As the UK-based Pinnacle Distribution finds itself consumed by insolvency, the industry is expecting a much broader fallout. The process of going into administration, similar to bankruptcy in the United States, means that distributed labels are facing non-payments, serious distribution disruptions, and potentially fatal financial problems. "I think this could seriously hurt labels if they sold records and don't get paid," Orchard cofounder Scott Cohen told Digital Music News. "Labels are scrambling for new distribution."
Other were more grim on the prospects. "This Pinnacle thing will put a number of labels out of business," predicted Rich Masio, senior director of Content Acquisition at digital distributor IODA.
Indeed, the sudden meltdown of Pinnacle prompted the Association of Independent Music (AIM) to hold an emergency meeting in London on Thursday. Obviously a high-stress event, especially for those attempting to figure out how to get paid, and how to recover product. In total, Pinnacle handles roughly 300 independent labels, and millions of albums remain in the pipeline. Others attending the meeting included Apple and Pinnacle digital partner Consolidated Independent (CI).
Sources are now sharing the depressing details of a crumbling company. One executive noted that nearly 100 Pinnacle Entertainment staffers were abruptly released, while another noted that mostly administrative and warehouse personnel remain. Appointed administrator BDO Stoy Hayward is now sorting through the insolvency details.
The chaotic crumble speaks volumes on the broader market and economy. "Essentially the physical market is collapsing in the UK," the London-based Cohen continued. "When retailers go out of business and the remaining ones reduce floor space, distributors go bankrupt... and the physical market becomes unsustainable."
Now, against the backdrop of shrinking CD sales, lowered consumer spending, and serious liquidity concerns, member labels are struggling to maintain a semblance of sanity. That offers opportunity to rival distributors, though for labels, a partner shift does not alleviate existing Pinnacle account issues.
In fact, it could complicated efforts. "We're hearing that if you bolt from your Pinnacle deal, you get dropped to the back of the line to recover money or product, and that goes for doing your digital through CI," one label source close the fallout told Digital Music News. "This could starve a lot of indies that can't afford to not get paid, but have no money to continue under Pinnacle. It's a nasty catch-22."
Still, an early exodus is happening. Independent distributor New Note has now shifted its accounts away from Pinnacle, and accelerated a transition towards Proper Music. The digital component of that deal involves digital distributor IODA, part of a quickly-fashioned alliance. "We're not quite sure yet what labels we may stand to gain or lose over this, but we have gotten calls form a couple of labels," Rich Masio explained.
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