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UMVD Nearly Doubles Latin Share
By Leila Cobo
June 21, 2003
MIAMI--The leading U.S. distribution company has never been more than an also-ran for Latin music, placing dead last in U.S. market share as recently as three years ago.
Universal Music & Video Distribution's (UMVD) share of the Latin marketplace has nearly doubled in a year, from 18.8% in first-quarter 2002 to 32.5% in first-quarter 2003, according to Nielsen SoundScan.
That vaults it to No. 1 from No. 3, leaving behind longtime market leader Sony Music. And last month, for the week ending May 11, UMVD achieved a 40.38% market share, the largest ever in Latin on a weekly basis, according to Nielsen SoundScan.
UMVD's quantum leap is largely the result of the distribution deal inked with the Univision Music Group (UMG) and its Fonovisa and Disa labels.
But the numbers also reflect a fundamental change in the way Latin music is sold in the U.S.: It is shifting from Latin mom-and-pops to mass merchants. And they indicate a heightened awareness of the importance of allocating resources specifically to the Latin marketplace.
"[Many] accounts are targeting Latin product as a growth area," says Harry Fox, Warner Music Latina VP of sales. "They know, they follow the trends, they follow the population growth, and they realize that there's an opportunity there to capture that Latin consumer."
But because Latin is a niche market, the competition to get product into major accounts is ferocious.
"It's like any niche label," says Gregg Vickers, VP of sales for EMI Latin USA, which is distributed by EMI Music Marketing (EMM).
"We have to struggle against the Britney Spearses of the world. You have to have a story to sell, not only to the distribution people but to the accounts. As a Latin label, we have to take the responsibility of exciting the customer and EMM."
EMM also saw its distribution market share rise to 11.3% for first-quarter 2003, from 9.2% for the same quarter last year.
But if the competition to get into stores is stiff for the majors, who have clout, it's even tougher for indies. As a result, many smaller labels who used to sell well on their own have recently signed major distribution deals to increase their sales and visibility in the U.S. and Puerto Rican marketplace.
In the past six months, for example, EMI has signed deals with several indies--including Max Mex, Aries, Puerto Rico's Gogo Music, and Vene Music--and expects to see market-share gains by the end of this quarter.
And UMVD's explosion, of course, can be directly traced to its UMG/Fonovisa/Disa deals, as well as to distribution agreements with smaller indies like Puerto Rico's VI Music, which specializes in Latin rap and regaetton.
"Latin was a tremendous growth opportunity for us," says Gustavo Lopez, UMVD VP of Latin sales and marketing. Equally important, UMVD has been able to accommodate its new product thanks to an expanded Latin department. That enables it to operate independently from the labels it represents.
MAKING LATIN A PRIORITY
Some seven years ago, the company assigned Latin product to Latin music "specialists" within its domestic distribution system, as opposed to simply piling Latin product on top of everything else a general sales rep had to pitch.
Designating Latin reps within the distribution system, Lopez says, "plays a factor in this ongoing effort to grow the [Latin] business at the domestic account base.
"When you walk in as a label, and Latin music in the big scheme of things only represents 5% of the overall sales, you already get little attention as it is," Lopez says. "If you walk in there as a cousin of the [distribution] company instead of a brother or sister, as a sales rep, it's harder."
That fact has not been lost on other distributors, notably WEA, which also switched to a similar model four years ago. But while WEA does not distribute additional Latin labels--a factor in its smaller market share--UMVD has many.
And they are huge.
So huge that by December 2002, when it signed its distribution deal with Fonovisa, UMVD had already doubled its Latin field staff, from eight to 16 people, making it the largest serving the Latin market in the country.
By then, UMVD had proved its worth in distributing labels other than its Universal Music Latino and its newly acquired RMM Records.
Regional Mexican indie Disa, for example (of which Univision owns 50%), had seen its sales explode under UMVD distribution. The sales have been greatly helped by Univision TV campaigns.
Forking over Fonovisa, which had its own distribution, was still a leap of faith for Univision, given that its market share was already between 10% and 12%. But the label was under-represented in many domestic accounts and absent from others, including Tower Records.
"For me, this is a watershed moment," said Zach Horowitz, president/COO of Universal Music Group, at the time the deal was signed.
So far, the results have been positive. In this issue's Top Latin Albums chart, for example, three of the top 10 titles belong to Fonovisa, more than any other label.
Six titles fall under the UMG umbrella, and seven out of the top 10 are UMVD-distributed.
Five of those titles are newly created compilations, part of a trend among Latin labels. And because the sales possibilities with catalog material are so obvious, UMVD has added two reps to its staff. Based in Minneapolis and in Detroit, their sole responsibility is to work catalog.
"We're trying to get Fonovisa back where it should be," Lopez says. "[There are] older titles that deserve to be in the browsers, and it's very hard to get them back in once they've been out. And these are titles that can sell 30 to 40 pieces a week. So, slowly but surely, we're trying to build our catalog."
All of this has resulted in a bigger-than-ever presence of Latin music in domestic accounts and in mass merchants.
The Handleman Co., for example, which stocks all Kmarts and one-third of all Wal-Marts, currently has an average of 2,000 Latin titles in about one-third of its stores. That is up from a "negligible" number of stores 10 years ago.
As a result, annual sales of Latin product for Handleman grew by 30% in 2000 and by 6% in 2001 as the number of stores stabilized.
The shift to more mainstream retailers is reflected in Nielsen SoundScan numbers, which are far more upbeat than figures collected by the Recording Industry Assn. of America (RIAA).
Last year, about 19.5 million Spanish-language records were sold, down about 4% from the 20.3 million sold the year before, according to Nielsen SoundScan.
In contrast, the RIAA reported a 16% drop in Latin shipments last year.
For first-quarter 2003, sales of Spanish-only albums, according to Nielsen SoundScan, were up by 13.5% against first-quarter 2002. But unit shipments of Latin albums were down 6.5%, according to RIAA figures.
What this indicates, at least to a degree, is that sales of Latin music in traditional Latin-only outlets--many of which do not report to Nielsen SoundScan--have dropped.
"It's not that the markets are growing; the habits of the consumer are changing," says Guillermo Page, VP of strategic marketing and distributed labels for EMI Latin USA.
This is not necessarily good news.
For one, sources say, positioning product with a mass merchant is expensive, and the cost to a Latin or non-Latin album is the same in some accounts. But sales of Latin, a niche market, cannot come close to sales of a mainstream English-language album, often making the cost prohibitive.
On the other hand, the slowdown in traditional Latin accounts directly affects artist development.
"I hope we don't lose the perspective of the traditional Latin accounts," Warner's Fox says. "Because that's where we break new artists. We don't break them in U.S. accounts."