The New Orchard

The Orchard (http://theorchard.com) has recently re-launched with NEW services, NEW fee structures, and even a NEW contract.

But is it truly Reformed? Or just the same ol' deal Refried?

The New Orchard has been quite active on various mailing lists recently.

So I figured my old article might be due for an update.

Now Brad, of The New Orchard, seems to be a nice enough guy, responding in a timely and reasonable fashion on mailing lists.

And they've dropped the annual fee, expanded their services to encompass digital and on-demand distribution, and re-structured their sign-up fees to give discounts to clients signing up multiple CDs.

Further reading, however, indicates some significant disadvantages in payout terms to signing up multiple CDs -- They define a "record label" as "anybody adding 5 or more CDs at one time." Which is certainly an interesting definition.

It does leave out in the cold any long-established indie artist with a back catalog of 5 or more CDs they'd like to distribute all at once, though.

On the other hand, they've got a link in the FAQ offering maybe better terms if you email them about adding 5 or more CDs at once. Go figure.

But let's examine their NEW contract, shall we?:

And I'll intersperse my comments as before.

I'm still not a lawyer - You still should be asking a real lawyer before you sign ANY contract this complicated.

Up front, I'll say that I've written an entirely NEW article because The New Orchard has changed enough, they deserve that much credit.

Three Distribution Options

The "New" Orchard now offers three options for distributing your music: Worldwide Digital Distribution, Worldwide Digital Distribution & Physical Distribution in the US and On Demand Distribution.

1. Worldwide Digital Distribution: This is The Orchard's newest option! We distribute your digital music files in ALL of the new, legitimate digital music services (DMS) in the US and Europe, including Apple's iTunes (US), BuyMusic.com (US), Listen/Real Networks, DotMusic (UK), HMV (UK), WOM (Germany) and more. [Current Orchard-distributed releases are already receiving this service under option 2.] This means we have deals DONE already with all of these services - and not that we'll go negotiate them later, after we get your rights as bargaining chips. To our knowledge, we're the only company distributing non-major label music that has CLOSED deals with ALL the major services. Further, our "Digital Only" option is non-exclusive, meaning that you're free to distribute your music through DMS providers outside of The Orchard or, for example, on a label site or the site of a specialized digital retailer. Who knows where and how digital music will be sold in the future - this world is new and evolving quickly, and we aren't going to tie your hands. We never have in the past, and we never will in the future. For a join fee of $49 (only $35 for additional releases - see below), you're in.. The "New" Orchard will continue to report to you on a quarterly basis and give you 70% of the revenue generated from your music. The account balance minimum for payment is $10. To our knowledge, The "New" Orchard is the ONLY distributor of any kind that offers a digital only option. You can find a complete listing of Orchard DMS partners here.

Their list of partners, digital and traditional, is fine.
It's true (as far as I know) that The New Orchard are the only ones offering digital-only as a distribution option...
One does have to wonder who would want a digital-only option for their distribution needs, though.
Actually, come to think of it, I can't name any names off the top of my head, but I'm pretty sure there are others who offer digital-only distribution, and that's all they offer.
But technically, it's still true that The New Orchard is the only one to offer digital distribution only, in addition to having physical distribution as an option.
Seems to me that if you're that set on having only digital distribution, you'd go with somebody who specializes in only digital distribution, rather than somebody who does it as an optional side offering.
Still, there's nothing objectionable here, so you should investigate the terms.

2. Worldwide Digital & Physical Distribution: The Orchard's original non-exclusive distribution offering remains in place, and you can continue to sell your music wherever CDs are sold. This option includes digital music file distribution through DMS partners and physical distribution through online retailers (including Amazon.com, CDNow and Barnesandnoble.com) and one-stop distribution partners, who supply record stores. This option costs $99 ($69 for additional releases - see below) for newcomers and gives you the broadest distribution package available anywhere. The "New" Orchard will continue to report to you on a quarterly basis and give you 70% of the sales revenue. As before, the minimum account balance remains $250.

3. On Demand Distribution: If you're out of CDs but want to continue physical distribution, The "New" Orchard can manufacture CDs for you, one at a time, and save you the up-front manufacturing costs! For a one-time set-up fee of $30 for current Orchard-distributed releases [or $129 for the whole Digital & Physical Distribution & On Demand Manufacturing combo for newcomers], we will manufacture new CDs whenever our partners need them, at a cost of $1.40 to your Orchard account. Payment details are the same as Digital & Physical Distribution: we report to you quarterly; you receive 70% of wholesale price; and the minimum account balance is $250. Look for a detailed overview containing all manufacturing and design specs on our website by mid-November!
This being March, one has to wonder why their home-page is so out of date...
I confess I didn't dig any deeper for their promised specs.

No Renewal Fee and Discounts for New Additions

The "New" Orchard is happy to announce that we no longer charge a yearly renewal fee! Once you add a title to Orchard distribution, it remains in our catalog with no additional fees.
A welcome change, given that once the title is in the catalog, maintaining that title is easier for them than removing it anyway.
Furthermore, The "New" Orchard is pleased to announce a 30% discount on all additional releases distributed through any of our three distribution options! You can add a new release to Worldwide Digital Distribution for $35 [$14 discount], Digital & Physical Global Distribution for $69 [$30 discount], or On Demand Manufacturing for $90 [$39 discount].

New Artist and Label Area Coming Soon

The "New" Orchard is currently building a new personalized artist & label area with detailed accounting. The area will be built around your specific account and will include order information, return information and all associated costs; at-a-glance account management for multiple releases including inventory status, re-order history, and in the near future, real-time order status; online registration for additional releases and other great improvements. This area is a one-of-a-kind reporting tool and was designed specifically to meet the needs of our label and artist partners! I'll send you an email to announce the ribbon-cutting when it's ready.
Isn't this the account management page which has been promised, and non-functional, or, at best, chock-full of incorrect data, since the inception of The Orchard?
If I were launching a NEW Orchard, I think I'd have fixed this up before saying "Boo" about it.
But maybe that's just me.

After five years, we are now in a position to fulfill the promise of the Orchard - to represent independent artists wherever music is sold, physically or digitally. From the beginning, we believed that the future of the music industry was digital distribution, but to get you there, we needed to offer you a physical alternative while the digital marketplace evolved (to that point, and for your convenience, we've attached the grant of rights you signed when you joined the Orchard). It took longer than we expected for the digital market to develop, and it will take some time for our partners to load all Orchard music on their sites, but the revolution has finally started.

As I recall, when The [old] Orchard first started up, they were pretty hot on the idea that they could do traditional brick-and-mortar distribution, and that they would build their business focusing on that.
I don't think The New Orchard was even the first to get their indie artists signed up in the digital marketplace.
At any rate, if I was foolish enough to sign their old contract, and now they were telling me that they were just roping me in so they'd have me locked down for the digital marketplace we all saw coming, I'd not be really happy. But we're focusing on the viewpoint of an artist who was not already signed up, and was considering signing up with The New Orchard, so let's not dwell any more on this.

We appreciate you sticking with us during difficult times, and we are excited about the opportunity to deliver for you. We are confident we will exceed your expectations - thanks for giving us the chance to serve you. In the meantime, stay tuned for continued news about the things we're doing to deliver your music to the world.

You can ignore this, as it's addressed to people foolish enough to have signed their original contract.

-Brad

The Orchard Agreement
Ah, the meat of it all.
We agree to provide You throughout the Territory and during the Sales Period with listing of your Recordings in E-Stores during the Term. We will pay you Seventy (70%) percent of our Net Income, accounted for quarterly (please see www.theorchard.com for regularly updated Accounting and Payment Policies), which directly results from sales of any of your Recordings. You grant to us throughout the Territory during the Sales Period the NON-EXCLUSIVE rights to sell, copy, sublicense, distribute and otherwise exploit any and all of your Recordings by any and all means and media (whether now known or existing in the future), including, without limitation, the non-exclusive rights to sell, distribute and otherwise exploit any and all of your Recordings throughout E-Stores including, but not limited to, those via the Internet, as well as all digital storage, download and transmission rights, whether now known or existing in the future.
Once again, they've granted themselves an awful lot of scope and power to use your music in ways nobody could possibly predict.
I should point out, however, that I was 100% incorrect in my 2002 article regarding the limitations of "any and all Recordings"
I read that, in a worst-case scenario, to mean Recordings you never even sent to The [old] Orchard.
A careful reader would observe that they define "Recordings" at the bottom as only "each and every compact disc ... which You deliver"
My apologies to all concerned for this error, though I did promise in the beginning of the 2002 article that there would be errors due to my not thinking like a lawyer. If I was writing a contract, I'd work harder to not re-define terms (like "Recordings") in such a way that I end up saying "any and all Recordings" when I really didn't mean that.
But that's pretty standard legalese, so I guess I shouldn't complain too much about it.

You grant to us throughout the Territory and during the Sales Period the rights to use your name(s), professional and/or group name(s), photographs and other images and likeness of You, biographical and/or other information concerning You regarding all of our business activities (provided we will not have any merchandising rights for anything other than your Recordings). You agree to supply us with retail ready products, including artwork, of your Recordings manufactured by You or on your behalf sufficient to fulfill orders for your Recordings promptly following our request.
One oft-repeated complaint regarding The [old] Orchard was in the sheer number of CDs requested before any tangible proof of actual Sales ever occurred.
With no real account management page, nor any way of tracking where your CDs are, The New Orchard can still pull in an awful lot of product from your stock, tying it up in limbo, and you've got nothing to show for it...
Seems to me that they'd be better off just asking for a whole box of 25 to 30 CDs, or even a case of them up-front, rather than nickel and diming you to death with more and more shipments of CDs that they've only managed to get onto some store's shelves, and not actually sell
Or, if they just don't want to warehouse that many, don't re-order and re-stock their shelves until they've seen actual Sales at the retail level reported back somehow.
It's certainly a pain in the ass to get information out of Retailers (trust me on that one) and there will be a significant delay between their initial order and re-stocking what might a hot item.
But the bottom line is that they know, even better then I do, that getting 5, 10, or even 20 CDs of yours onto the shelves is not the tricky part.
Getting the CDs off the shelves and sold is when they need to re-stock.
Otherwise they just clutter up the Retailers' shelves, and provide no real service to anybody.

You shall be responsible for all the costs associated with additional preparation (including shrinkwrap and jewel box).
They don't want to mess with anything but shrink-wrapped and standard jewel boxed CDs.
Certainly can't blame them for that, but why not just tell you that up-front, instead of letting you sign up, and then charging you extra fees?
Or at least make it clear that they are going to re-package all submissions to standard shrink-wrapped jewel boxes, and that there are fees for that.
Payment for your sales will be processed when your release balance reaches $250.00 (Two Hundred and Fifty Dollars) or $1000.00 (One Thousand) for a Label. If your quarterly release balance is less than $250.00 (Two Hundred and Fifty Dollars) or $1000.00 (One Thousand) for a Label, this amount will be rolled into the following quarter. Label shall be defined as an entity submitting more then 5 albums to the Orchard at one time.
Once again, we come to the crux of the matter.
You are getting 70% of the sales price.
You are not getting paid until there is $250 in your account.
Or $1000 if you submit 5 titles at once, which is their definition of a "label".
Keeping it simple, for an Indie artist with under 5 titles to sell at once, assuming about $10 for your Retail Price, that means that until you sell about 36 CDs (do the math) The New Orchard will be sitting on your money.
For most Indie artists in their target suppliers, 36 CDs is a lot of CDs.
For sure, if you do sign up with The New Orchard, you might as well send them at least 36 CDs initially -- You're not going to see a dime until they sell that many, and you'll just waste postage and stock-up fees they will charge you (viz) until you've sold 36 CDs anyway.
If sending them 36 CDs to start with seems excessive, then maybe you need to re-examine the realities of retail distribution.

We shall have the right to withhold Twenty-five percent (25%) of the Net Income as a reserve for returned and/or defective goods. However, these reserves will be released and paid to You no later than four (4) quarterly accounting periods from the time such reserve is initially established.
But now it gets more complicated.
Even when you are owed $250, you'll only get $187.50 until another YEAR passes, and then you will get the remaining $62.50
Now the brick-and-mortar distribution game is a fickle one. Stores order titles they think will sell, or they are pressured into ordering to get discounts for ordering more, or they are pressured into ordering as part of a package deal.
Eventually, they have these CDs that aren't moving that are cluttering up their shelves, and they ship them back to, in this case, The New Orchard, for a refund.
Obviously, The New Orchard, or any distributor, can't just "eat" that CD. But it seems to me, perhaps being naive, that 25% is a rather high return rate.

Not withstanding the foregoing, We reserve the right to increase the reserve if units shipped exceeds 100 in any given quarter without further notice to You.
Now this is definitely a problem.
If The New Orchard is selling through your CDs fast enough to need more than 100 in a quarter, surely they ought to have some idea that the sales are actually happening, and stores aren't just stocking up for the sheer fun of having your CD clutter up their shelves.
Not to mention that at 100 in a quarter, they are only 3 X over the number of CDs you need to sell just to get paid at all.
But the crucial problem here is that The New Orchard could increase the reserve to any amount they like if your CDs are suddenly selling big-time.
Surely some kind of limit here would be prudent.

You warrant and represent that You have the right to grant us (and any person or company named by us) the rights, contained herein, without any liability to us or any other person or company from whom the rights are obtained. You will be solely responsible to pay all applicable persons and companies (including, but not limited to all music publishers) for all rights to use all recorded performances and/or other artistic materials (including, but not limited to all musical compositions and/or samples) contained in your Recordings (and/or in all artwork). You warrant that the use of the same by us (and any person or company named by us) will not infringe upon the rights of any nature or any person or company. You agree to indemnify, reimburse, and hold us, our officers, members, agents, representatives, successors, designees and assigns harmless from and against any and all liability, loss, damage, cost and expense (including court costs and reasonable attorney's fees) arising out of or connected with any claim by any one or more third party which arises out of any breach of any of your warranties herein, representations or agreements. We shall not be responsible for any inadvertent error in any listing of your Recordings. We reserve the right to reject any of your Recording(s), artwork or other material submitted by You.
That all just boils down to covering their asses if you're dumb enough to copy somebody else's music instead of writing your own.
Fine.
We may assign our rights under this agreement in whole or in part. You may not assign this agreement without notifying Us.

The New Orchard can get themselves bought out by the Big Five, or Apple, or Microsoft, and your contract transfers whether you like it or not.
That would be fine, except that it says "in part."
Which means they could sell off the Digital Rights only to Apple, the physical distribution to Sony, and the on-demand rights to Cafe Press.
Or they could even chop it up into even smaller parts, one would suppose.
Any reasonable, or unreasonable, combination could be sold off to some other company, and you'd still be stuck with this contract.
You, on the other hand, can't sell off your cut of The New Orchard to, say, a label that might want to pick you up.
That's the letter of the contract.

You shall be responsible for all costs of shipping Recordings between You and Us, including shipping costs in the event of returns.
Seems reasonable, except that they have been known to order more CDs than they need, then return them, or worse, NOT return them when you need them for another vendor who is actually SELLING your CDs and PAYING you.
So unless you're sure your CDs are going to be flying off the shelves, The New Orchard is likely to become an expense rather than a revenue.

The Term of this agreement will automatically renew for one (1) year at the end of each Term unless You notify Us in writing no later than 90 days prior to the expiration of the Term (Renewal).
I'm always leery of a contract that the other party can cancel whenever they want, but I'm locked in except at specific cancellation times.
Seems to me an equitable relationship, of any kind, should be equally binding in time period for both parties.

The following words when used have the following meanings: "You" means the person(s) signing as individual(s) and/or as member(s) of any group(s). "We" or "Us" means ORCHARD ENTERPRISES, INC., dba THE ORCHARD. "Territory" means the Universe.
Even though this deal is non-exclusive, and even though Brad has posted on-line that they have released artists in the past who got big deals, they still could choose not to do so, and that could torpedo an impending deal with a big-time label.
For all their talk of rapid change and the digital age, their contract seems awfully intent on locking the artist down, while giving themselves the freedom to do whatever they like.
If their policy, in the few test cases so far, is to just release an artist who needs "out" for an impending contract with a label, why not just let the artist terminate the contract any time they want?
That would truly show that they understand how rapidly things can change not only in the digital era, but the way it always has been in the music industry.

"Signing Date" means the date You sign. "Term" means a period starting on the Signing Date and ending one (1) year from the Signing Date. "Recordings" means each and every compact disc and/or any other audio and/or audiovisual recording in any format, in whole or in part (whether now known or existing in the future ) which You deliver during the Term. "Sales Period" means the time period beginning on the Signing Date and continuing in perpetuity for each of your Recordings in each country of the Territory. "E-Stores" means electronically or digitally accessed commercial retailers (whether now known or created in the future) including, but not limited to on-line record stores or websites. "Net Income" means our gross receipts directly from the sale of your Recordings, minus each and every cost and expense incurred by us specifically related to those Recordings (please see www.theorchard.com for a list of current costs).
Everything was pretty much standard, until you get to the fact that they can take out costs and expenses, which they can define and change at any time, and provide a link to their home page for a list of current costs.
I'm not seeing a list of current costs on their home page. Are you?
So I dig deeper and find this list:

$.25 per unit picking fee - The physical removal of a single CD to fulfill an order.
$.50 per unit breakage fee - A blanket fee for jewel-case breakage during shipping.
$.10 per unit re-stocking returns - The physical act of re-stocking unsold CDs returned from partners.
$.10 per unit shrink-wrapping - Only applies to CDs delivered to The Orchard without individual shrink-wrapping.
$2.00 per release re-stocking reorders - A flat fee charged for the physical act of adding new CDs to your inventory, after your initial shipment of CDs has sold through. Does not vary according to size of restock.
$2.00 per release returning product to artist or label - Only applies to special-case emergency scenarios where artist or label needs Orchard-warehoused product returned to them.

Shipping: Shipping charges vary depending on shipment. Shipment cost is distributed evenly among every unique item that is included in a shipment to the retailer or one-stop. This fee is typically between $.15 and $.20 per unit for larger orders.

Digital Encoding Fees: The Orchard uses a third-party state-of-the-art facility to encode your CD to meet the diverse specifications of each individual DMS. The Orchard pays a standard one-time encoding cost for each individual CD release. This cost is covered by your initial set-up fee. There are no additional costs associated with selling your music files via DMSs.
So if you want to sell your CDs on The New Orchard, you've got to jack up your prices a bit.
Exactly how much is difficult to say. You can guarantee that first $.25 since that has to happen for every order.
Plus, if I'm reading it right, $.50 for every CD, because it might break during shipping. Seems to me they'd be better off just charging the people who packaged the CDs so badly that they broke in the first place.
Now, the returns deal is variable. But The New Orchard is witholding 25% of your money, so assuming they know what they are doing, call it $.02 ($.10 / 4) for the returns.
Presumably you're not silly enough to send them CDs that weren't shrink-wrapped in the first place, so skip that one.
Plus some amount depending on how many CDs they ask you to ship them, and how often they re-order those quantities, after they've sent out your initial batch of CDs.
Last I heard, they had a habit of asking for 30 CDs at a time, and would do that every few weeks, until you realized that all those CDs were going out, and nothing was coming in.
So, per CD, that's $2.00 / 30 = $.06
And, finally, the fee to return the CDs to you, assuming you can get them to actually do that, which many artists in the past have found difficult, at best.
Assuming you only got suckered into sending ~90 CDs before you realized they weren't ever going to pay you, you'd be looking at $.02 per CD.
Then there is the shipping. They tell you the typical fee for larger orders. That's nice. What's the fee for AVERAGE orders?
After all, the odds are better that your CDs will be sent out in AVERAGE orders. That's why it's called AVERAGE.
But, let's be generous, and assume that The New Orchard actually does ship out so many large orders, that small and average sized orders are actually dwarfed by the sheer volume sent in a larger order. You're still out another $.17 per CD.
All told, that's about $1.00 per CD that will be chewed up by The New Orchard in their fees, if things don't work out for you, as they haven't for so many artists with The [old] Orchard.
Even if all goes well, and you actually manage to drive enough sales through The New Orchard, and you are happy with their ongoing efforts, you're looking at $.90 per CD, unless you are selling so many that you can ship them a lot more than that each time they re-order.
All of this is in addition to the expected cost of you shipping your CDs to them -- But you'd have that in almost any deal, except CDs sold at gigs or local retail shops where you drive by there anyway. Just want to be clear that this $.90 to $1.00 is on TOP of what you would expect your retail price to be.
Of course, most other people in the on-line realm aren't asking you to ship 30 CDs and tying up that much of your inventory with a single vendor, until you actually have enough sales to warrant it. But these numbers are very small for traditional distribution, so they are in the "middle" of what one might expect.
Bottom line, your price-point is driven upwards from $10 to $11.00 if you want to be sure you're not going to lose money.
10% overhead in "hidden fees" for doing business with The New Orchard may be acceptable to you. It isn't to me, but it's not a red-flag obvious deal-breaker.
They'd sure save themselves a lot of accounting overhead and ill will (on my part at least) by getting rid of the fees they KNOW will happen on every sale, and rolling it into their %age of the sale, and pushing the other fees off onto the people responsible for causing them. Is it your fault if their shipping carrier breaks a bunch of CDs? Is it your fault if Retailers dig your CD so much they order too many and can't sell them? Why should you pay for it? Why can't The New Orchard really break with the old-school thinking and put the burden of those expenses on the parties responsible for them?
Again, this is not a deal-breaking "Don't Sign This" sort of thing, but it's indicative of where The New Orchard needs to focus if they want to continue improving their worth to you, the Indie artist.

This does not create a partnership or joint venture between You and us. This constitutes the entire agreement between You and us pertaining to its subject matter and may not be changed, waived, discharged or terminated, in whole or in part, except by an instrument in writing signed by You and us. This agreement shall be governed by the laws of the State of New York which apply to agreements entered into and wholly performed in the State of New York and any disputes arising from this agreement shall be subject to the exclusive jurisdiction of the state or federal courts located in the City, County or State of New York.

2003, The Orchard Enterprises, Inc.

So what's it all add up to?

All in all, I'd have to say "Reformed, not Refried." The New Orchard has clearly made big steps toward legitimacy for the right clients.

But I still can't recommend The New Orchard for 99% of Indie artists. Only if you're reasonably certain, based on existing sales in traditional retail markets, that your CDs are going to sell, will you actually make money in their deal.

As The New Orchard clearly points out -- They aren't a label, or a management company, or a promotions company. If you don't already have demand -- actual people walking into stores looking for your CD, you are wasting your time and money (and The New Orchard's time and money) to try and use their services.

They'd save themselves a lot of grief if they just said that. So many artists have this naive idea that their CDs will somehow magically sell if they could just get them in the stores. These artists then convince themselves that The New Orchard will be a Great Thing for them.

Nothing could be further from the truth.

As an Indie artist, you've got to focus first on creating a demand for your product. The sheer volume of CDs available in retail stores will bury your CD into anonymity until you've done that. No demand, no sales.

Here's a mantra for you: "Demand Drives Distribution" | Repeat it every morning of every day.

Go for The New Orchard deal when you've got so many different places stocking your CDs, and actually selling them, that it's a big hassle just keeping track of them all. Until then, you are just funding The New Orchard with your sign-up fee, and causing you and them headaches down the road if you're not willing to accept the fact that your expectations for what The New Orchard can and can't do were out of line with reality.

Otherwise what will happen is their Retailers will get tired of your CDs cluttering up their shelves, and The New Orchard will get tired of your CDs getting returned and cluttering up The New Orchard shelves, and you will end up paying for it. Do yourself a favor, and just rent one of those box-like storage units and warehouse your CDs there for yourself. It will cost about the same and save you a lot of headaches until you find a way to create demand for your product.

Even with all the Reformed parts, there are still some significant issues that remain as renewed promises, not provably delivered. So keep an eye on what other Indie artists, already using The New Orchard, are saying. Search the YahooGroups like MusicThoughts, music news resources like MI2N and industry watch-dogs like the new League of Advocates for Artists Worldwide

A lot of artists managed to delude themselves that The [old] Orchard was a Good Thing -- And I would contend that The [old] Orchard formented a great deal of that delusion, by not being more clear about their target clientele. Once again: Unless you are reasonably certain that you're CDs will be moving off the shelves, don't waste your time and money. Or theirs.