Music Blogs

So, the whole of distributor Pinnacle has, indeed, gone into administration. A notice was posted on the website of parent company Windsong Holdings yesterday lunchtime reading: "David Harry Gilbert and William Matthew Humphries Tait were appointed Joint Administrators of Windsong Holding Ltd and Pinnacle Entertainment Ltd on 3rd December 2008. Please note that the joint administrators act as agents of companies and without personal liability".

The company reportedly told their 94 staff of the situation yesterday morning, and senior executives were expected to meet in the afternoon to decide what to do next. Unlike when eUK went into administration last week - which threatened the supply of mainstream releases to the supermarkets and high street stores like Zavvi and WH Smith - the collapse of Pinnacle will impact more on the bigger independent record companies because it specialised in the indie sector.

This fact could make the collapse of Pinnacle more devastating, depending on how much money the company owes the record companies for which it distributes - certainly it's not unknown for the collapse of larger indie distributors to lead to the closure of some of the labels they work for. A number of UK indies came close to the brink (and at least one went over it) when distributor 3MV went under in 2004.

With this in mind the Association Of Independent Music was due to hold an emergency meeting for its members at its Chiswick HQ this morning. The trade body said legal and insolvency experts would be on hand to offer free advice to affected labels. AIM have also sent their members a template letter which they recommend labels who used Pinnacle send to the distributor's administrators without delay in order to lay claim to any stock currently sitting in the firm's warehouse.

Pinnacle also handled some physical distribution on behalf of other distribution companies, so they too could feel the effect of the company's collapse, though one, Kudos, emailed its client labels yesterday to assure them they'd be OK. Their message said: "Pinnacle accounts for no more than 20% of our overall turnover. The rest of our business is export, digital, and those key accounts who we service directly. Pinnacle was also up to date with us, having only missed the most recent payment (balance of September and 50% of October billing)".

Pinnacle is a long established name in independent music distribution, though it's not the first time the company has collapsed, it went into liquidation in 1984. It was then that Windsong Exports bought the outfit, transforming it into one of the UK's most successful indie distributors. It was subsequently bought by record company Zomba in 1996, and became part of a major record company when BMG acquired complete ownership of Zomba in 2002. After taking over Zomba, BMG owners Bertelsmann shifted Pinnacle into its media services business Arvato, where it stayed until the start of the year when a management buyout led to the distributor becoming an independent entity again.

At the time top man Sean Sullivan said: "The team at Windsong/Pinnacle has worked hard to build and retain its unique position in the marketplace handling an enormous range of music, DVD and games. We are excited at the prospect of returning to independence and operating a business that is nimble enough to respond to increasingly complex market conditions and client needs".

But Sullivan et al probably didn't anticipate just how hard market conditions would be by the end of the year. Confirming the company was in administration yesterday, administrator Matthew Tait told reporters: "Unfortunately the company has been affected by the sudden and steep downturn in the UK economy. We are looking at how best we may be able to handle the trading assets and work with the company to achieve the most favourable outcome".

It's not clear whether Gilbert and Tait will try to sell the company as a going concern or wind it up. It's also not clear whether Pinnacle will continue to operate while the administration goes into effect. Some reports suggest they will, though others say all 94 staff have already been made redundant.

2008 has not been a good year for music distribution, of course, as a sector already struggling on the back of slumping CD sales felt the full force of an economy in decline. Smaller distributors like Amato and Goya bit the dust at the end of last year, and last week major player eUK called in the administrators (though its collapse was arguably caused by problems at sister company Woolworths). And problems in the sector aren't limited to the UK. Yesterday it was also announced German based vinyl distributor Neuton had declared insolvency, while there is speculation about Canadian distributor Fusion 3 after it reportedly laid off most of its label managers and sales reps.

To conclude, now is not a good time to be in music distribution. And with Pinnacle's collapse coinciding with eUK's administration, the next few months are going to be a challenge for the UK record industry at large.

-- from today's CMU Daily, www.cmudaily.co.uk