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What’s happening with the vinyl industry?

  • 29 September 2021, Wednesday
Vinyl increase

Is it yet another inevitable change in the music business or a threat bigger than Corona for independent record labels?

In the first half of 2021, vinyl sales skyrocketed by 94% according to RIAA. Recorded music revenue in the US grew by $1.5 Billion (+27%). The growth is mainly driven by music streaming and premium subscriptions to shops like Spotify, Apple Music, and Deezer, with an increase of 13% compared to the first half of 2020.

We can see such growth not only in the US but also overseas with Germany who got $1 Billion in revenue from recorded music, a 12.4% growth (Source: Music Business Worldwide).

Graphic Music Germany Figures Half 2021

And what happened to vinyl sales? They exploded.

In the US, vinyl sales saw 108% growth during the first half of 2021. As we’re seeing the same in Europe, what’s the issue? People are buying vinyls, so labels and artists should be happy about this, right? Not so fast.

As mentioned by The Guardian, vinyl pressing plants are struggling to meet demand, and well-funded labels are trying to jump the queue. On top of that, there’s a shortage of PVC, which provokes delays from suppliers to the pressing plant, so they can’t keep up with the usual production delays. A couple of decades ago, we could press records within a few weeks, while today we have to wait between 6 and 12 months. If you’re a record label or an artist with audio files and artwork print files ready to be sent to the pressing plant, you’ll have to wait almost a year to get your vinyl in your hands. This is not sustainable.

To dive deeper into factors and consequences of the shortage of vinyl production, we interviewed Mirko Gläser, owner of the German independent label Uncle M Music.

Mirko Gläser Photo

Mirko Gläser, owner of Uncle M

My name is Mirko Gläser. I am the owner of the hybrid music company Uncle M, based at the German North Sea coast. We see ourselves as a mix of a label, marketing/PR agency, music publisher and consultant for currently about 75 bands and numerous international labels.

I have been active in the label business since the beginning of the 00s and in earlier years, during the most successful phases, I accompanied bands like The Gaslight Anthem, Flogging Molly, Gogol Bordello, but also the Donots, Itchy or 100 Kilo Herz with my work. We are connected with iMusician via the band Attic Stories, which publishes its songs in our music publishing department Oh Lumiere.

Can you tell us what’s happening with vinyl products and pressing plants?

There are many reasons for this. (Also) because of Corona, there is a raw material crisis in many industries worldwide. Products based on wood and oil (which is the case for LPs: PVC and paper are the main components here) are experiencing massive price increases, triggered by a huge demand in the construction and manufacturing sector in the USA and China. Certainly complicating matters here is the fact that the constant closures of Chinese ports due to the local COVID outbreaks have caused immense irritation to the very fragile supply chain and logistics. In addition, the enormous amounts of energy required for pressing have been costing more and more for several years - not to mention the necessary CO2 compensation. All in all, average manufacturing prices have increased by up to 60% since the beginning of 2021.

But there is another important complicating factor: Vinyl has been booming for several years and, at the latest since the end of 2019, has also become a topic again for major record companies, which are now pressing their new releases and also their gigantic back catalogs in ever larger quantities. Around 2010, 700,000 vinyl records were sold in Germany; by 2020, the figure was around 4.2 million - and rising.

However, and this is where the problem comes to a head: there are only a small number of German and international pressing plants that could also produce such quantities. Apart from a few smaller DIY manufacturers, there are perhaps 3-4 suppliers in Germany who could be called upon for such mass production. Across Europe there are less than 10. Vinyl production is a very manual process - from master creation to mixing special colors. Vinyl fans have become accustomed over the years to getting elaborate color combos (splatter, half/half, egg yolk, ...) - and it causes the local pressing plants massive (timing-) problems to produce this on their antique-looking machines.

Behind held hand an industry leader talks about being more than 1 million sound carriers in arrears, which corresponds to a year's production in his pressing plant!

The short form:

  • Massive competition & fights for the few available pressing slots

  • Massively rising prices

  • Disruption of production due to lack of raw materials

How was it before?

Not even 2 years ago, the situation looked quite different. The lead time for the production of an LP edition (no matter in which quantity) took about 6 weeks until the delivery of a test pressing, which is needed for the production release - and after its release another 6 weeks. So 3 months between the time a band comes out of the studio and the time of a possible delivery of the merchandise to record stores and mail orders.

Nowadays we are talking about 8-10 weeks for the test pressing and at least 6 months (tendency: increasing!) for the production of the merchandise.

The threat

The obvious point is currently first of all this: actually, today a band would have to submit finished artwork to the pressing plant a few weeks BEFORE their studio date and also already submit detailed information about the planned order (number of pieces, different vinyl colors, etc.). Of course, this is not usual in the industry, because most bands probably go "shopping" for the album AFTER their studio date (i.e. offer it to external partners) and roll out the campaign afterwards. It has also become almost impossible to reconcile these crazy lead times with those of e.g. booking agencies and clubs, which are also struggling with out-of-control lead times after COVID and are currently mostly booked up 12-18 months in advance as well.

Where this leads to becomes clear at second glance: While newcomers in particular have benefited in the past from the fact that well interlocked campaigns support each other (i.e. a tour for the album generated double attention and a promotional campaign transported from the national to the regional press), today multiple strenuous attempts must be made to achieve the same goal.

Liquidity also suffers massively under the new conditions. The trend towards advance payment is currently increasing - in other words, more and more studios, but also press plants, want to receive their money when orders are placed. These high costs are refinanced by LP sales, which are now up to 12 months in the future instead of 4. In the past, it was easy to bridge this gap with an early pre-sales phase and ensure quick liquidity, but now the risk is increasingly shifted onto the shoulders of the bands OR their fans (honestly: what fan of a young newcomer band buys an album 1 year in advance?).

For labels, this liquidity pressure is now potentiating. Whereas they used to give records to pressing plants one after the other and were able to finance the costs of record 2 with the revenues of record 1, they are now forced to pre-finance several (sometimes dozens of) albums simultaneously at increased prices - with uncertain knowledge of delivery and release dates.

The question remains how these short-term problems will affect the long term. Even without the vinyl crisis, small and medium sized bands have had massive (re-)financing problems to recoup studio and pressing costs.

Quote

Consequently, a further standardization of albums released on vinyl (chart hits + niche kings), which will especially put pressure on specialized record stores and mail orders (which already often face the problem of getting new material into the store at all because of the delay). In any case, the increased raw material and manufacturing prices have led to the fact that an average vinyl album no longer costs 15-20 euros in stores, but rather 25-30 euros. Customers will only buy those albums that they REALLY want. Discovery or random purchases will become less in the future. (accompanying one could also ask the question how many albums a collector can afford while also his general wealth and net income is affected by corona measures and the general economic crisis).

Many bands are already responding to the current crisis by releasing albums digitally first and then physically 3 quarters later - which in my opinion will result in additional dramatic drops in sales. Vinyl sales in stores but also on tour account for about half of an album's sales (the other 50% bands usually get sold to pre-orderers via their own webshops). I have big doubts that the sales at the merch table many months after digital release can still keep up here, if fans could already learn the album via Spotify inside and out. Actually, the consequence of this thought should be to invest even more money in haptics and packaging - but see above: Prices are already exploding for standard pressings. Who can and wants to afford even more expensive collector's editions?

If bands and labels aim to continue releasing in sync and launch marketing, touring and other promotional activities in parallel to the release dates, then they currently have no choice but to stretch their lead times from 6 to 12-18 months after recording the album - no matter what the cost.

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