionaLly has lead to inefficient and untirnely
customer advertising, in that the branches (a) don't knort what
they have to work with; (b) don't have sufficient discretionary
funds available to rnaximize sales; and (c) nust administer
different systems for each labe1 .
I.
t-
To address the problem, CEMA is taking the following steps
and makes the follohring reconmendations:
A. The branch managers, in consultation with Joe lilansf ield
and appropriate label personnel , will develop branch narketing
plans for rna jor new releases. The plans will be finalized and
disserninated not later than 6 weeks before street date. The
releasinq label will allocate funds shortly thereafter in
confornance with the plan, so that the amount of rnoney available
will be known when the project is solicited (4 !'teeks before
street date). Funds will be spent in conformance with the plan,
and reported through cEMA's independent customer advertising
audit systen.
B. CEUA is establishing a new position of customer
Advertising Coordinator, whose task it wiII be to devise,
inplernent and naintain good operating relationships between the
branches, the labels, and CEMA hone office.
C. Requests for advertising authorization not encompassed
within a particular release's marketing ptan will be submitted on
a nerrr trcEIr{A Advertising Proposal It f orm, a prototype of which was
distributed. Each reguest will be assigmed a control number,
which will follow it through to completion.
D. In this connection, cEl.{A' s customers frequently require
CEUA to conrnit advertising funds up to 90 days in advance. For
example, national accounts (Handleman, Musicland, etc. ) have
reg:ular programs which entail considerable forvard ptanning.
Rather than breaking out funds entirely at the start of each
calendar quarter, it htas decided to allocate money on a rrrolling
and also
90 dayr basis. This should promote greater flexibility
to
precise
advertising
reconcilement of budgeted
facilitate more
actual sales.
E. Each tabel nust allocate discretionary funds to the
branches, and trust CEMA to use them wisely. lilhite there is no
CEIIA rrpolicytt per se as to an appropriate accrual , lack of funds
!ri11 cause the label to rniss opportunitj.es lthich typically result
in better pricing or positioning. Given that records rarely
happen everywhere at the sane time, each branch must have enough
fn most
financial autonomy to rnaximize sales in its territory.
chase
the
the
to
it
is
not
for
branch
feasible
circumstances
label for authorization in an environment where reaction tirne is
short and a decision must be nade quickly. other distributors
have discretionary funds available, and do not hesitate to deploy
them for naxinum conpetitive advantage. Discretionary funds also
are necessary for those releases where no branch marketing plan
has been prepared. Each label present agreed to supply cEl'lA with
discretionary funds, the amounts to be decided by each label.
III.
Photo Books and ?rr Title Strips
Discussion re the cost v. benefit of photo books. By
decision of the rneeting, photo books will be elininated on
routine basis and conpiled only in connection brith display
they may be useful with artist
contests, where it is felt rrarts
and craftsrr aspect of many
the
Even
then,
manaqters.
a
presentations is unnecessary.
Dave Palacio is to investigate the actual cost of 7tt title
strips before a decision is made whether or not to continue their
production
Iv.
.
Label Inventories
one perception at retail
is that cEIrlA occasionally has poor
Foi exarnple, Wherehouse claims that more CEMA titles are
fifl.
on back-order than all other distributors cornbined. This
results in lost sales, because consumers typicatly don't keep
looking for a selection if it isn't in stock. The custoner
questions the extent of the label's cornrnitrnent to the project,
and rnay even delete SKU'S fron its catalog. As a result, store
reports and other rnarketing efforts suffer. cE!'!A field sales
staff are required to devote setling tine to addressing open
order problems. Activity at the Dcs is disrupted' and perpetual
Additional
fill pioblens may develop on particular titles.
shipping expense is |tfincurred. The handout distributed sets forth
percent of fill on irst-passrt at the DCs for both new releases
and catalog items; thus (in the case of new releases) accurately
measures the extent of inventory available by street date.
CEti{A recognizes that obsolescence is a serious issue, in
many cases representing the difference bethteen profit and loss on
The desire to avoid obsolescence, however,
a particular title.
has created a more subtle problem. Label production departments
must develop more sophisticated mechanisms to insure that
adequate inventories are on the floor.
V. l{en Release Scheduling
The present systetn of nonthly releases, each label $tith a
different ship date, is being superceded. In its pface, CEMA
j.ntends to implement a procedure of regular hteekly rel-eases.
whatever labef has projects ready for solicitation will be
included for that r^reek. The prinary advantages of this system
are that it trill allov/ for shorter planning windows, thus
and elirninating many of the errors
affording greater ftexibility,
v/hich the present system has induced ( $rrong program infornation,
If a label rnisses a release date, it need
wrong prefixes, etc.).
not wait an entire month for its next ship date to ro11 around.
More precise production coordination also should be achieved.
one consequence of the new systen is that cEMA's nonthly
solicitation books (one for proprietary labels, one for what
formerly trere knolrn as distributed labels) will be elininated.
rn lheir place, cEl{A t^till publish a single new release guide,
containing information on all releases from whatever source
derived. A ne$, position of Pubtications Coordinator is being
established to produce weekly solicitation materials' proqrarn
checklists, the CEIIA trConf idential ,rr and related items. CEMA
also will develop an internal 'rprojected new releasesrr
pubtication. Valid concerns re labe1 confidentiality of new
release objectives expressed; any conpilation of label sales
figures will have extremely restricted distribution to cEl,!A's
Executive connittee and the National Sales Uanagers.
Monthly branch rneetings (in theory, tined to coordinate with
the arrival of solicitation rnateriats) no longer will be
regularly held. Each branch, of course, wi1-l continue to hold
its own weekly meeting, and may hold branch-wide neetings as it
wishes (within budgetary restrictions ) .
A calendar was distributed proposing a 6-week countdown
bethreen the tirne when finished artwork rnechanicals are delivered
to cEl,lA for the product solicitation package, and street date.
Following discussion, it was agreed to expand this to a 7-week
period, adding an additional week for product manufacture and
staging after orders have been received. orders received after
the cut-off date established by this schedule will not
necessarily be futfilled on initial shiprnent. Labels nust
coordinate with their respective pronotion departnents to insure
realistic gane-plans at radio.
Ner,t
release.
systen is to be implernented soon, possibly with July
Labels vrere encouraged alr./ays to have prornotional cassettes
available at the branches in time for product solicitation.
If
not possible to furnish the entire album, at least provide the
single. Week1y solicitation schedule may create a need for rnore
advance cassettesi CEI,IA to prepare a new advance cassette list by
genre of nusic by person by branch, and furnish copies. Labels
to handle their own futfillrnent of promotional cassettes, with
assistance fron CEMA DCs as requested.
vr.
CEI.{A
Department Review
A. College Program. Thought to be highly viable but in
in Iight of changing conditions. Focus
will be on retail in a select number of trtrend-settingtt narkets.
List of possible l"ocations handed out; Iabel input solicited.
Position wiIl report to Senior Field Marketing Representative
( tFI,[Rtr ) at each branch; Faith Henschel coordinates nationally and
establishes priorities.
B. National Retail l.tarketing. New position at each branch
Branch
Marketing Representative (rrBI{Rrr) will replace old
of
coordinators.
nati-onal
To report to Branch I'{anager i Sue snyder
nationally
while job
coordinates
and establishes priorities.
preparation,
still
is
in
focus
will
be
on
retail
description
support; tour support; Ioca1 radio reports; narket researchi
telenarketing at branch levelt probably not store reports.
Positions will be staffed ASAP.
c. Urban Marketing. Earl Jordan reported on current
status. Proposal: for an urban specialist FMR position at
selected branches. Incumbent would have regular FMR duties in
his or her territory, but also would be responsible for urban
narketing throughout the branch. This proposal approved on a
trtesttr basis for cleveland, washington and San Francisco.
VII. Store Reports
Both local and Billboard reporting involve rnuch tirne and
result in i-nconclusive benefit. l,lany reporters are not
considered workable. Many stations are changing their research
nethodology. Furthermore, cost is considerable, both in
displaced sales and returns.
need of rationalization
Ira Derfler: local reports are important, and interaction
betrrieen CEMA and local promo reps must be inproved in order to
In particular, branches should
accurately establish priorities.
AM
rneetings. Query, though, if
wednesday
Pl,l
or
consider
Thursday
quality
tine.
At present, nost
would
displace
selting
this
meetings held on Friday except washington (wednesday Pu) and
chicago (Thursday Al.l). Branch Managers to continue to establish
meeting dates at their discretion.
Too nany requests for reports dilute the notion of
trpriority.rr In practice, only 6 records or thereabouts can be
effectively worked at one time. Labe1s to evaluate carefully
their criteria for designating a pro ject as a 'rpriorityt I' CEI'{A to
establish linits, if necessary.
VIII. Singles specialists
A new position at each branch, to be devoted solely to
selling singles. rrThe freshest of the fresh fruit,rr occasional-Iy
overlooked under present system. close interaction with label
sj.ngles person wiII facilitate the tirnely sale with proper depth
and spread of this important marketing tool. Sue snyder to
coordinate at national level.
It r^ras stressed that, in order for this position to function
nost effectively, each label should appoint its own national
singles specialist. That person would Iiaison wj.th label
prornotional staff, Sue Snyder, and the cEIilA singles specialists.
IX. Branch office space Requirenents
Arrival of chrysalis and SBK promo reps, plus anticipated
capitol , Rhino and Enigrna regional staff, result in need for
additional branch office space. Approx, 48 neet positions
altogether. Branch l{anagers to assess their requirenents and
report to Dave Palacio.
x. tlusic Video
CEMA to cornmence selling as another music configuration.
Price sheet handed out. EI.{I to lead \tith a Queensryche
cornpilation in Julyt 9 other titles htill foIlow shortly
thereafter . Product r^ri I I be sold through cEl,!A' s regular customer
account base, and possibly select video r.tholesalers. No interest
in theatrical video or video store accounts at present. Dave
Palacio to investigate reactivation of old custorner account
numbers and procedure
XI
for opening
new accounts.
. Returns Procedure
A cover sheet j-s being devised to supplement the present
to be attached to the customer-prepared
list before forwarding to the Jacksonville Returns center. while
labels wiII of course be furnished nith conplete accountings frorn
the Returns Center, custoners are not being requested to break
down their authorization requests by label . Furthermore, cEltlA no
Ionger will solicit returns projections by label from the
rrenveloperr procedure;
branches.
XII.
North Carolina Dc Update
Transition from Jacksonvilte and Bethlehen still scheduled
for mid-July. Expect service disruptions.
XIII. Basic Coverage
The handout distributed is for an unknown artist with few
lay-outs for
tools and nominal label support. CEI.{A to develop
genres and also evaluate cost of rrnext steprr in
other musicrrBasic
coveragerr concept will assist CEMA to pinpointcoverage.
rnarket titles, avoid loading, and insure adequate response r,rhen
label marketing and promotion activity results in customer
interest.
xlv. Retail Growth
The handout distributed illustrates the significant
consolidation atnong CEMA's customer account base, hence the
growing polrer of the central r^rarehouse retailer,
XV. Pricing and Related Issues
A. 99.98: CEI'{A believes that most new releases should be at
$9.98, except possibly for selected urban and countryi customer
resistance may be countered with an attractive initial discount.
B. New Artist Policy: Transition fron $6.98 to $8-98 or
$9.98 has not proven to be effective. Therefore CEMA recomnends
alternative strategies such as guaranteed sale, deeper discount,
or enhanced advertising.
c. Midline: If analog configurations are released at
nidline,
CD
price point must match. Capitof and EMI narketing
common name and wiII report to Joe
departnents are devel-oping a
Mansfield.
D. Singless LoFI \diL] apply to aII returns. RcRc s/il-l
apply to cassette singles with a high break-even, e.g. 30?.
Before rnoving forward, CEMA rrilt consult hrith the l-abeIs.
capito] and EUI narketing departments are developing a generic
counter display for cassette singles; Branch Managers to furnish
Joe l{cFadden with realistic utilization estimates. A generic
trshelf -toppertt divider card also is under consideration.
E. Prograns: FYgo program analysis handed out.
F. Il{Rs: current procedure is cunbersome and tirne-consurning
and will be revised to perrnit greater label and branch
f l exibi I ity .
. Customer Conventions
Recent proliferation of customer conventions requires
careful evaluation of each proposal to derive maximum benefi-t at
reasonable cost. Joe l,lansf ield to coordinate. Attendees
typically will include one branch representative plus one home
office representative. Labels nust insure availability of
current video product. Suggestion for labels to contribute to a
cEl,lA budget to update annual NARM video on rrnodularrr basis.
rrTeam cEl,lArr doughnut concept. conventions also present label
artist presentation opportunities, which can result in
development of significant customer gooderill.
XVII. CEUA Catalog
Revised version will ship May 15, 1,989. Importance of barcoding all product ernphasized. E.g. wherehouse rrstarl systen
depends upon bar-code for inventory replenishrnent; failure to
code correctly results in stock-outs thus lost sales. List of
non bar-coded product distributed; delinquent labels to renedy
within 90 days. Hand-out is a guide to converting rrold catalog
num.bers to rrnewrr catalog numbers on affected product; labels not
to change catalog nurnbers vrithout apprising CEUA.
Scanner system currently being tested in L.A. shouLd result
in more efficient and less expensive inventories.
XVI
XVIII. Product Lines
Is CEMA doing everythi.ng it can to rnaximize sales in these
areas? What is the extent of the labels' commi,tment?
A. country. ceorge colLier has accepted position of
Director of country Marketing (for capitol), based in Nashville;
this should result in better coordination with local label
activities and sharper focus. Better CEMA input required in
order to effectively schedule prograns i Branch Managers to
evaluate cornpetitive prograns and advise Mansfield. Branch
Managers also to evaluate overall potential for country business
Label needs to cornrnunicate
within their respective territories.
its enthusiasm to the field nore effectively for this repertoire
genrei consider naking country a separate profit center within
the Capitol organization.
B. Angel . Business has been rrf lat.rr l,lain problem is that
rnajor customers seem to be entirely price driven and are not
necessarily sensitive to repertoire considerations, which are
Angef's strength. Advent of scanners nay help irnprove turnover
in specialty stores. Angel regional staff is perceived as being
highly effective; Branch Managers to concentrate on inprovinq
relationships with a view tonards better penetration. Joe
tlansfield and Renny Martini to co11ect, evaluate and disserninate
conpetitive classical pricing infornation.
Enigna classical line will be retainedi one release per
quarter comprising approx. 5 titles.
C. Urban. Query re utility of rrBlack Music Month'r program.
Branch l,lanagers to analyze effectiveness, impact on marketplace
and customer response. Idea for labels to coordinate ads,
programs, generic POP.
D. Blue Note. Turnover of approx. S 4yf/year j-s insufficient
to fund rnajor advertising. Mansfield to furnish customer
Performance Report to Lou ltann lrith a view tol^tards evaluating
future advertising requirements. Transitional issues in Iight of
disbanding of cEl,lA catalog Development Department.
!{hiIe several reissues have experienced marginal sales,
cornpilations and new release artists have done hlell. High hopes
for upcoming rtDecaderr series and Lou Rawls album produced by
Bil1y Verat contains duet with Diane Reeves. Branch Managers
enphasized need to have adequate inventory on hand. Consider
presol-iciting reissues and then nanufacturing to customer orders;
caneel if insufficient customer interest.
Enigrna rrlntimarr Iabel sells approx. 7K-l-5K units each
release. Possible joint rnarketing efforts coordinated by )azz
specialists at each branch.
8. cD Box Sets. Successful and wilf continue to be used.
F. Budget. Price point is 93.98; turnover approx.
$101,!/year. Effective August ]-st, EMI is abandoning budget
business; titles either will be discontinued or increased to
96.98. Ira Derfler hands out list of titles being deleted.
Capitol probably getting out of budget business, toot presently
undergoing financial analysis. consider expanded use of Special
Markets
.
c. illdline. Price point is $6.98. Is cEMA's nidline
catalog strong enough? Will custoners take it in without
ruinously deep discounts? Labels to evaluate higher-priced
titles with a view towards towering their price. consider that
artist royalties not payable if artist is in debit balance.
coordinated CEMA effort (generic name, generic box) also should
improve profitability.
Judicious discounts and effective ad
support both also are necessary. Branch l{anagers to evaluate
anticipated effectiveness of proposed regularly quarterly
discount programs, and report to Mansfield; consider inpact of
recent lilEA price changes.
Rhino's Billboard seri,es is at rnidline; most RouLette
catalog re-issues also sri11 be at rnidline. Rhino actively is
seeking nidline licensing arrangements. Enigrma will develop a
nidline series this surnmer cornprising approx. 20 titles.
XIX. Conpetitor Pricing
chart handed out identifies conpetitor price points and
returns factors. Transition to box-Iot/loose pricing scheme
explained
xx.
.
NARII 1990
Meeting to be held in L.A.; irnportance of advance planning
enphas i zed .
■0
XXI
. UIS
Development
Inadequacies of present cornputer systen are well understood.
Thorn-Eltl has comrnitted approx. 950M for a 2-3 year changeover-
XXII.
POP
Fulfillnent wilL be transferred to ne!', High Point Dc.
customers wil-I be shipped rnore rnaterial direct. Labels requested
to evaluate usefulness of PoP carefully in tight of increased
customer disinterest.
fuuzW*"-^a'-
■■
͡
͡
議
鞘
■
il
D
ate:
Novenber 3, l-989
To:
Russ Bach
From:
Dave Kronemyer
Re: PIIOENIX I,ABEL
MEETING
cEIrlA net with its labels on october 26, L9a9 at the Ritz
carlton Hotel in Phoenix, Arizona. The purpose of this meno is
to sunmarize what happened.
I. Fourth ouarter l,larketing Plans
January L99o - uarch l-990 marketing plans r,tere evaluated
with a vieht tohtards: (a) rraggressiverr pricing, in the sense of
discounting only to the extent necessary to increase safest (b)
better coordination of deals $rj-th custoner open-to-buys, fiscal
year-ends (which could result in inventory pull-doqtn), custoroer
-dvertising conmitments, and likely conpetitor activity; and (c)
adequate coverage in light of labe1 expectations and anticipated
customer demand for various products.
Following discussion, it was decided to offer the foltowing
programs:
10-90F
7-90,
(a)5t norma■ dating hits from
■-2-90
through l―
(b)5t norma■ dating hits from
■-29-90
through 2-
(c)3-option cata■ og from ■-8-90 through 2-■ 6-90′
the three options being3
(1)63 + 30 days dating′ (11)5t + 60 days′ or (111)4t
+ 9o days or due on 5-25-90, WhiChever is ear■ ier
(Note′ the 3 options assume MIS can program our
computer to offer these a■ ternatives)F
back― orders through 3-2-90′
artistldと o :euIR31u:Ed 311lII EI:gじ :1こ a13 :::じ I量 五ζ: I[y
being the consensus of the group that the prilnary
emphasis here shou■ d be on effective lllarketing as
opposed to discounts,
(e)6t + 60 days dating jazz from 2-5-90 through
2-23-90, and
(f)5t hits from 3-2■ -90 through 3-30-90′ eXtra
・ ｀｀
・′
′
30 days dating only for orders received before 3-23-90'
otherwise normal dating.
In all cases, even though not announced to customers,
proltrams will end with a 2-day grace period to ensure that goods
6rdereal during the program peiiod receive the program price, even
though possibly not shipped by the program expiration date.
currentiy, because of dita processing restrictions, cEuA glives
away unn-cessary discountsi Dave Palacio will investigate an
ord-ring protocol such that the progran price is granted only to
custorneis which place orders during the program period in
response
II.
to
CEUA
order solicitation.
Music video
EUI presently has 7 selections in releasei other 1abe1s qtere
canvassed re their future plans. CEUA er0phasized customer
acceptance of video as a rr4th configuration. 'r RcRc factors are
for cDst deal structure is evolving. In addition to its
existing customer base, cEuA also is opening key non-rnusic
accounts. Video nay lend itself to innovative rnarketing: for
example, cornpilations or packaging qtith cassettes. while Angef
is considering release of 10 CDv titles in Spring 1990, CEI'IA does
not yet perceive this as viable in the pop marketplace. CDv wilL
be discussed with PMA after they begin operation.
uaterial oltned by capitot and EI.II which f onnerLy was
parties (e.9.
licensed by Picture l{usic International to third nPl'lArr
(
CBS/sony ) is reverting. Picture l,{usic Anerica
) has been
video
to
coordinate
forined t6 exploit it dornestically, as weII as
cEt'lA
cEuA.
with
each
label
sales, narketing and distribution for
to
sales
manager
is considering hiring a national video
facili.tate inieraction with labels and customers i more on this as
PI'{A is f ormed.
III. cassette Single Classics
The cassette single classics program ltas evaluated. EI'iI
reported on its difficulties with obtaining consent to couple.
tteichandising aspects were discussed: is this line amenable to
coordinated graphics and packaging anong the labels? Joe
uansfield to investigate. CEUA's customers perceive cassette
single classics prinarily as a vehicle for hits, not obscure Bsame as
sides
.
IV. I{idline/Budget
l,lost labels prefer trpricebustersrr for the 96.98 rnidline and
rtpreferred price't for the S4.98 budget linet it was decided to go
with these names. They'IL be introduced in January L99o in
connection with the 4th quarter catalog program.
Joe Mansfield presented qraphics proposals for a generic cD
l-ongbox, which wiII be refined and circulated.
rrPreferred Pricerr cassettes presentLy carry a functional
discount for wholesalers, but not equivalently-priced cDs. Joe
to investigate and make reeommendations, possibly in
connection with a recalibration of RcRc factors.
V. catalog Development
Each label reviewed its catalog release plans. cEl{A
enphasized the necessity of separate advertising funds to support
catalog releasesi consider a rolling accrual which each branch
would retain, even if not used during the period for which
designated. cBS Records Group, for exanple, accrues 38 to cBS
Distribution for catalog advertising, which is expensed to the
label which owns the repertoi.re, but used in oistribution's
discretion. contrary to sone impressions ' cE!{A does not fund
Dave Palacio to
cataloq advertising fron its distribution fee.
devise a nethod of identifying and tracking rrcatalogl sales with
a vi.ew torrards inplenenting an accrual systen on this or sone
similar basis .
National Sales l,lanagers (C1iff schuttz and Dennis Hannon )
will make suggestions to each label re 99.98 and 98.98 titles to
$6.98 and vice versa, 96.98 titles to $4.98 and vice versa, 94.98
titles which should be droppedi uztt prefix cDs to rrsrr prefix and
vice versai and natchi.ng cD and cassette prices on the feut
individual titles that still are different.
sone interest expressed in Capitol's rrgift packagerr concept,
originally assenbled for Price clubt Rhino has created a
conparable package for its Bitlboard series. cEl{A's National
sales l{anagers wiII review catalog ltith each label and suggest
Iikely titles for inclusion.
t{hi}e the affected tittes still are under examination,
capitol plans to retain its $4.98 line ( fornerly lcreenlinetr) t
EMI , on the other hand, now is out of 94.98 conpletely.
vI . cut-outs
Each label should coordinate all price changes and deletes
with its National sales Uanager. In the past, ere've had problems
with labels doing this on thair own without giving us sufficient
tirne to get the change into our computer systerd. Rather than
deleting titles on a sporadic basis, we intend to send a cEllA
delete letter to our customers biannually. Please accumulate
your delete titles and cEuA will. canvass you for them when_it's
Line to send the tettert the next request date for lists will be
approx. Decenber 1st. cBItIA asks that each 1abel rigorously
survey its inventory with a view towards cutting out tittes which
ucFadden
͡
no longer are noving. We presently store approxinately 39
nillion units at our Dcs. obviously r,re're happy to keep product
on hand if it's selling, but if it's at the end of its useful
Iife, it more appropriately should be cut out. Returns will not
be accepted six (6) rnonths after the cut-out date. Heavy cut-out
lists will be expected for LPs and vinyl 45s.
cassette singles typically have no useful value after their
short life cycle, and are difficult to drill or starburst to
prevent their return to CEMA. Therefore, they should be scrapped
instead of sold at cut-out.
vII. 7'r Vinyl Singles
wEA has stated that they will be out of this business
completely in 1990. Even in narkets thought to be cornrnitted to
7'r vinyl (e.9. country, urban), cassette singles far outsell 7rl
vinyl , and 7tr vinyl is trsinking fast.rr For example, a recent
orpheus survey of approx. 30 Billboard urban reporters showed 7rl
vinyl denand at less than 1o?. With one or two minor exceptions,
radio no longer is serviced with 7rr vinyl . one-stops stil1
desire to provide their juke box custoroers with 7tr vinyl , however
(a) there is a declining nurnber of juke boxes, (b) they're
infrequently replenished, and (c) they play no role in breaking
ne!, records, thus a single nust be top-10 or so to qet in.
CEMA National Sales Managers will identify key one-stops
with juke box business and determine when in the product's life
cycle the juke boxes are nost likely to order.
Possible strategies in light of these developments incl.ude:
(a) solicit on a linited basis to key one-stops and then press to
filt their initial orders onlyr (b) increase the price
considerably to compensate the labels for their increased costs
of production against fewer saLest (c) adopt a 'rone-rtayrr sales
policyt (d) have Special l,larkets seII themt (e) Iicense then
entirely to a third party, possibly on a t'finished goodsrt basis;
or some conbination of these alternatives. CEUA will formulate a
policy and then discuss it rdith the labels for approval ,
Each label presented its future 7 vinyl single plans. AII
singles (except those currently on the charts) should be on the
next label-supplied cut-out tist to initiate the 6-nonth returns
cycfe
.
vinyl LPs
Now at 4.58 of sales, hrith customers reporting continuously
dininishing interest. Key-one stops have inplernented higher
return charges for vinyl . One of the roain factors propping up
vinyl LPs in the narketplace is customer perception; accounts may
think they need it, when they really don't, which results in
VIII.
higher returns on fewer units shipped. Each tabel discussed its
future vinyl LP release plans. In light of vinyl's irnninent
dernj-se, rnost labels will, devise a procedure for ordering vinyl
LPs on rrone-shotrr basis. curt Kendall to make sure that code
v/orks for notifying custoners that vinyl (as well' as other)
product is no longer available.
Ix.
oDerations UDdate
s Jacksonville DC will stay open; however, since this
is a change of plan, some re-staffing will be required. The
Returns center eventually wiII be shifted from the plant into the
Dc. CEMA is considering dedicatinq the Jacksonville Dc to
certain types of slow-moving rnerchandise, €.9. catal-og iterns,
video, Special Markets.
been
Probl-ems vrith Greensboro are $rell-knohtn and either have
rrin
of
orders
tracking
are
being
addressed.
Better
solved or
processrr was requested, and Don Dentzer will investigate the
possibility of additionaL interrnediate order check points.
Bounce-back post-cards will be inserted in future shipments
requesting customer information re exact date of delivery.
Some customers are receiving product too ear1y. curt
Kendall to check with the Dcs re their ship dates to different
customers in their respective service areas, and review findings
with the Branch Managers.
cEMA's rrstatus coderr systen was discussed. Most labe1s
authorize CEMA to scrap rrdefective returnsrr upon receipt; those
label-s not in confornity htere requested to review their practices
with a view towards pernitting CEI,{A to adopt this on a uniform
basis. curt Kendall to investigate if status code system should
be revamped; and if status codes can be displayed on osl. Dave
Palacio to investigate possibilities of: (a) irnprinting a
variance nessage on each packing slip detailing reason why goods
weren't shipped (e.9., deleted, back-ordered, etc. ); (b) crossreferencing customer Po's on packing slips; and (c) inserting
program inforrnation (not price) on packing slips, thus in theory
enabling one-stops to put the goods on sale nore quickly.
Previously, CEMA has nade recornmendations to each label
(prirnarily, the third-party labels) re various inventory. matters,
such as nunber of finished goods to manufacture for initial
shipment and allocation of quantities between the various DCs.
This rnore properly is a function of each label 's Production
coordination bepartment, and CEMA no longer rtill offer this
service, except on an advisory basis. CEUA will continue to nake
available daily sales and inventory reports for each label to
enable it to evafuate intelligently its inventory positionover 6 rnillion units of obsolete inventory are resident at
CE!'{A,
5
͡
͡
creensboro, which the l-abels r,rere urged to cut out or destroyt
identified by HaI Grogan, \.rho
CEUA witl advise re specific titles
is acting as obsol-escence consultant. Labels with excess LP
inventories should act pronptly, as even cut-out dealers are
corning to view this product as obsolete.
The Jacksonvill-e and Los Angeles DCs tsiIl be closed on
Thanksgiving and the Friday thereafteri Greensboro will be closed
on Thanksgiving but open the Friday after Thanksgiving. AIl Dcs
will stay open on Tuesday, wednesday and Thursday betlreen
christnas and New Year ( as vrif I the rest of CEMA) . cEl,lA ltill
close on the Friday before Christrnas and the Friday before New
Years, lrith the exception of creensboro.
x. custoner Advertisino
Capitol allocated its entire third quarter advertising
budget to CEMA for discretionary use within certaj.n parameters,
and subsequent accounting as to how the money was spent (as
This resulted in
opposed to individual project allocations).
more effective util-ization of tirnited advertising resources,
enhanced the branches' ability to dea] with customers, and also
elininated a l-ot of paper shuffling. CEMA reconmends that each
label adopt this systern.
cEl'lA sales reps are able to sel,l product more intelligently
if they have advance knowledge of each labe1's advertising
comrnitrnent. Thus, cEl,lA recornmends that each labe1 accrue
advertising nonthly on the basis of sales projected tvro months in
advance. E.g. the label estinates sales during the nonth of
February at $L rniLlion, thus al-locates advertising funds to CEUA
at sone previously established accrual in Decenber, thus cE!!A
wilt be abLe to present the label's advertising program to its
custorners when it solicits sa1es.
AlL l-abels agreed this was a qood idea, will establish their
own accruals, and allocate funds to CEUA as far in advance of the
release solicitation peri.od as possible. CEI,IA reconmends that
label accruals shoutd be at least L.5? in order to give CEMA
sufficient tools to work with on behalf of that label's product.
CEMA enphasized that it will not conmit customer advertising on
the basis of a verbal 1abel allocation. one of the main reasons
for the success of the capitol discretionary system is that it
eliminates the problem of finding an authorized label
representative to allocate label funds, thus Capitol's product is
represented in connection with opportunities hthich rnust be acted
upon quickly, e.et. one-stop rdailers or other advertising where
some competitor's product has faLlen out.
cEl,lA urged better internal label coordination of tine buys
pronotion representatives, and locaf promotion
loca1
by
cornnitments for in-store advertising. Label regional
͡
͡
representatives are requested to route all commitrnents for
custorner advertising through cEl,lA, rather than directl-y to
customers, thus enabling cEIrfA to verify the clain when submitted
by the customer.
At present CEMA has no formaf policy re any variance bet!"een
(a) the l-abef 's allocation of advertising dollars to CEUA and the
anount which CEMA comrnits to a custoner, or (b) a custoner
advertising conmitnent and the amoun! of the credit actually
given to the customer on the submission of a cJ-airn (thus charged
back to the label). The occasional rninor discrepancy is
inevitable, and we've been spending far too nuch tine chasing
do\,rn authori zations f or smal l amounts rr af ter the f act . rl
Therefore, for alt customer advertising adrninistered by CEMA,
there will be a perrnissible variance of L0? or $L00, \.rhichever is
greater, bethleen the allocation and the conmitnent, as well as
between the cornmitrnent and the amount of the clairn.
. Data Processing Update
MIS intends to visit each branch and label- to3 evaluate
computer usage, needs and requirements; exanine systerns and
procedures that may contribute to data processing errors or
As explained by Don
slowdowns; and train personnel on Pcs. trcooperative
processing,tr
philosophy
of
is one
Dentzer, !tIS' new
the
will
inplenent
that is, to focus on the technology that
the
problen,
to
nerely
as opposed
solution to a business
UIS also believes that j-t wj-II not be
technology itself.
possibte to address cEl,!A's needs and requirenents on a global
tasis, rather, in rrdeliverable pi-ecestr to neet priorities which
CEMA has set with MIS' advice and guidance. To inplernent this
objective, l,lIS has reorganized into tearns, one of which has been
asiigned to CE A. Look fontard to the abitity to down load nainframe data into PCs for nanipulation in 1-2-3 spreadsheets.
The hrand project temporarily has lost priority due to other
M.I.S. emergencies, but should be ready for testing by January L'
1990. Joe uansfield is coordinating.
XII. HUV
Hl,fv is a chain of retail record stores owned by Thorn-Eul
plc. It will be establishing a Neht York city 'rsuper-storerl
location (approx. 25K square feet) soon. CEMA is in the process
of obtaining inforrnation re HltV's future plans' and evaluating
the response of cEllA's present customer account base.
xrrr. Pricino rssues
cEUA's focus for L99o I^til1 be on [aggressivetr pricing, in
margin as
the sense of attenpting to capture and retain as nuch
possibLe. while CEMA wilt not be a price leader, j.t will monitor
XI
͡
͡
closely and closely follow price changes by its conpetitors with
greater market share.
As far as general pricing trends are concerned, CEMA
perceives that j-ts custorners are interested in lower cD prices,
nainly on principle; they don't object to a $9.98 nanufacturer's
suggested retail list price, even on urban titles, provided that
it's accornpanied by an initial discount; country still
predoninantly is $8.98; while one-stops naturally are interested
in as rnany discounts as possibl-e, there have been no serious
courplaints with regards to CEMA's elinination of functional
discounts in favor of box-l-ot pricing; and that the main arena
for price conpetition issues presently is the rack jobbers.
Racks account for sone 16-188 of cEllA's turnover, and are
under severe pressure frorn their o\tn lnass-lnerchandiser clients
for irnproved gross margin. l{ass merchandisers nohl have the
sophistication and computer capability to break out different
product lines within departrnents, and have observed that their
gross nargin on sell-through video is in the range of 288-308, as
opposed to approx. 258 on recorded music. This has a variety of
consequences, such as more space being devoted to video iterns and
less to cassettes and conpact discs. In response to these
concerns, racks have requested a return to the functional
discount (in turn giving then greater price flexibility with
their customers) t or sone other form of price relief, such as
improved RcRc factors, additional sales prograrns and key city
advertising.
A related topic is the ernergence, particularly in the video
business, of rrninimun advertised prices,'r t hich is a vendorenforced policy against retailers to prevent them from sale
pricing product under a certain floor (e.9. ' 17.99 on $9.98
proauct;. Handtenan is sending Russ Bach the Paramount policy
addressing this point. Dave Kronemyer will then study the
legality of the policy.
Prices and returns factors for different configurations at
various price points erere anal-yzed. BasicalIy, CElilA is
aggressive in nost price points. The issue of budget-priced cDs
neeas to be addressed, as hte are too high versus our main
competitor, cBS. The poi-nt hras stressed that the labels cannot
count on a list price increase duri.ng 1990 and therefore must
plan on increasing rnargins by giving less discounts.
XIV.
Nevt
Release Prograns
Again, cEllA foresees no increase in $9.98 nanufacturer's
increase in gross
suggested retail list price for l-99o, thus any
rrAutomaticrr
discounts
rnaigin must come fron reducing discounts.
especially
sense,
make
or dating on new releases frequently don't
which
(or
of
failure)
for minirnurn coverage items, the success
depends far more upon other ingredients such as advertising,
rnarketing and promotion. Labels can reduce or possibly elininate
sorne new release deals and still
accomplish their coverage
objectives. Thus, for exarople, a 6& discount for pop product
sell-s no more units tban a 58 discount, a 72 discount on urban
product accornplishes the sarne results as an 8* discount. Dating
frequently accomplishes nothing, except for retailers on slorrerturning itens. Too nuch product on deal also dilutes the
conpetitive rredgetr of a deaL for ttspecialtr product. A related
problen is the range of different deals, which rnakes it difficult
for CE A to present product consistently for new rel-eases. Joe
Mansfield and Joe UcFadden \^ri11 better coordinate this with the
1abels.
The consensus of the group was that, absent unusua]
circumstances, ner^t release deals should be 58 no dating, except
for end-of-nonth ship dates to roll into the next billing cycle,
or rnajor artist campaigns hrhere hre want it stacked deep upon
release.
A11 invoice discount, invoice dating or free goods programs
must be inplenented by cEl,fA National sales at the label,s
request. The reasons for this are to ensure that our custoner
receives their fulL benefit and to nake sure that the progran is
coordinated properly at both the national and the branch levels.
No program can be inplenented with data processing without cEllA' s
approval .
Guaranteed returns programs are cunbersome to implenent and
are questionable in naking additional sales above the new release
target. In particular, the sales Level up to which returns are
guaranteed usually is set too high (e.9., 1OO,0o0 units) to
provide any rneaningful custoner incentive to order product early.
The consensus of the group was that guaranteed returns should be
offered on rrout of the boxtt initial shiprnent orders only, up to a
realistic sales cei ling.
cEl,lA questions rrtoo many, too of tentr deals with cassette
singles (e.S., l-08 when 5t \rou1d do)t Joe !{cFadden to review each
label's situation with its v.P. Sales, with a viehr towards
reducing deals.
XV.
DAT
Hardware and CBS software are expected to be available
sometine during 2d quarter 1990. Angel nay have a classical
release about then. uerchandising aspects still are not
resolved.
XVI
. Packaginq
The 6xl-2 longbox
still
finds great favor with
9
cEltA's
͡
ハ
customers, despite the fact that by Spring 1990 the U.S. wilt be
the only country in the world using this packaging. Even though
the cost is high and it,s instantly disposed of, important and
valid rnarketing considerations point towards its continued use;
for example, a Wal-Mart test sar^r sales drop 538 rrhen CDs hrere
locked up. Some diminution of sal-es could be expected for CDs
displayed in plastic keepers. Use of generic boxes, particularly
on rnid-Iine and budget items, wil-1 reduce artwork costs and
obsolescence
.
discussion re CBS, desire for lOOw shrink-wrap (as
to the 3Ow currently used). NARM evidently is unable to
coordinate a security-strip insert compatible with various
detection systens.
XVII. PIIRC
CEIIA requests that labels sticker potentiall-y objectionable
product pursuant to RIAA guidelines, copies of which were
distributed. A1so, a notation re objectionable Iyric content
should appear on the nehr release board, so that CEIIA can apprise
its customers.
XVIII. Ner., Release Books
In view of continued proliferation of errors in prefixes,
proetrams, and rel-ated points, boards will not be accepted unless
the V.P. Sales for the subrni.tting label has signed off. The
trmarketing planstr section of the board should not refer to
conpetitor iteros such as Tolrer rrPulse. rr
we are experiencing considerable difficulty synchronizing
the new release deal sheets lrith the mechanical boards that are
used to produce the new release book. Each 1abeI should make
sure that the sane infornation appears on both, and the deal
sheet must accompany the board in order for us to input it
properly into our system. No new release information will be
passed on to the field untit the deal sheet (not just the board)
has been conpleted. Finished boards go to: Diana Flaherty, T-1L.
DeaI sheets go to: ltike Hillerman, T-12.
CEI,IA reiterated its policy to rrbumprr a release to the next
scheduled ship date if the DC,s don,t have sufficient inventory
on the floor to fill custoner orders in-house as of ship date.
Bob singer srill conmence faxing key one-stops detailing \,rhat's
shippable for each release. Labels that consistently fail to have
sufficient inventory on hand by scheduled release date wiII
become subject to shifting of release dates. curt Kendalt wiII
devise an order protocol such that customers submitting orders
after the order due date will be shipped last and only if there
are sufficient goods on hand to ship aII customers submitting
orders prior to the order due date.
Some
opposed
■0
Pros and cons of CEltA, s weekty rel-ease schedu]e rrrere
discussed. It was decided that CEMA shouLd release every trro
weeks instead of every week; this to conmence for street dates in
January 1990. Thus, new release nechanical boards would be due
on the Friday prior to hleek i-. Nes, release books would be
printed and distributed during Week 1 and Week 2. product lrould
be solicited during Week 3 and Week 4; order due date \./ould be
Friday of vleek 4. coods vrould be manufactured and staged during
week 5 and week 6; shipped during Uleek 7t and the street date
wouLd be Tuesday of Week 8.
Labels vrere encouraged to del-iver advance cassettes to CEMA
simultaneously with their delivery to Label promotionaL staffs.
XIX. rrBasic Coveragerl
Revised basic coverage estimates for different genres vrere
handed out. rrBasic coveragerr envisions an unknorrn act with
1ittle or no Label advertising cornrnitrnent. The usefulness of
this concept is that it specifies the nininum product spread
r^rhich CEIIA expects to achieve; label marketing and promotional
activity typically will build on coverage over this benchmark.
Put differently, laying goods out into the rnarketplace in excess
of basic coverage when the label doesn,t make the requisite
narketing and pronotional cornrnitnent sinply results i-n returns.
xX. Urban [usic
Recent .rJack the Rapperrt conference ernphasized the
irnportance of inproved liaison and communication with influential
rnon & pop dealers, Because they are econonically nore
heterogeneous, they require different narketing and promotional
strategies than central warehouse retailers servicing the pop
market. Frequently, these involve higher entry and maintenance
costs.
The Capitol urban promotion staff now is soliciting store
reports in cooperation with CEI{A. In that connection, Earl
Jordan now is responsible for disserninating CEMATs urban
priori.ties. EarI discussed his rtkiLf report procedure which
!,rj.11 apply to l-abel-requested store reports unaccompanied by
conmensurate R&R activity.
The possibility of stationing
dedicated urban narketing representatives in each branch was
discussed.
XXI
. Store Reports
Labels htere encouraged to request realistic nunbers in light
of radio and sales activity; asking for reports hrhen the record
is unsupported by marketplace activity sinply diffuses cEllA, s
focus, and reduces our overall effectiveness.
■■
A number of label representatj-ves are requestj"ng store
reports, such as: independent marketers, rtconsultants, rr
rrinterns,'r regional personnel , and rnembers of pronotion staffs.
often, different priorities are sol-icited, and store managers
with lirnited tirne to spend on this activity are distracted from
their other duties. As a result, there is considerable confusion
in the marketplace.
Some discussion as to rrhether or not CElitA requires
additional personnel (or, say, a dedicated position at each
branch) to r./ork store reports. Whil-e CEUA will review, this
initially is thought to be unlikely in view of the dirninished
workability of many accounts, the changing conposition of
Billboard and local reporting panels, and the fact that those
accounts vthich are r,/orkable typically function on a relatively
clear fee-for-services basis, which additional personnel eron,t
affect. Joe l!{cFadden wiII advise labels re the range of roarket
prices for store reports for each Billboard paneL (assuning sales
activity reasonably related to the report requested), broken down
by account and chart position. While CEMA will solicit the
reports and inplernent whatever activity each label requests, the
cost of free goods is a label expense, not CEIiIA'st Dave Palacio
to devise appropriate charge-back mechani.sm.
xxII. rrsinqle of the weekrl
This program to be curtailed in light of dininished customer
interest. Good coordination with the Singles Speciatist for each
branch is necessary for successful results .
XXIII. In-Store Plav Copies
Capitol and EMI presently Il'tR, erhereas Chrysalis and SBK
ship designated guantities directly to each branch autonaticalLy,
prior to release date. CEI,IA prefers this latter systera, whj"ch
Capitol and EMI will consider implenenting.
XXIV. Displav Contests
Poorly coordinated (e.9., no PoP on hand), too frequent
(particularly in light of diminished interest at retail), and
thus fail to impleraent label objectives. Labels are requested to
consider their suitability carefully before requesting.
CEMA is cooperating erith an industry-wide study ( sponsored
by CBS) to evaluate POP effectiveness.
XXV. Collegre Representative Program
A copy of the new job description was circulated, with
erophasis that this program services product fron all labels.
■2
͡
͡
Faith Henschel coordinates, and labels were encouraged to contact
her for rnore information.
XXVI . Label Staffinqr CEMA Staf f j.ng
Label staffing plans were reviewed. CEI,IA does not maintain
branch offices in Seattle, Philadelphia, Boston, Detroit,
Minneapolis or Miami, thus cEuA will charge back cost of space
for label personnel- in those facilities.
CEMA sales offices are not for the use of trconsultantsrr or
rt It is irnpossible f or CEI,IA to support outside
'r interns .
personneL with office facilities,
space, support staff, nailing
facilities, etc. fn view of the support needed by labelpersonnel, CEMA wilL be rnaking a proposal to Corporate
(Snith/Hodgson) regarding additional office personnel.
Labels are requested to route requests for action on various
matters as often as possible through their assigned National
Sa]-es Manager (Cliff Schul-tz or Dennis Hannon) t Earl Jordan (for
urban product) r Faith Henschel (for alternative product) t and Sue
Snyder (for singles and BllRs), rather than directLy to the
branches. This request is made for tkro reasons. One, the
branches are overloaded with cornrnuni-cations . Trrro , these sales
managers function on your behalf and need to be your eyes and
ears on a consistent basis.
cEllA Branch Marketing Representatives ( BI{RS ) are for
working new product, not stable artists.
This job was discussed
extensively at the Branch Manager neeting which followed the
label meeting. If you need a further explanation, please speak
to Joe l,lcFadden or Sue Snyder.
tr
■3
MEMO
DATE:
ltay 7,
lro:
Russ Bach
FROII:
Dave Kronemyer
R.E:
NARl,l
l-990
Meeting with Branch Managers/Hone office Staff
of this note is to recap the rneeting that $re
held with our branch managers and hone office staff at the NARil
Convention on Uarch 9, L990. Present were the eight branch
managers, Bob Freese, Russ Bach, Dave Kronernyer, Dave palacio,
Joe Mansfield and Joe ttcFadden. we lrere joined in the afternoon
by Diane Flaherty, Dennis Hannon, Caren Hester, Earl Jordan, Curt
Kendall, Joe Kleinhandler, Cliff schultz, scott Sinon and sue
The purpose
snyder
A.
.
Branch }lanager Reporting Structure
With iloe Mansfield,s Leaving to becone v.p. of Marketing for
Capitol/Nashville, the branch nanagers will report directly to
Russ. Amonq other desirabte consequences, this wiLl reinforce
the role of the branchrrUarketingrt
nanagers as Capitol-El.tl Uusicrs key
regional executives.
is but one discipline within
cEt{A, albeit an inportant one. Having the branch rnanagers report
to narketing, though, may be inappropriate focus. Conversely,
CEIIA'S new chief narketing executive (yet to be appointed ) should
not be reguired to divert his attention to branch nanagenent.
The new reporting structure also inplements CEl,tA, s rtinverted
pyrami-dl organizational structure, the key objective of wlrich is
to put as much power in the field as possible.
Russ revieered the developnent of branch teans, and comnented
on the continuing usefulness of the branch nanager reports.
B. FY'91 Budset, FY'91 coaLs and Objectives
Russ reviewed the FY'91 budget and the contributions that
are anticipated from each label . One of CEUA'S key objectives is
to irnprove cash nanagenent. This has several irnplications i g:9.- r
cEMA's credit group recently has been re-structured., and from a
narketing standpoint we nust careful-ly monitor discounts to
capture and retain as nuch variabfe nargin as possible, while
still realizing sales.
FORM 2● 17L{1‐ 00)
C. Recurring [,abel Issues
Another of CEUATS key Fy,91 objectives is to naintain and
irnprove good labeI relationships. The branch nanagers reviewed
recurring label issues, which incLude:
1. Disproportionate allocation of tine and
resources to nanaging labet regional personnel . Uany
have poorly defined job descriptions, and seen to be
unardare of the role they should be playing to naxinize
sa1es. This has lead to unfulfilled expectations and
communications breakdorrns . E. q. virith customer
advertising, the label representative inadvertently nay
rnake conmitments on cEtltA, s behalf which are not in
accordance with our marketing plan, or difficult to
track within our system. As a result, CEIIA may not
receive proper allocation from the labeJ., and due to
lack of infornation the custoner nay not have
sufficient goods on hand lrhen the advertising runs.
Label regional personnel are useful rnenbers of the
branch tean and can make a positive contribution to
sales. In a sense, they are the inevitable consequence
of our de-centralized structure, as each label adds
additionaL Local staff in an effort to nonitor cEuAt
insure that CEITIA proroinently focuses on that label ,s
product in the field; and provide a feed-back nechani.sn
to the Label's hone office group. The sales Managers
nust assume a leadership role with lab€L regional
personn€I to insure that they function effectively.
2. fnefficient conmunications fron labels in
formats that are untimely, redundant, duplicative, or
otherwise not useful . For exanple, inportant
infornation !e new releases, sales objectives, radio
and tours couLd be consoLidated into a single data
base, which would irnprove coordination and
responsiveness. While the situation has inproved
considerably, too nuch tine still is spent on
unproductive conference ca1ls. Weekly neetings
frequently are too long, and the labels aren,t
adequately prepared to present their product. At
present there are too nany ]tf ire drillsrr which are not
based on genuine crises but rather, typically, poor
connunication. This problen, to the extent it exists,
is readily solvable.
3. Extracting custoner advertising funds for
individual projects, as opposed to working within a
pre-deternined budget. Dave Palacio enphasized that
rrsales policy adjustnentsrt should not be used for
advertising, rather, other custoner invoice
adjustments.
4. Ange1 probably will be noving to its own
solicitatlon book, hrith the sane solicitation cycle but
separate release and ship dates.
5. Billboard
reporting: labels generally believe
is rrgood in the crunchrr but poor at
naintenance. LabelE disproportionately evaluate CEMA
on effectiveness lrith Billboard, even though chart
position contributes rnore to perception than actual
that
CEIiA
sales.
soliciting reports clearLy is a CEMA function,
directly interacts with the custoner
furnishing the report. Too nany extraneous inputs
soliciting reports (e.9., labe1 regional
representatives, narketing conpanies ) confuse the
reporter and dilute CEUA, s iupact. These other inputs
have a legitinate role in the process, but it is to
naintain generally friendly relationships with the
customer, thus enabling cEl.lA to get the relrrt when
called upon to do so. consider centralizing
responsibility for singles report solicitation with the
singles Specialists and albun report solicitation with
because CEHA
the Sale6 llanagers.
With the on-going trlegitinizationtr of the
Billboard charts, each title,s position rtill become
nore dependent upon actual sales activity, dininishing
this a6 a potential source of confllct. Interin focus
therefore should be on the nulb€r of workable reporters
added, not gross adds. Labels should concentrate on
genuine priorities with actual radio and retail
support, and develop a philosophy of itquality not
tr
quantity.
D。
Internal Issues
cEl.lA structural issues were discussed, including:
1. l{ew positions at the cEl,lA branches still are
being developed, and those job descriptions nust
continue to evolve to neet 1abel needs and
requir€ments. For exardple, the urban specialists nay
be spending too nuch tine on dealer reporting and not
enough tine on narketing. There still is sone
confusion about the precise role of the Branch
Marketing Representatives. should the singles
Specialists report to the Sales l,fanagers?
2. CEUA policies re advertising, returns and
terns of aale are in the proceas of being revised.
Copies to be sent to each branch in bulk for
disseminatj-on to the appropriate persons within each
custoner's organization.
3. Classical inventories still are being paid for
fro!0 advertising funds. In Fyr91 this cost cCnter will
b€ re-allocated to rroverload lrork force.n The scanner
project still is in ttre process of being inplenented.
4. iloe Kleinhandler reviewed the statua of DC
operatlons. Branches reguested a tinely report if for
any reason a nerr r€Iease ships late. some discussion
re the continuing usefulnesa of return authorizations t
Joe to investigate. Several branches having probletls
with custoner adherence to street dates (and
conversely, late shipnents to customers) i Joe to verify
shipping lead tines and the possibility of shipping
singles separately. Problen here of course ls
availability of goods at the DCs.
5. Caren Hester presented an overvlew of current
customer advertising adninistrative iseues. (a)
Outatanding allocations nust be reconciled to actual
funds 6pent by the end of FY,gO. (b) Sone
discretionary funds allocated by the labels have not
yet been co'nnitted to specific proJects. (c) Sone
funds speciflcally allocated have not yet been entirely
spent, and are candidates for conversion to different
projects. Conslder a quarterly nsrreepn of all
allocatione to clo6e out indlvidual artist budgets?
(d) Discussions are taking place with Cli{A for non-Iinerl
data and to expand our capabLllty to track exp€nditures
by artist for each lab€l . (e) Discussions also are
taking pLace with the labeIs to sinplify the allocation
process (which now has nine separate steps)t qet
broader allocations, to pernit great€r discretion and
flexibilityi and arrive at a procedure for breaklng
down custo!0er ads featuring product fro! more than one
label for appropri ate charge-back.
6. scott Simon discussed the status of activity
at Credit and his re-structuring plans to re6u1t in a
nore professional credit environment. Barbara $larren
fron cE}tA Finance will be joining credit to aEsist with
accounts receivable. once procedural issues adeguately
have been addresaed, Credit should be in a position to
assume a more Lnteractive role with the branches, thus
better supporting sa1es.
7.
CEllA's catalog to be issued quarterly in a
ncheck-listtr fornat (as opposed to the rthick booktl
fomat). Consider using a CE}tA-developed Pe database
to print out the catalog, rather than the nain-frane
corrputer, vhich apparently has inported errors in the
past. Dave Palacio to coordinate the assembly of a
catalog f or Capitol/Elrll l-,atin. There are nany
potential Latin accounts in each distrlct that aren,t
being solicited.
E. Index
Group Study
Russ l.ntroduced Linda Pet€rs fron Index croup, a managenent
coneultlng firn that has been retained by CEUA to study various
aspects of cEuA's activities and operations with a view towards
rnaklng CEUA the best distribution conpany in the '90s. rn uhat
it calls a nchannel systemsr approach, fndex is focusing on th€
entire recorded nuslc supply chain and the links betwe€n th€
various elements that conprise it. sone of the questions which
Ind€x is asking include: what are the critical success factors in
the record distribution businegs? What will the successful
distrlbution company of the '9Os look like? How will CEIiIA'S
custoners do business htith it in the '90s, and uhat steps do€s
cEllA have to take in order to respond to tttis conpetitive
chal lenge?
fndex croup will be conducting intervievs internally and
and custoners later this spring i Dave Kroneroyer is
coordinating.
Irith labels
F. Capitol tterchandising
arsha Edelstein and cathy o'Brien presented capitol'a new
philosophy for retail rnerchandising. Anong other activities,
they would like to reinstate photo books on selected projects and
receive ueekly ntritten reports fron each 8UR re developnents in
their respective territories. Capitol ls creating a new posltlon
called Field Retail Altareness uanager (nFRAUtr) to iDprove retail
merchandising strategies and
execution. Iational
FHR
coordinatlon to be the responsibtlity of cEuA'B new vP of
uarketing. overall, retail has less and less use for PoPt
furthernore, it isn't distributed efflciently. Thus aLternative
techniques trust b€ devised and inplenented to achieve rnaxinum
merchandislnq irnpact.
5
MEMO
DATE:
June 1, 1990
TCr:
Russ Bach
FRO}I:
Dave Kronenyer
RE:
NashviIle Meeting
roet trith the labels on !.{ay 2-3 , L99O at Nashvif le.
of this note is to surnmarize what happened.
CEI{A
purpose
I.
The
Uission Statement and Business Objective
CEI{A presented its Mission statenent and Business Objective,
developed during internal neetings over the irornediately previous
CEUA's
four days.
They are:
CEMA's lrtission
selI, narket, distribute and ship consuner
a
timely and efficient nanner to satisfy consumer dernand.
To
entertainnent aoftware created by the labels in
CEUA's Business Objective
To nanage tbe rDarketing process for label products
through a de-centralized environment using rnatrix
managenent techniques.
Job descriptions and key perforr0ance indicators for CEMA Branch
litanagers, SaLes Managers, Sales Representatives, Senior Fl[Rs,
FltRs, BIt{Rs, Singles Specialists, Urban Specialists and Label
Regional Representatives were handed out and reviewed.
II.
custoner Advertising
rracking down advertising authorizations consumes upwards of
of sales l,lanager tine. Frequently, effective advertisinqt
opportunities are 1ost, or go to the Labels which are nost
accessible. This sinply emphasizes the necessity for a
discretionary fund progran. While the exact percentages have not
yet been agreed upon, all labefs agree in principle that frontline product strould accrue discretionary funds. Joe llcFadden
thanked all labels for the advertising accrual- on Price
5oB
Busters/Preferred Price.
FORM 2317L(1‐ 90'
CEUA confirned its policy that no branch is to nake an
advertising corumitnent until it receives an allocation from caren
Hester's office. This 1n turn depends on caren receiving
authorization from the label (or the Label Regi.onal
Representative ) . Irtany labels still fail to furnish previouslypronised autborizations on a tinely basis.
CE A processed 11,OOO advertising docunents in FY,gO. Caren
and Dave Palacio are developing a revised procedure. Among
other issues, this wiLl address rolling over or re-assigninq
unused allocations, tlre possibility of aggregating nultiple label
authorizations into a single allocation to the branch, and
possible E-nail applications to cut down on paperrrork.
With increased market strength, CEII{A nust becone rnore proactive in arranging event sales with najor retailers. These
typically keep us in the store with increased shelf space, even
after they're over. Joe DlcFadden will. circulate a proposal .
III.
Tour ltineraries
Dennis Hannon presented his proposal for a consolidated tour
itinerary calendar, which vrill sharpen cEllA's focus on this
inportant priority for breakj.ng new artists. The calendar not
on!.y will identify artists on tour, but also set fortb each
Iabel's conrnitment level , which CBI{A will be looking to the
labels to establish. Dennis to evaluate posslble E-nail
applications for tour itineraries. E-nail could speed up sending
infomation from the lab€Is to the branches.
Iv. Music video
cguA ha6 re-entered nusic video distribution. EUI presently
has approx. ten titles out, and capltol has approx. eight
projects in developnent. The top 25 customers cornprise approx.
518 of the businessr cEllA has identified key distributors and
retailers with a view towards obtaining broad coverage. cEl.{A
will stay on top of pricing trends ahd also nill suggest
rnarketing and merchandising strategies.
v. Christmas Product
occaaional exceptions such as Rhino's fu11 price line
notwithstanding, nost christmas product still is sold in June and
JuIy to wholesalers at budget price. Ron Mccarrell will develop
a checklist for our Christnas push. cEl.tA sales Managers to
canvass their custorners for interest in pre-packs. Label sales
vPs to research their catalogs for possible titles.
. Operational Issues
Deletes: Labels are not to inplenent directly with
cuatoners. Rather, all deletes nus! be processed through CE A,
vrhich then will advise custoners and appropriately code our sales
j.nventory
VI
and
system.
Inventories: StiLl are way too high in light of our
corporate targets, which are 4 turns per year moving up to 6
turns per year. Label Sales VPs to identify titles for scrapping
or schlocl<ing. CEUA nay be required to utilize outside storage
f or surplus i.nventory, which !,rill be charged back to the label-s
on a fair usage basis.
Cata■ oo Fl■ l and Back orders: CEMA wil■
begin the process
of developing a proposal to handle all catalog inventory
nanagement and replenisbment directly from each Dc.
Ne$,
Release
Fill and Allocations:
CEldA,
s policy is to
burnp
the title unless sufficient finished goods of each configuration
are on the floor of each DC to 1OO* fill aII custouer orders on
shipnent date. Tremendous probl-ens occur lrhen CE!,IA has to
allocate a new release title to its custoners, including: Iost
sales, contanination of rnodel stock levels, poor coordination
with tabel narketing and promotional efforts, one-stop resi.stance
if both configurations aren't shipped sirnultaneously, and nisallocation of sales l{anager time.
DC ltanaqement: Each branch is serviced by one DC, thus the
functions as that branch's rrservice center. rr Improved
conrnunication between the DC nranager and the Branch Managers in
that Dc's service area should result in rnore efficient
DC
operations
vIf.
.
customer Conventions
will prepare both a trrack videolr and a rrretail videorr
for appropriate use at such functions. Labels to advise each
branch if they desire to furnish additional support (e.9., artist
appearances, prornotional itens). sales !{anagers to advise Joe
ltcFadden of anticipated attendees. cEltA's cost for custoner
conventions will be billed back to each label; Iabel Sales VPs to
neet and evaluate usefulness of these expenditures in light of
contribution to sales.
vIII. Merchandising
A recent CBS survey re in-store displays and POP was handed
out. considerable discussion ensued, focused on the continued
utility of POP and the role of the FURS to inplenent label
merchandising objectives. Branch Uanagers to evaluate customer
cE!{A
of light boxes and in-store video play for Rand Bleineister.
While -CEII{A will prepare display books on 1abel request, they wiII
be rudinentary and not an art6 E crafts
use
exerci,se.
IX. Pricing
The nain developt0ents are WEArs change to
nanufacturer's suggested retaiL list price for
and l{ew Klds released at 910.98 suggested list
counterpart, 5Z/3o days program); and Islandrs
progran.
a
$7.98
nid-line;
l,ladonna
(915.98 CD
d€veloping
artist
CEMA plans to keep nid-line at $6.98 for the tirne being to
capture shelf space and additlonal market share. we also expect
nid-line grosth as a result of fresber product and better label
advertlsing support. The new Price Buster logo was displayed.
Diana Flaherty has prepared separate Price Buster and preferred
Price cataloga, and will furnish the Sales I'tanagers with ranking
reports .
little resistance to reLeasing pretty lvonan at
$10.98. A transition fron $9.98 to 910.98 probably wiII not
affect CD prices, which will renai.n either at $13.98 or 915.99
depending on the strength of the titIe.
Sale6 Uanagers to advise
Joe UcFadden re the actual price for which $8.98 product is being
sold at retaiL. CEl.{A's stated policy re prlce changes is not to
lead but rather to closely follow the market.
Sales Uanagers also to advise Joe l{cFadden re the Island
program. The general consensus tas that it still was too early
to evaluate its effectiveness. Consider raising the cassette
price and lowering the CD price?
X. CD Longbox
EUI reported
Chris Toby reviewed environmental concerns and various
alternative proposals. Joe Kleinhandler to investigate possible
use of cardboard or recycled naterial in Lieu of styrofoan for
packing.
. Stickerino
Jin Cawley reported on a recent RIAA neetinq where agreenent
Iras reached on the design and content of the sticker. Each label
retains the prerogative to establish criteria for vrhat gets
stickered. Ehe general consensus lras that this should be
resolved on a case-by-case basis with flexible standards to
XI
preserve as much label discretion as possible.
xII.
configuration fssues
7rr VinyL: FolLolting extensive discussion of various
alternative proposals, the labels decided not to release anythinqt
further in this configuration, on the ground that costs outweigh
revenues. While this may result in norninal sales displacement,
that was thought to be inevitable in this rapidly disintegrating
market.
VinyL LPs: Conprised 1..88 of sales in the 4th quarter of
FY,90 and 3.4* for FY'90 overallt returns were 77t in FY'90,
illustrating custorner purging of inventories and the rapid
deterioration of this format. Following extensive discussion,
the 1abe1s decided to solicit selected nehr releases only on a
one-shot basis, and then press to fill with no re-orders. Joe
UcFadden to evaluate a one-way sales policy.
Cassette Sinales: Returns r,rere 28.78 in the 4th quarter of
Fy'9o, 22.72 for Fy'90 overall, and are going up. ttuch of this
nay be due to increased reliance on the cassette single as a
marketing device. Dave Palacio to investigate returns by type of
custoner and product release date. While RCRC factors are in
place, the break-even percentaqe rnay not be high enouqh t iloe
lilcFadden to evaluate. l{o sentir0ent to change to a 92.98
suggested retail list price for cassette singles. capitol's
experience r,/ith U.C. Harnmer (no cassette single release) was
evaLuated. This lead to a discussion on strategies to rnaxinize
aLbun sa1es, such as: stop-manuf acturing points; raising the
price; or changing the RcRc factors.
XIII.
Dealer Reporting
out the new Billboard panels. About L3*
points
pop
singles
are workable and about 15-1,68 of the
of the
pop albun points are workable. The arithnetic of nore legitinate
charts enphasizes the need for effective label narketing and
Sue Snyder handed
pronotional efforts in order to capture points.
XIv. Manufacturing
Vic Beretta reported on plant capacity and utilization.
Approx. 1,000 people are employed at the plant, which presently
has a capacity of approx. l-oo nj.Llion cassette units per year (up
from 75 nillion) and 32-35 rnillion CD units per year (up fron 20
million). confiquration spread is approx. 508 albun cassettes,
2ot cassette singles and 30t CDs. Expect 48-72 hours turnaround
on cassette singles; 10 days on new release cassettes i and 5-7
days on cassette re-orders. vic to investigate possibility of
elininating the xDR tone-burst which appears at the beginning of
cassettes. vic requested better label pJ.anning for manufacturing
lead-tirnes with sLower-noving cataLog naterial .
CDs have slightly longer turn-around because of ■ower
capacity; Vic reiterated his poficy to go outside if satisfactory
standards can't be achieved. Increased CD denand has been caused
by greater use of DPRO'S, CD-5 singles, and three and four color
printing. Vic rdill circulate a questionnaire to the labe■ s re
their anticipated future demand requirernents.
uuch uncertainty attends DAE, particularly in light of
conpetition between Sony's R-DAT t€chnology and Philips, new SDAT.