Distribbery being revamped before return
Al Teller, former chairman and CEO of MCA Music Entertainment Group and now CEO and co-chairman of Alliance Entertainment, apparently has put his dream of creating the seventh major music conglom on hold.The firm has all but shuttered its independent distribution arm, INDI, which at one time distributed product from more than 500 labels, but now handles discs from fewer than 50. The indie network will shift to a much smaller operation boasting around six labels by early next year, according to sources. It will not fold however, as had been the industry chatter. The new and improved INDI, the acronym for Independent National Distributors Inc., is expected to bow during the first quarter of next year with an eye on growing a leaner, meaner operation, which could have as many as 15-20 labels by midyear. INDI’s staff of more than 125 likely will be reduced by two-thirds, according to sources. INDI G.M. Larry Stessel will remain with the firm and be instrumental in reshaping it. But the new direction suggests Teller, who when he took over Alliance in 1996 asserted he was on the road to building a seventh major music conglom, apparently no longer is pursuing that vision. INDI also has closed three warehouses and now will shift from having internal back-office functions to paying to have those duties handled externally, all in an attempt to cut overhead and set the stage for a comeback. Since taking the Alliance helm, the company has filed for bankruptcy protection and has been working to repay creditors. (Daily Variety, July 15). It recently received $50 million in debtor in possession (DIP) financing to keep Alliance in operation during the restructuring. The company is expected to glean around $50 million from its sale of label subsid Castle, and recently sold its Red Ant label to Wasserstein Perella for $1 million. The investment banking firm also agreed to put in $11 million of working capital. The bankruptcy court is expected to review a new business plan for INDI during a Nov. 15 session. Execs at INDI, which was acquired by Alliance in 1995 for $25 million, have told labels with product it distributes that it will cease distributing their product by year’s end and that they should find other distribution avenues. Execs also have told some labels to withhold delivery because of the change in direction. But INDI, which sources estimate is owed more than $20 million by its accounts and has lost around $45 million-$50 million over the past three years, will use the expectedly propitious fourth quarter with sales from new releases by the Rolling Stones, Mariah Carey, Fleetwood Mac and Janet Jackson to help add to company coffers and pay down debt and expenses. The new plan was revealed to independent label execs at the National Assn. of Record Merchandisers mini-confab, which was held over the weekend in Laguna Beach. Alliance execs declined to comment. An announcement is expected later this week.