At the Chicago Reader, Peter Margasak explains the ripple effects from the Touch and Go’s decision to end its distribution service:
As part of these “production and distribution” deals, Touch and Go would front labels the money to press new records, then make quarterly payments to each of them that represented any profit the records were making balanced against those expenses. Rusk declined to comment for this piece, so it’s hard to be sure why he decided to scrap this system, but the brutal financial climate, coupled with rise of downloading and file sharing–which has seen record stores drop like flies and sales of music plummet–must be a big part of the reason. (In his official statement he mentions “the current state of the economy.”) His company has long been praised for its efficiency and refusal to chase growth for its own sake, so it’s hard to imagine it would make such a traumatic change unless it were necessary for its survival.
Greg Kot covered similar territory for the Chicago Tribune: Touch and Go’s cutbacks leave independent music labels reeling, claiming “Owners say they will have to scale back operations to survive; others unsure if they will be able to make it.”
The biggest labels, such as KRS and Drag City, are already taking care of business with other distributors. They will probably follow the lead of Merge, who had used Touch and Go for several years, but has gone directly through ADA for the past few years. ADA (Alternative Distribution Alliance) is “the largest distributor of physical and digital independent music in America,” and is part of Warner Music Group.