Here’s a simple way to put the explosion of vinyl record sales in perspective: Pressing plants around the globe have the capacity to manufacture 160 million albums a year, according to the estimate of one executive with decades of experience in physical formats. But, he explains, the current “extraordinary” demand for vinyl looks to be more than double that: somewhere between 320 million and 400 million units.
It is a stunning appraisal. Twenty years ago, vinyl albums were selling just over 1 million copies a year. But if manufacturers were able to meet today’s demand, vinyl album sales would be set to surpass their all-time peak of 334 million LPs in 1978, according to the RIAA. Adjusted for inflation, the 1978 figure amounted to $10.3 million in sales. If demand could be met today, sales could top $2 billion.
Except they can’t. In periods of low demand, vinyl albums take two to three months to produce and get into stores. While delays existed pre-pandemic, label sources tell Billboard that a spike in demand that began in July 2020, coupled with continuing supply shortages, means that vinyl record orders placed in early May will be fulfilled in December at the earliest — while some manufacturers are telling clients they will have to wait until March 2022.
“There is not one area of the supply chain that hasn’t been impacted,” says Brandon Seavers, co-founder/CEO of vinyl manufacturer Memphis Records. “Even the houses that produce album packages, such as inner sleeves and album jackets, were not prepared for the surge in demand.”
Music fans in COVID-19 lockdown spent their disposable income on turntables and vinyl instead of concert tickets, which makes the pandemic responsible for both the skyrocketing demand and the disruption of the supply chain and other factors that have caused the production bottleneck.
Pressing plant and label executives say that during the pandemic, order sizes have doubled. “Labels that used to do a couple of thousand copies on a title are now doing 5,000 copies, and labels that were doing 5,000 copies are now doing 10,000,” says Matt Earley, co-founder/vp sales and marketing for Cleveland-based plant Gotta Groove Records. That increase has a lot to do with big-box brands Walmart and, to a lesser extent, Target. “Big boxes buying into vinyl has changed the picture,” says Seavers. “In 2020, the average order on a title was 3,700. Now the average order is 7,000 to 8,000.”
This demand for depth — more copies of a single title — has taken its toll on breadth — the range of available catalog titles, says Laura Provenzano, senior vp purchasing and marketing for vinyl wholesaler and distributor Alliance Entertainment. “Currently, we have 37,000 vinyl titles in stock,” she says. “At this time last year, we had 45,000. So that’s also where we are starting to feel the shortage.”
The slowdown hasn’t affected sales. The vinyl boom generated $626 million in 2020 — a 46% increase in sales over 2018, according to the RIAA — and made it the No. 1 format for albums. In the first four months of 2021, that growth more than doubled to an eye-popping 98.8%, according to MRC Data, which suggests that vinyl will top $1 billion in revenue this year. Demand isn’t the only thing driving revenue either: Since 2011, the average suggested list price for a vinyl LP has increased from $21.71 to $27.11 in 2020.
But on April 29, however, the numbers began to tell another story. Vinyl sales remained robust, but rising material costs, labor shortages and shipping delays significantly reduced vinyl manufacturers’ production capacity. As the traditional spring and summer uptick in front-line releases started, CDs, which are faster to produce and can be ready weeks after an album’s digital release — compared with months for vinyl — edged out vinyl as the No. 1 album format in May, 13.7 million units to 13.5 million, according to MRC Data. The first Record Store Day drop, on June 12, could put vinyl back in first place — at least momentarily.
In the short term, those involved in vinyl manufacturing and sales say they are sanguine about the production crunch. “It’s a big, big problem,” says the physical sales executive who puts demand at twice the capacity. “But it’s a damn good problem to have.”
Unless this year’s delays affect demand down the road, that is. How long the vinyl boom — which began in 2011 — will continue has been an open question. Now that question looms larger, because if demand doesn’t break an already fragile production system, a growing consumer hunger for vinyl pressings of top-selling pop and hip-hop albums could threaten the long tail of reissues and indie-rock albums, which sparked the boom in the first place.
In 2019, the supply of vinyl albums had caught up with demand — for a minute. Until 2015, vinyl production had been dependent on vintage presses kept in operation by cannibalizing parts from older machines that no longer worked. But that year ushered in new entrants to the vinyl business, including manufacturers of more efficient pressing machines. Viryl Technologies in Etobicoke, Ontario, for example, introduced pressers that operated on new technology, while Gz in the Czech Republic manufactured new units cloned from their predecessors and supplied them to affiliated manufacturers such as Memphis Records.
The Tennessee-based manufacturer is one of over a dozen new pressing plants that have opened in the United States since 2015, according to the Vinyl Pressing Plants website. Among them: Third Man Records in Detroit; Cascade Record Pressing in Milwaukee; Second Line Vinyl in Oakland, Calif.; New Orleans Record Press in Louisiana; Smashed Plastic in Chicago; and Brooklyn Vinyl Works in New York.
This influx of new pressing plants resulted in a flat year for vinyl manufacturers in 2019, says Gotta Groove’s Earley, who recalls “a period of about 18 months [ending in July 2020] when there was more capacity than demand.”
Beginning in 2020, however, a series of events would alter those market dynamics. That January, Rainbo Records, one of the industry’s oldest and largest vinyl manufacturers, closed and sold its pressing machines after losing its lease.
Then, in February, Banning, Calif.-based Apollo Masters — one of only two companies worldwide that produced the lacquer discs essential to the vinyl stamping process — burnt down in a three-alarm inferno that required 82 firefighters to extinguish it, according to local news reports. The remaining lacquer producer, MDC, is in Japan.
“At first, everyone s–t a brick,” says Quality Records Pressing and Acoustic Sounds owner Chad Kassem of the Apollo Masters disaster. MDC has increased its productivity, so the sector’s worst fears have not been realized. But a single manufacturer of lacquers remains a concern that points to just how tenuous the vinyl supply chain is.
When Apollo burned to the ground, the vinyl industry was still coming to grips with two problems that had emerged in 2019. First, Direct Shot Distribution, the Franklin, Ind., fulfillment house used by the three major labels to distribute their CDs and vinyl to wholesalers and retailers, was delivering the wrong product to stores and, in some cases, failing to fill orders at all. And the majors represent close to 85% of U.S. music sales. To make matters worse, labels began laying off executives who worked with physical product, largely because of growing confidence in streaming revenue, and some staffers who inherited those responsibilities were ill-equipped to handle the Direct Shot mess, let alone the looming crisis. “All the bad news was hitting at the same time,” says a brick-and-mortar retail executive.
And then came the pandemic.
Initially, labels narrowed their focus to streaming and downloads, holding back releases of physical formats due to uncertainty over when brick-and-mortar stores would reopen. But as lockdowns eased in June 2020 and retailers began to reopen with limited capacity for shoppers, labels resumed ordering vinyl and CDs.
Many music fans had already turned to mail-order vinyl, and as stores reopened, they faced a slew of other challenges: warehouse closures, a shortage of truck drivers, shipping delays and an overall breakdown of the vinyl pipeline. Suppliers of packaging and raw materials, pressing plants and transport hubs were all subject to shutdowns or slowdowns due to COVID-19 outbreaks. Plants that didn’t shut down often operated at reduced capacity because safety measures that demanded social distancing allowed for fewer workers.
“We used to be able to fit 12 to 15 people on our assembly lines, but in order to keep the workers six feet apart, we could fit only six to eight,” says Eric Astor, president/CEO of Furnace Record Pressing in Alexandra, Va. “The pandemic made us rethink and reconfigure our entire operation, from sales and logistics standpoints to the plant floor. So suddenly we have an assembly backlog because we don’t have space for everyone.”
“There is always something squeezing the supply chain,” says Independent Record Pressing GM/vp customer relations Sean Rutkowski, ticking off “shipping issues, getting color compounds, stampers or printed album covers” as pain points.
Making vinyl records is a combination of craft and science, which means there is a limited workforce qualified to create stamping plates from the lacquers — each of which can produce about 1,000 pressings before it needs to be replaced — and press operators are in short supply. With little time to train new workers, “it’s taking longer to make plates, to do test pressings — everything,” says Rutkowski.
Further complicating the pressing process is a surge in demand for limited-edition color vinyl pressings of releases. “Back in 2015, if it was flat, round and black — vinyl itself was the driver,” says Seavers of Memphis Records. “Now the driver is color vinyl, mixed-color vinyl and exclusive packaging with bells and whistles.”
Pressing albums on colored vinyl is an even more time-consuming process, says Rutkowski. “If we have 10,000 units on order from a label that are to be pressed in six different colors, that will definitely impact capacity, because every time we change the color, we have to clean the machine and [recalibrate] it in order to get good sound quality.”
Record Technology Inc. owner Don McInnes agrees that color vinyl slows the production process, but it “does not have as significant an impact as packing additional items like inserts and stickers into an album,” he says. “That requires a lot of additional handwork that clogs up everything.”
While grappling with production delays, record manufacturers are also dealing with rising production costs. “The price of vinyl pellets went up 17% on April 1,” says McInnes. And Rutkowski says that Independent Record Pressing, based in Bordentown, N.J., is operating in a warehouse district that is “remarkably competitive for labor.” The state is also gradually increasing its minimum wage to $15 an hour by 2024 — which, he adds, “drives up the wages for all the employees in the marketplace.”
Those rising costs are eating into manufacturers’ already slim margins. Bruce Ogilvie, chairman of behemoth wholesaler Alliance Entertainment/Super D, says vinyl manufacturers make 30 cents to 60 cents per unit, which was a key deterrent when Alliance was exploring entering the market. “The return on investment is nothing to write home about,” he says.
“Everyone assumes the vinyl manufacturers have this great thing now, but this is hard work,” says Dave Hansen, co-owner of Independent Record Pressing. “Vinyl manufacturers are being taking for granted. Everyone tries to beat us up on price, but no one is getting rich making vinyl records.”
The decade of growth that vinyl sales have enjoyed since 2011 has been fueled by a shift in consumer demographics. Once dominated by older white males, vinyl buyers are now a diverse group, according to retailers and label executives.
So, while sales of classic rock have dominated the past decade — according to Billboard estimates based on figures from MRC Data, The Beatles and Led Zeppelin respectively sold 3 million and 1 million vinyl albums during that time — contemporary artists in pop, hip-hop and country are the top sellers for the first 19 weeks of 2021: No. 1 is Harry Styles’ Fine Line, which has scanned 94,000 copies this year; No. 2 is Kendrick Lamar’s 2012 breakthrough, good kid, m.A.A.d city, at 72,000 copies; and Billie Eilish owns Nos. 3 and 4, with When We All Fall Asleep, Where Do We Go? and 2017 EP Don’t Smile at Me, which together have sold 134,000. Current country is in demand as well: Chris Stapleton’s 2020 album, Starting Over, has scanned 67,000 copies so far this year, while his catalog has moved over 400,000 vinyl LPs.
Manufacturers say that increased demand for front-line releases has led labels to shift their vinyl pressing priorities from catalog to recent releases. “Labels want their new releases to come out before doing the repressing of catalog titles,” says Kassem of Quality Records Pressing. “I can’t get catalog back on the presses because of new releases with a street date.”
Ratcheting up orders for current titles are big-box brands Walmart and Target, which, after retreating from physical sales, are once again betting on vinyl. The mass-merchant sector accounts for 13.6% of the 14.9 million units that have been sold this year as of May 27, according to MRC Data. That’s up from a 4% market share in 2018 but down slightly from 13.8% in 2020. According to label sources, Walmart accounted for about 8.2 points of the latter percentage, while Target’s share was 5.4 points.
While these mass merchants do help drive catalog sales, they capture an outsize market share when it comes to vinyl sales for current hit artists. According to calculations made by Billboard using numbers from MRC Data, in 2020 mass merchants accounted for 26.4% of Styles’ catalog vinyl sales, which totaled 535,000 copies; 24.3% of the 400,000 copies sold from Stapleton’s catalog; 19% of the 760,000 copies sold from Lamar’s catalog; and a whopping 43.3% of Eilish’s catalog sales, which totaled 740,000.
Label sources say that demand for vinyl has revived Walmart’s interest in music product. Its 4,473 U.S. stores now carry approximately 300 titles and, label sources say, have scanned over 50,000 copies of some popular titles.
The priority — and shelf space — given to hitmakers like Styles and Eilish signals a shift in the customer base for vinyl and raises questions about what the vinyl boom might look like if it continues. Rising orders on front-line titles could crowd out the indie-rock and reissues that first sparked the vinyl renaissance at independent music retailers.
For the moment, though, the rising tide has lifted all ships. From 2018 through 2020, indie merchants were vying for 40% of the market with Amazon and other online sellers. In 2021, the surge in vinyl demand gave indie retailers a commanding market share — 45.6% of the 14.9 million vinyl copies that have been scanned as of May 27, compared with the 35.7% garnered by Amazon and its ilk. And should vinyl become a lasting habit for younger buyers, what started out as a fad will have grown into a multibillion-dollar business for the music industry.Source link