Nick Tangborn is not a dick. He may be, in fact, the nicest person I have ever met in the local music scene. A tall man with big sideburns and a neatly styled sandy-brown pompadour, Tangborn knows everyone and everyone knows Tangborn. Hanging out with him at a show or a bar is like hanging out with the perfect host, someone who can make you and everyone else around you feel comfortable and attended to. His warm heart and generous smile are disarming.
In addition to various DJ gigs around town (during which he'll spin everything from Richard & Linda Thompson to Kelis), Tangborn, 34, runs the Jackpine Social Club record label. Founded in 2002, Jackpine is the realization of Tangborn's longtime dream. The label's first release was a tribute to Kris Kristofferson featuring a bevy of notable artists -- Mark Kozelek, John Doe, and Tom Verlaine, among others -- doing renditions of Kristofferson tunes. Since then, Jackpine has released records by some of San Francisco's most talented and enigmatic acts: singer/songwriters Kelley Stoltz, Jesse DeNatale, and Sonny Smith, and jangly pop band Oranger. These CDs can be purchased in record stores around the country. There is but one problem.
"[My wife] and I were walking through Virgin records," Tangborn tells me, "and we saw a bunch of Oranger CDs, a bunch of Kelley Stoltz CDs, and she said, 'Oh, it's great, they're in Virgin,' to which I said, 'It's awesome that they're in Virgin -- someone's going to buy them. And I will never see a dime.'"
This is what you call getting fucked. Hard.
It was an honest mistake that anyone could have made, and as it turns out, a number of people made it. In addition to Jackpine, local labels Future Farmer and KoolArrow, as well as other respected names, put their trust in a distributor called Telegraph Co. They trusted that Telegraph would get their CDs into record stores across the country, which it did, and then, upon receiving the money from the sale of those CDs, that it would take its share and pass the rest along to the labels and, in turn, their artists. In most cases, the money never made it all the way back. Jackpine, Future Farmer, KoolArrow, others -- all are owed tens of thousands of dollars by Telegraph. To someone like Tangborn, who had financed his operation through working as a consultant, doorman, bar-back, you name it, the loss was crippling.
It all started very simply. In the late '90s, a man named Jerod Gunsberg, who, he says, previously worked as a music executive at Disney, founded a record label called Telegraph, which put out releases by nascent alternative bands. Those records sold poorly, so when, in 2001, Stan Hartman approached Gunsberg about buying his fledgling label and turning it into an ambitious distribution company -- it would aggregate many smaller record labels to amass a catalog that would allow it to negotiate its offerings into bigger markets -- Gunsberg thought it sounded like a good idea. And it was.
"In theory, they had a good idea: Indies unite in this horrible system and be taken seriously," says Dennis Mitchell, CEO of Future Farmer, which puts out records by local acts like For Stars and the Mother Hips. "So I got pulled into that."
With Gunsberg acting as general manager out of a live-work loft in Williamsburg, Brooklyn, and Hartman maintaining the warehouse facilities and handling the finances in Lawrence, Kan., Telegraph set out to attract as many small indie labels as it could. The indie distribution business is structured like a pyramid, with the labels on the bottom, smaller distributors like Telegraph in the middle, and a handful of "one-stops" at the top; the one-stops won't deal with small labels individually, but they will deal with an aggregator like Telegraph if its catalog is appealing. Thanks to its label roster, which in addition to Future Farmer included indie stalwarts like Kindercore and Pitch-a-Tent (home to Cracker and Camper Van Beethoven), Telegraph was able to negotiate a deal with a one-stop called IDN, which would ensure that every label's CDs made it to stores.
So, say you're Tangborn and you've got a deal with Telegraph and you've got an artist named Kelley Stoltz signed to your label. First, you pay for Stoltz to record his new record. Then you pay to manufacture the CDs. Then you send those CDs to Telegraph, which passes them up to IDN, which gets them into Wal-Mart. When John Musiclover walks into Wal-Mart and buys that CD, a chunk of that sale goes back to IDN, which takes a cut (usually 10 to 30 percent) and sends the rest to Telegraph, which takes a cut, in this case 20 percent, and sends what remains to Tangborn, who, after paying his expenses, splits the profits with his artist. In addition to the fee it gets for distributing the CDs, however, Telegraph also collects for what it spends on marketing and promoting the release, as well as on things such as "refurbishing," as when Tower Records sends back two dozen unsold CDs with Tower stickers on them and you need to re-shrink-wrap the whole batch before you can send them to a different store. It's a convoluted process, and when things go wrong, the first party to get fucked is always the small label -- and, in turn, the artists -- which doesn't have a team of accountants to tally the beans or a posse of lawyers to challenge the improprieties, which seemed to arise at Telegraph with increasing regularity.
According to many of the people I talked to for this story, Telegraph started making mistakes, charging for services the labels neither approved nor required. Phone calls stopped being returned. People like Tangborn weren't seeing any money from the sales of CDs. Because Telegraph's representatives went MIA, and because distribution itself is a system that rivals a Rube Goldberg device, it took Tangborn and others months to figure out what was going on.
"I actually hooked up with Nick," says Billy Gould, who owns KoolArrow, about his suspicions that Telegraph wasn't playing fair, "and I asked him how things were going with him, and he said, 'Not very good.' And that kind of confirmed this little nagging feeling that I had. Then I spoke with Dennis Mitchell at Future Farmer. ... I think it was really the labels getting in contact with each other where we could share information so we could see how bad it really was."
Depending on whom you ask, Stan Hartman -- who could not be located for this story -- is either a vicious con artist or merely a poor businessman. Either way, it's clear that the first thing he did when his company's profits failed to keep up with its expenses was to use the money he owed the labels to try to stay afloat. This method lasted only so long. In October 2003, under pressure from his creditors, Hartman laid off Gunsberg and began dismantling Telegraph. According to Tangborn and others, Hartman became unreachable.
"This was a total, 100 percent 'I got scammed,'" says Gunsberg. "Nick got scammed, Billy got scammed, everybody got scammed."
Not everyone is willing to let Gunsberg off the hook. Says Dennis Mitchell, who estimates that he lost close to six figures, "Jerod had never worked in distro in his life. ... The guy couldn't sell a record to save his soul."
Velena Vego, GM of Pitch-a-Tent, disagrees. After working closely with Gunsberg on several releases, she found him "nice." Despite the fact that she lost $50,000 to $60,000 in the debacle with Telegraph, Vego chalks it up to bad business decisions. "I just think they overextended themselves," she says. "They had a New York office, people's salaries. ... They wanted to be like a real label. They wanted to be Matador, Merge, something like that. They just didn't have the artists to keep that up." After all, it took labels like Merge and Matador years to build their catalogs, and they weren't hemorrhaging cash all the while as they were doing it.
After a year of trying to track down his money -- close to $30,000 -- Tangborn and his lawyers have grown pessimistic. No one can find Hartman, Gunsberg has declared bankruptcy, and IDN isn't sending any money down the pyramid since it's still recouping a hefty advance it gave Telegraph as part of their initial deal. The good news is that Tangborn has been able to save up enough cash over the last year (through his full-time job -- his first in 3 1/2 years -- and numerous DJ gigs) to relaunch the label, which he's doing with a bang this September with a Sunday night residency at Thee Parkside that will help raise money for future Jackpine endeavors. Having found a new distributor, he's also back to releasing records; an EP by local psych-rock outfit Parchman Farm hits stores in November, followed by new material from Stoltz and DeNatale, and a debut solo album from the Court & Spark's Tom Heyman. Perhaps best of all, though, is that after getting totally dicked over this last year, Tangborn himself hasn't turned into a total dick. He's still the first guy to buy you a beer when you walk into a place and the last guy around when you need to unburden your soul.
Finally, there are a few lessons that can be learned from all of this. According to KoolArrow's Gould, one thing a label owner needs to stay on top of his distributor about is accounting. "Not so much in terms of making money," he says, "but having a program and system, a regimen where they're checking in every six to eight weeks and letting you know where they stand. Just the fact that they do that shows that they're making an attempt to be transparent."
"Hook up with other labels on your distributor, keep in contact," he adds. "You can't really have a competitive attitude at all. You need each other to stick together."
To Future Farmer's Mitchell, the experience is just another indication that digital downloading is truly the way of the future. "We've got deals with Microsoft, iTunes, you name 'em. We've got eight deals in place. Brilliant: We get direct deposit, in our bank accounts, on time. Why? Because those guys don't know any better. They don't understand that the music business is corrupt."
Which it is. Full of dicks, in fact. People out there to fuck you over, who find it even easier to do if you haven't done your homework.
"The indie distribution model is so horribly flawed," says Gunsberg. "Guys like Stan Hartman -- you're gonna have total unbelievable con men out there. ... It's a system that can be worked, because everything is so amorphous."
Fledgling indie labels: Consider yourselves warned.