Dave Chamberlain

Owning your own record label--dream come true or recurring nightmare?

Independent record labels dominate Chicago's musical landscape. From labels churning out blues and indie rock to jazz and dub, residents of the Windy have a penchant for rejecting the monoliths that make records on the coasts and just doing it themselves.

But what exactly goes into starting and running your own record label?

To find out, we posed a series of questions to Rob Miller and Nan Warshaw, owners of Bloodshot Records, an independent alternative-country label. Since first releasing "For a Life of Sin: Insurgent Country Volume 1" (with then-partner Eric Babcock) in 1993, Bloodshot has built a national reputation releasing records from the likes of Ryan Adams, the Waco Brothers, Neko Case, and the Bottle Rockets. We asked for the dirt-in-their-nails details, from inception to present. We asked for numbers, in an effort to prevent the financial haze from obscuring those details. A case study, so to speak, of the inner workings of an independent label, from conception to success.

NEWCITY: Why did you start a record label?

MILLER: The glib answer is we were bored. At that time in Chicago, every band was getting signed in the whole post-Nirvana where's-the-next-scene rush. Grunge was on Gap ads. Everything that we grew up with, the punk and alternative scenes, was being commodified into commercials. It was really disturbing, but we saw all these bands around Chicago that were doing this weird thing with country music, and we thought, gee wouldn't it be a goof if we pressed up 1,000 CDs and see if we could sell them.

How did you assemble the bands for "For a Life of Sin"?

MILLER: We knew a lot of them just from hanging out. Back then there was no scene to speak of. A lot of these bands didn't know about each other. Some would be playing at Phyllis', others Lounge Ax, others Schubas. We'd just walk up to a band and say "Hey gang were putting out a CD, do you want to be on it?" And they were all like, sure; no one else is putting out this kind of music. It wasn't hard to get people on, because there were no other options.

What were the start-up costs for Bloodshot?

MILLER: Between the three of us, we each kicked in, like, two grand. We all had day jobs; I was a carpenter painting houses, [Nan] was doing publicity work, Eric was working at Flying Fish. We had no grand illusions of "Hey, we're starting a label!" We were just doing it for the goof. We had no grand expectations, not even of putting out Record Number Two. We didn't have an aspiration for anything until like three years ago, when we woke up and were like "Holy shit, there's people actually depending on us for their livelihood."

What did the $6,000 pay for?

WARSHAW: It covered design, artwork, films, manufacturing, initial low-postage cost. There were no big costs other than the manufacturing.

For the first record, how did Bloodshot and the bands agree on royalties or financial compensation?

WARSHAW: We actually had one-page contracts that said something like two cents per CD sold from 2,000 to 5,000, and three cents after that--something like that, but it was meaningless to us at the time because we had no idea if we'd ever break even, if we'd even sell 1,000 CDs. So we just did it: I drafted up a contract, got advice from a lawyer, made sure it looked legal, and went from there.

MILLER: The notion of royalties was a very esoteric idea--for us and the bands alike--because it was like the first step in someone paying attention to a lot of these people. It reminded me of having my shitty little hardcore band in high school--we were happy to put our stuff on anybody's compilation. Because there was someone at least interested in doing them.

Now that you've been a label for almost ten years, how do you approach bands differently?

MILLER: There is no set way. The bottom line is if we love the music, we'll find a way to put it out. Some people come to us, especially nowadays, we have the luxury of having a name so people will come to us: the Bottle Rockets, Wayne Hancock, Alejandro [Escovedo]--after all of them have gone through shitty major label deals, they're like "Wow I can call the office and actually talk to the owner and they won't give me the runaround."

Do you use contracts or handshake deals?

WARSHAW: In most cases, it's a signed contract.

What is the standard royalty fee for artists?

WARSHAW: There isn't a standard, because we have different deals with different bands. As much of an accounting nightmare as it is for us, we really try and tailor each deal to what each band needs and wants. And what they're used to, how they think it should be structured. Some of the deals are set up rather traditionally, because that's what the band wanted, because that's how their lawyer works. Others are completely non-traditional, just split the profits and that sort of thing.

Are lawyers part of the equation?

WARSHAW: Most of the bands will have a lawyer, or a friend who's a lawyer, just to look over the contracts.

But you don't actually sit and negotiate with a lawyer?

WARSHAW: Very rarely.

After you've secured a record deal, who pays for recording?

WARSHAW: We're paying for it, but sometimes a band could come to us with a record already done, and we're reimbursing them. Almost always, we pay the recording cost.

Do you set a spending limit on recording costs?

MILLER: It varies. We've had records, even recently, done for as little as $3,000. The project defines itself. No one's pulling any Fleetwood Mac bullshit, flying in the USC marching band; no one needs huge expense accounts to FedEx the band's favorite kind of pizza from their hometown.

WARSHAW: And no one's staying at four-star hotels, they're staying at Motel 6. But we should note that we aren't trying to make all the CDs for $3,000.

MILLER: We're in a position now where we don't need to make every CD for $3,000. But it's changed over time. Something like the Old 97s' first record, they came to us with a $2,500 budget, and we were like "Good god, where are we going to come up with all that money?"

What does it cost to manufacture one CD?

WARSHAW: Raw manufacturing costs run from $.80 to $1.20-but that's the broadest possible minimum, including artwork--none of that includes the films, shrink wrapping, design costs, shipping. It essentially includes the jewel case.

And how many CDs do you press at once?

MILLER: Minimum of 1,000. Ryan Adams, 50,000--I think we did 30,000 out of the box. Bottle Rockets, 15,000 to 20,000. It's all over the place.

How did you handle the distribution of "For a Life of Sin"?

MILLER: Because it was a Chicago-based compilation, we drove around to Reckless, Quaker, all the stores and saying "Here are some local bands, will you take some on consignment?"

WARSHAW: We knew a little bit about the industry--clearly not too much--but enough to know that we had to act like a record label an pretend that this was the first of many releases, to even be taken seriously. You know, have the right paperwork in order, have bar code on the CD, have a sell sheet. It was only after we sold a bunch of the CDs by putting them in the stores ourselves, on consignment or the stores buying them outright, that we could move out from Chicago.

MILLER: And then it was a lot of research, finding record stores in other towns that might be interested. I was in [the band] Moonshine Willy when this first record came out, we went on a tour and in every town I was like, where is the cool record store, let's see if they'll take some? It was basically building a database from zero. We couldn't go online and search for "cool record store." It was all trench work, and it still is. Distribution sucks.

Who distributes your records now?

MILLER: Our primary distributor is ADA.

And how does distribution work?

WARSHAW: Distribution is the bane of an indie label's existence. We're lucky to be in the position now where we have great distribution--comparatively speaking--but it's still ongoing work that Steve [Duba] and his assistant here spend a lot of time micromanaging retail. Although we have a distributor that takes care of physically getting the records into the store, it's still up to the label to let the store know what's available, because all the distribution reps are overwhelmed.

MILLER: There's just not many stores that will take independent stuff anymore. All the mom and pops are going away. Everyone's buying CDs at Best Buy, Wal-Mart, Target. Best Buy just instituted a policy that if it can't sell 5,000 copies throughout their whole chain, they won't take one. Best Buy used to be pretty good for us--they even used to have regional buyers. You're seeing a lot of the big chains who used to have regional sales buyers giving way to some guy who's sitting in a bunker somewhere in Topeka, Kansas, doing the buying for the entire chain, irrespective of regional trends or tastes--the continuing Walmartization of the country. Small chains are disappearing.

WARSHAW: We call the mom and pops ourselves--even though our distributor might have them as an account.

MILLER: But [our distributor] is, rightfully so, occupied trying to get our stuff into bigger chains. I would rather have them spend their time doing that, and we'll take care of the smaller stores, building personal relationships. A Borders might be interested in buying a box of thirty Alejandro [Escovedo] CDs, but they won't give a shit about buying two Trailer Bride CDs. But, the small store will. So it's up to us to call them and say: `Will you take one of these, will you take two of these... .' Spread that over the whole country, you just sold 500 extra Trailer Bride CDs, which to a major label is nothing, to our distributor is nothing, but to a band like Trailer Bride, to us who love the band, it means the difference between the record making money or the record not making money.

WARSHAW: With distributors, the only way you get paid is with your next release. Getting distribution is only the beginning--then getting them to actually pay you for what you've sold or what they have is difficult at best.

MILLER: Like any indie label, we have stories of going to distributors offices and physically taking our stuff out of the warehouse because they're not paying for it. Or siccing collection agencies on them. Or other times just watching money and CDs disappear into a vortex.

How do you know what to charge for a CD?

WARSHAW: The first step, is we set a suggested retail price. Which is such an absurd system. But we'll set, let's say, $14.98. The royalties are based on the suggested list price of a CD. We have to establish that for the artist, but even more for the distributor. They want to know what the suggested price is. That goes on the sell sheet. Based on that is how much we're selling it for--roughly about half the suggested list price is what we're selling it to our distributors for.

MILLER: The distributor orders it, they send it to a one-stop, they send it to the store. At each stop, it gets marked up a little more.

What's a one-stop?

WARSHAW: Another middle man--sometimes a distributor sells directly to stores, but many of the small stores can't hold the volume necessary to buy from a distributor, so they have to buy from a one-stop, which is why a lot of small stores have to mark stuff up higher than the chains, because there's another middle man.

How many records must you sell to break even on the whole process?

MILLER: That's absolutely on a per-band basis. There's so many factors. In our first couple of years I could have told you that if we sell 1,500 to 2,000, chances are we broke even. I would say even lower than that. But now, it depends on the packaging, how much touring, how much we're supporting them, how much the record cost, etc.

How do you track sales?

WARSHAW: There's an invoice going out for every sale, whether it's from a store or a distributor. There's an equivalent if someone buys a CD from us online or from the catalog.

Can you track sales figures down to the specific number?

MILLER: There are ways, if we wanted to get bogged down by the minutia. Soundscan and our main distributor have an inspector program where they can show you which store has ordered how many. But all these things are weighted. We sell a lot on the road and through the Website. They don't all get counted by Soundscan.

WARSHAW: Internally we keep those numbers for ourselves, for royalty purposes, and have exact numbers on sales through six-month periods.

How do you know when a store runs out of Bloodshot CDs?

MILLER: That's where all the legwork comes in at the office. Because we can't expect the little stores to know immediately if they've sold out of [Kelly] Hogan's new record. We can't expect our distributor or the one-stops to let them know every week. That's why we're on the phone, hey: "We shipped you these, it looks like you sold them." They just need a prompt. Like the distributors, these people are overworked.
We go through our lives assuming everyone knows who Hogan is, everyone knows who Jon Langford is. They don't. Every store has untold thousands of CDs being pitched to them every week, so if we develop a personal relationship, and go "Oh good you sold those three Hogan CDs, can you take a couple more?" It might just be as easy as reminding them. Because they're businessmen too; they've gotta make sure they sell ninety "It's a Britney Spears Christmas" to make sure they pay the bills. But if they love music, it behooves us to remind them about us.

When do you go ahead with a second pressing of a record?

MILLER: With the advent of CD technology, the whole notion of a first and second pressing has become almost meaningless. By the time you can say "500 CDs" the guy hasn't pressed the button fast enough to stop it. But it depends. If it's Ryan Adams and it's selling and he plays on "Saturday Night Live," then yeah, we'll call the plant for another 10,000. If it's Devil in a Woodpile, we can be sure that the 500 I ordered is gonna last us six months. Which makes just enough money for us to put out another one.

How has the Internet helped sell records?

WARSHAW: We're in direct contact with the people buying our bands' records. And we can, on an individual basis, keep them informed about the band coming to town, new releases, and it eliminates all the middlemen.

MILLER: From a pure sales point of view, we're doing about ten to fifteen percent of our business online. But in a broader sense, say you live in Tulsa, Oklahoma, where you knew the cool guy at the cool record store who knew all the cool music, but he's been squeezed out. And you read a review of Splitlip [Rayfield]--the chain isn't going to have it. But you can go online, get led to our homepage or maybe buy it on Amazon. Or just follow up on the review and listen to it online.

One final question. What is Bloodshot's best seller to date?

MILLER: Ryan Adams. Nothing but net on that one.

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