Manage for Success: Control Manufacturing Costs, Newsletter #49, May 2005

"Manage for Success" is a free monthly newsletter for record label executives who want to operate their companies efficiently and successfully. It's published by Keith Holzman of Solutions Unlimited, a management consultant, troubleshooter, and trusted advisor, and is based on his many years as a senior executive in the music industry.

Copyright 2005 by Keith Holzman, Solutions Unlimited. All rights reserved.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

This issue of "Manage for Success" marks the beginning of the fifth year of these newsletters, and as a result, coming up with new subjects is becoming rather difficult. Therefore I'd appreciate hearing from your if you have a topic you'd like me to discuss in future newsletters. For example, Daniel Nahmod <http://www.danielnahmod.com> recently suggested I discuss how to reduce the costs of creating manufactured CDs. So here it is, incorporating some of his thoughts.

Keeping down the costs of printing and manufacturing makes lots of sense at any time, but particularly now that most labels are selling fewer CDs per title. To use Nicholas Negroponte's metaphor from his "Being Digital," sales of atoms (manufactured goods) are declining, while sales of bits (legal downloads) are increasing. This is in part due to the success of such online retailers as Apple's iTunes Music Store <http://www.apple.com/itunes/> but also because of illegal downloading.

You can start controlling costs by reducing your printed materials to just the necessary numbers of pages required for the project. For example, do you really need to print lyrics in the package? Perhaps not, especially if you make them available on your website and indicate as such on the package. Directing buyers in such a manner also encourages those who want the lyrics to visit your website where you can also post interesting stories or articles about the project. More important -- you might also be able to entice them to buy other recordings or merchandise. That's just good marketing.

Another, and an increasingly likely factor, is that more and more consumers are copying their CDs to their computers and loading them onto to their iPods or MP3 players -- probably never looking again at the packaging. So why spend any more on the package than you have to?

By the way, this does not apply to special compilations or "legacy" projects where you may intentionally want to publish value-added material.

In addition, consider printing only the outside folder or booklet panels in four colors, printing the reverse side simply in black and white (one-color.) This kind of printing is called 4/1 (four over one.)

Another way of controlling costs is by not using a "clear-case" jewel box, eliminating the need to print on both sides of the tray (inlay) card. This is not only a considerable savings in print costs, but also in materials, since a standard jewel box usually costs a little less than a clear-case.

 

These simplifications needn't have any impact on sales so long as the folder/booklet front and the tray card are eye-catching and attractive. It will require excellent design, but at no real increase in cost. Fancy but uninformative packaging is not going to get you better placement in Borders, Tower, or Barnes and Noble.

Eliminate any unnecessary materials such as drop-in cards or stickers -- a savings in both printing and labor for inserting or applying materials.

I also recommend that you place all your production printing work with a single supplier, and in fact, all your printing if that's possible. This helps create economies of scale, and engenders supplier loyalty.

The same suggestion applies to your CD replicator or manufacturer.

In the case of a CD manufacturer who also has a wholly-owned printer, you might consider having them do both printing and replication for you. I don't refer here to a replicator who jobs out or brokers printing for you, since they'd be dealing with a third party who has to make a profit and bear the costs of shipping printed materials.

Here's something else to keep in mind. Estimate carefully your print and manufacturing needs for each new release. Begin by calculating how many DJ (promotion) copies you'll need to have available for shipping to press, radio, and other promotional purposes -- both prior to release, and for the first sixty to ninety days after. Add to that quantity your distributor and house account initial orders, plus copies you'll require for in-house use, mail and online sales, artist sales, etc. Total these quantities. The resulting number is the minimum you'll need to press or replicate.

As for printed materials, you should make not only enough to cover your replication needs, but I suggest you print enough extras to enable you to manufacture two or three additional re-runs of CDs, and also allow for shrinkage of three to five percent -- an inevitability at busy pressing plants. Also see where your printer's normal price breaks enter in. Sometimes raising your print order to their price break quantity results in very little extra outlay of cash because the per unit cost goes down. More important. it saves you from having to place small, and expensive, print-re-runs.

As I wrote last month, it doesn't hurt to take a good supplier out to lunch or dinner once in a while, and be sure to invite them to see one of your acts when there's a local performance. Specifically, be sure to check that you're getting the lowest and most competitive prices possible.

There are lots of ways to control the costs for operating a label. These are just some of the possibilities.

And if you need additional advice on how to keep your operating expenses under control, or any other suggestions to manage your label in a business-like manner, call me to take advantage of my forty years of record industry experience.

Or if you're thinking of starting your own label, let me suggest you take a look at my book, "The Complete Guide to Starting a Record Label." It's available as a downloadable eBook (in Adobe Acrobat® PDF form) and as a printed, spiral-bound book. Read the complete Table of Contents, and download the free Introduction at <http://www.recordcompanystartup.com>.

Until next month,

Keith Holzman -- Solutions Unlimited

Helping Record Labels Manage for Success.

 

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

 

You may use or reprint the above article provided that you include complete copyright and attribution with a link to this web site. Please let me know when and where the material might appear.

You can subscribe to "Manage for Success" by clicking here.

Most important, should you have a topic you'd like me to address in future newsletters, please email: mailto:keith@holzmansolutions.com

Copyright 2005 by Keith Holzman, Solutions Unlimited. All rights reserved.