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it remains to be seen whether,as Sam Sniderman was quoted as saying recently, “no Canadian artists got hurt” when his landmark record retail chain declared bankruptcy last week. While the multinational major labels — like SONY, Warner and Universal — should be able to suck up the hit to their bottom line, some of Canada’s smaller independent labels and distributors are bracing for the worst. They aren’t holding out much hope that they’ll get paid once Sam the Record Man’s assets are sold off.
These labels and distributors are included on the long list of unsecured creditors lining up to get paid for thousands of units shipped to the store.
They’re the casualties Sam’s son Jason Sniderman, the former vice-president who’s been running the stores since the 1980s, is hoping to minimize. The young Sniderman spoke publicly about the bankruptcy for the first time in an interview with NOW earlier this week.
“We’re just going to have to work our ass off to see if we can make sure that the creditors participate in whatever money we can reclaim from the business and make sure that we minimize whatever impact this is going to have on big guys, smaller guys, artists, everybody,” says Sniderman. “I feel that sense of responsibility, as does the rest of the family.”
In a wide-ranging interview, Sniderman tells NOW he blames the record companies and retailers, including Sam’s — and not just digital downloading — for slumping music sales.
“You can’t help but think that people in their own minds have been conditioned on a social basis that music is something they’re entitled to without necessarily compensating an artist every time they access a piece of music, whether it’s on the radio or digital downloading, especially when record companies themselves are promoting music at very, very discounted prices,” he says.
He also tells NOW that in the past he has quietly cut cheques so up-and-coming Canadian artists including Moist, Lowest of the Low and the Leslie Spit Trio could get their records out.
“These were people I knew, and they were people I believed in, and I wasn’t really looking at using it as a publicity angle to promote my store,” Sniderman says. “It was just something that my father had ingrained in me that he had been doing since the 60s.”
According to the company’s own account, it owes about $17 million to creditors. (That figure could change, depending on the number of claims that are filed.) It has no bank debt. At the top of the list is the Sniderman family itself — the largest secured creditor — which is owed over $8 million, according to the receiver, BDO Dunwoody.
The family has been injecting its own money into the company to keep it afloat for a number of years.
“We’ve never gone to a bank for financing,” says Sniderman. “We try to operate out of cash flow and we have been using our savings to try to finance the whole project. It’s been a labour of love for the past six or seven years.”
The decision to declare bankruptcy was made at a family meeting where it was recognized that the outlook for the business wasn’t improving.
“Nothing really was an impetus apart from the fact that the prospects for us getting any better weren’t really there as it currently stood,” Sniderman says.
Management decisions aside, the bottom line for many small operators in the already lean and mean Canadian music biz is that Sam’s sudden downfall will be a major blow. This is just the latest bankruptcy in the last year. Toronto-based CD Plus stung distributors when it went under last winter. (A new owner is now operating under the CD Plus name.)
Hamilton-based independent distributor Sonic Unyon, for example, is owed more than $50,000 on 5,000-plus unpaid units tied up in Sam’s.
“If it’s anything like any of the other receiverships we’ve been through, we don’t end up with anything,” says Sonic Unyon co-owner Mark Milne, adding, “It makes it that much harder for us to operate. It eats away any profit we might have made this year.”
Toronto-based indie distributor Outside is owed about $100,000 for over 8,000 units.
“I guess we’re philosophical about it,” says Outside president Lloyd Nishimura. “It’s just a part of doing business now.”
Montreal-based indie distributor Fusion III is also owed more than $100,000 on about 6,000 units. That’s a major hit, says Fusion president Jim West.
“We’re an independent, so anything over $10 is significant,” he says.
At the top of the unsecured creditors list is Universal Music, which is out over $2 million, according to BDO Dunwoody senior vice-president Peter Aykroyd. Universal would not comment but didn’t dispute the number.
Local music promoter Richard Flohil, who considers Sam’s one of the great record stores because of the deep selection of artists it carried, tells NOW he believes the timing of the bankruptcy is a shrewd business move to maximize returns.
In a widely circulated e-mail, Flohil recently wrote: “It’s another serious blow to the music industry, but Sam and his family are gonna come out with all their money back, the real-estate intact, and Canadian suppliers (the little guys as well as the five majors) are being — may one use the word? — screwed big-time.”
Whether the Sniderman clan recoups all the money it has pumped into the company over the past several years remains to be seen.
“That’s a really hard one to say right now, because it depends on a number of things,” says Aykroyd. “The main thing right now is how long will the public support last? We’re only really getting it at the main store. How soon will we be having to reduce prices, giving them discounts to get them into the store?”
Sniderman, however, maintains that the decision to declare bankruptcy and consolidate all stock into six stores across the country on the eve of the busiest record-buying time of the year had nothing to do with maximizing the amount the family will recoup.
“I’ve never done this before,” he says. “I don’t know if there’s a better time to do this or not. Obviously, the decision was really difficult, and obviously I took the advice of whatever professionals were around as to what we should do. But this wasn’t contemplated with that in mind.”
As for the “real estate” Flohill’s referring to, the family’s flagship store on Yonge at Gould, as well as three other stores remaining open in Halifax, Montreal and Vancouver, are owned by a separate family entity not affected by the bankruptcy. (Of the 30 corporate stores owned by the family, 24 were closed. Besides the four locations mentioned above, two leased stores in Toronto operated by the family will also remain open. Eleven franchise locations are not affected by the bankruptcy.)
Asked if the family considered re-mortgaging their properties to finance the business, Sniderman will only say that “without going into details, we did a number of things to try to bolster our cash position over the last four or five years, and those are decisions that we took very seriously.”
Sniderman also asserts that media reports that the family lost millions in a Sam’s-branded online venture that went belly-up last spring are false.
“The online venture was a licensing deal where I licensed the name to a third party and they raised their own capital, which had nothing to do with family capital,” he says.
Sniderman says he has been entertaining another inquiry for an online venture since the spring that may still fly. As well, Sniderman isn’t ruling out Sam’s emerging in some other form in the future.
“It’s just going to be a process of evaluation to see if we can actually come out of it with something that’s viable.”
scottand@nowtoronto.com
