With the explosion in file-sharing on the internet and the incremental obsolescence of the CD, traditional models for purchasing music have been hit hard in the last decade. But for years, a steadfast dedication to buying music the old-fashioned way—on vinyl and cassettes—has helped indie-music labels stay afloat. A recent change in the process of shipping those records through another similarly antiquated-seeming model, the U.S. Postal Service, has posed yet another hurdle for an already beleaguered music industry. Curiously, the USPS, long engaged in a losing war of attrition with the internet, now seems to be joining its ranks in making it more difficult for labels to stay in business.
“I don't know if it's 'killing the business,’” says Ryan Geis, manager of long-running Florida label No Idea Records’ distribution/mail order operation, “but it definitely hit the business in the knee with a hammer.”
Geis is talking about the across-the-board price increases the USPS instituted in late January. While the cost of mailing a letter domestically was minimal, it's international mailing—and shipping in particular—that saw a remarkable spike, one big enough that it could have an impact on the way many record labels and bands do business. Prices for international retail shipping services (of which there are a few different options) increased by an average of 14.5 percent, and in some cases as high as 50 percent. (You can read the specifics of the rate increase here.) Prices to ship to Mexico and Canada are now roughly the equivalent of shipping to Europe.
There's no question the USPS is in bad shape: Postmaster General Patrick R. Donahue says they're losing $25 million a day. While the USPS does not receive funding from the government, Congress tightly controls the organization. One proposal to help stem the losses is that they will cease delivery of standard mail on Saturdays, beginning in August. (Package deliveries will continue throughout the week.) Whether it's up to Donahue or Congress to move to five-day delivery is currently under debate.
One of the most obvious reasons for the revenue crisis the USPS has found itself mired in recent years is that the efficiency of electronic communication has obviated the need for a lot of traditional mail, paying bills and sending letters. But there’s another more insidious reason for the crippling financial state of the USPS. As has been written about elsewhere, George W. Bush signed the Postal Accountability and Enhancement Act into law in 2006. The law required the Postal Service to pre-fund pensions for all of their employees across the board 75 years into the future within 10 years, an extraordinary rare expectation. It also prevented them from branching out into any other fund-raising models.
The law was introduced by Rep. John McHugh (R) of New York, also a member of the corporate lobbying group the American Legislative Exchange Council (ALEC), supported by (wait for it) UPS and Federal Express. Before the law, the USPS was flush with funds. Most critics of this law agree it was an attempt to soften up the postal service, force it into bankruptcy and pave the way for privatization of the mail, in much the same that Republican lawmakers aim to defund other government services (schools, health care, etc.). It's mandating obsolescence through legislation: Once the government services are neutered, the next logical step is to point to their failures as reasons to open them up for private business interests to take over.
As is usually the case when big business jockeys for further market share, it's the smaller businesses that are hit the hardest. While it's not the end of the world, says Andrew Cox, Director of Distribution of Hydra Head Records, “we're definitely losing money on it.” That's especially true on orders that they've had to fulfill that were placed before the shipping rate increase, but sold to customers at the previous rate.
Other, smaller labels, Cox says, especially CD-only labels will be particularly harder hit. Hydra Head are largely known for their vinyl releases. “A lot of labels that only do compact discs and tapes, if you're buying a $9 tape and the shipping is $12, I don't know if I would buy that. You're not going to take chances on stuff that you're not super-familiar with.” Compact discs, which average around $10-12 from Hydra Head would cost around $13-14 just to ship now, he says. Hydra Head sell more CDs internationally than domestically, “which are still a bigger part of the market out there.” >>
Click through to continue to page two
No Idea’s Geis is seeing a similarly dis-incentivizing price jump in what they ship. “We've definitely had to raise our prices. Our records are right around $10. Before, sending one to Europe, it would be $9 or $10 to send [a one or two-pound package]. Now when you're shipping that $9 or $10 record, it's more in the $20 range now to ship. Those base low-weight prices are pretty bad.” The more you ship, he points out, the more things kind of even out, toward the six- or seven-pound range. So what does that mean for their international orders? More calculated purchasing, he thinks. “What I'm hoping is—and this is total speculation—is that the orders might not be quite as frequent, but they'll be bigger. Maybe two or three kids getting together to place a bigger order, to split the postage up.”
Another workaround that has been bandied about is the idea of dealing with middlemen in markets, like Europe, where indie labels do regular business. A label would ship records in larger bundles to reduce cost, to people who would then go onto to ship them within the country of destination. Whether or not that would be feasible for a label like No Idea isn't clear. They are also a distributor, so they have good channels through the record stores they sell through internationally. “A record broker seems like a cool idea in theory,” Geis says. “I don't know how that would work. Say you were a record broker and needed to collect a certain amount of orders before you placed your order. Would that take a week? Two months? The longer time periods seems like it might not be worth it.”
Run For Cover Records founder Jeff Casazza says pre-orders of new releases have been hit particularly hard. The label is now dealing with thousands of records sold at pre-price increase rates.“It's important to be able to sell direct” for a small label, however, Casazza says. “And that's getting more difficult.” While shipping more to companies in Europe and the UK that carry their records might help, shipping in bulk to distributors is just more of a hassle in his estimation. Direct orders make more money for the label, impose less of an additional cost on the customer, and help labels determine how many copies of a record to ship on future pressings.
On the plus side, the end result may be music fans purchasing records directly through those record stores, another group of small businesses always on the brink of insolvency. Worst-case scenario, the prohibitive shipping fees lead to even more illegal downloading than we're already seeing.
“This will probably just help push kids more toward digital,” Hydra Head’s Cox says, although he's optimistic that's in the legal sense. “Hopefully, it seems like people are kind of coming around and realizing that taking [music] for free is affecting not just giant labels. I feel like there's been more of a responsibility for people feeling like they need to support smaller labels and artists, through paying for digital, buying merch, even donating through PayPal.”
“I think that the people who are buying our records and records from similar labels are upset about this because they want to own the physical product,” Casazza says. “It's already so easy to download the record, if this was going to push them over the edge they already would've been over that edge."
“I'm sure [more illegal downloading] has got to be a result of this for sure,” says No Idea’s Geis. “I just don't know. I hope that's not enough to start putting places out of business. I think right now it's just a sticker-shock kind of thing with people seeing these kinds of prices going up so much, it's going to make them really reevaluate the way they way order records. They're gonna have to be more strategic and might have to wait until they want two or more things.”
In other words, music fans will have to think harder about ways to more efficiently use their money. There's one easy way to do that. As Casazza points out, he's seen plenty of people joking on message boards about how great the increase in shipping costs are; think of all the money they're saving by not buying all the records that they usually would have.