Wolfgang's Vault - In The News - The Tennessean, May 15, 2006

Wolfgang's Vault In The News The Tennessean, May 15, 2006

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The Tennessean, May 15, 2006

Zambooie Hits Right Notes to Move Up Music Merchandising Charts

Company founded by two musicians projects $3.2 million in sales for 2006

Michael Lewis had just moved to Nashville in summer 2002 when his record label suddenly ran out of cash.

After some grueling, 60-hour weeks waiting tables to get by, Lewis, a singer and guitarist for an alternative rock band, decided to find a new line of work.

So he and his friend, Bruce Fitzhugh, a metal guitarist, started selling T-shirts and other dry goods for underground rock bands.

Within a few months they founded Zambooie, a company that has become a small but successful player in the increasingly lucrative business of music merchandising, or simply "merch," in industry parlance.

Sales for the company, which now builds Web-based stores for bands and independent record labels, have grown from $900 in the first month of business to more than $1.5 million last year. The company projects $3.2 million in sales this year. The firm is making lots of friends, and business contacts, among musicians who haven't signed major record deals.

"When you're on a record label, they get mad at you because you're not selling the record or on tour with U2," said Lewis, whose old band, For Love Not Lisa, released two albums on Atlantic Records. "When we run into bands at music festivals, the bands love (Zambooie) because we're one of the few people around them who write them a check every month. We write some of these bands a $30,000 check every month."

Zambooie's success mirrors that of its competitors, including market leader Musictoday, a Virginia-based merchandiser of music gear.

Total U.S. album sales dipped 7.2 percent in 2005, according to Nielsen SoundScan data, but the downturn hasn't stung the merchandisers as much. Last year, Musictoday, the largest such sales outfit in the United States, had more than $100 million in sales and expanded its roster to more than 500 artists, including the Rolling Stones, country artist Keith Urban and John Mayer.

"It's a good time for the business," said Jonathan Mayers, founder of Superfly Productions, a New York-based company that promotes the annual Bonnaroo music festival in Manchester, Tenn. "The Internet has changed it quite a bit. Immediately following our event, it allows us to put our (merchandise) up right away. It allows us to test-market things."

Despite such success stories, few outside the industry know that independent music merchandise firms exist. The outfits like the low-key approach.

Zambooie often builds Web stores to fit the design of a particular band's Web site, but the only mark identifying the company is a small logo at the bottom of the page. Musictoday gets a bit more involved, often employing in-house designers to build bands' entire Web sites, but it still stays more or less behind the scenes.
Some call it grass-roots sales.

In fact, the rise of music merchandisers has made it possible for a burgeoning class of musicians to make a living at their craft without the help of a big record label. Whereas in the old days, merchandising revenue for unsigned bands or those on small labels depended on how long band members manned a table stacked with T-shirts after shows in smoky clubs, now payday often comes in the form of a monthly check from their merchandising company.

Merchandising companies, which take anywhere from 15 percent to 30 percent of sales, aren't the only ones cashing in on Americans' willingness to part with cold cash in exchange for music-related gear.

Trunk LTD, a division of CINQ Group based in Culver City, Calif., sells replicas of vintage tour T-shirts from bands such as the Grateful Dead and Yes to nostalgic baby boomers and hipsters. In the same vein, San Francisco-based Wolfgang's Vault does a brisk trade selling vintage handbills and memorabilia from the collection of Bill Graham, the late proprietor of the legendary Fillmore clubs in New York and San Francisco.

Underdog spirit

An underdog spirit prevails in the industry. Zambooie and Merchdirect were started with the working musician in mind, and both outfits' first clients were their founders' bands. In Zambooie's case, the founders realized the small Web store they had built for Fitzhugh's band was almost instantly profitable.

"We were like, 'Wow, this totally works,' " Lewis said. "We saw it's basically just a numbers game - we get a bunch of stores and fill their orders, and eventually we'd make money."

Lewis and Fitzhugh saved their tip money and filled orders between shifts waiting tables. When they were done, they stopped by the local 24-hour post office to ship them off. The company's first bank account was opened with $100.

Today, Zambooie fills a sizable chunk of a business park near Nashville International Airport and boasts its own screen-printing division, a heavily tattooed and pierced staff of 19, and a custom-built software program that manages inventory and financials.

Although the present looks rosy, Zambooie has also started hedging its bets with an unusually strong Web presence. In October, the company's Web site was transformed from a utilitarian directory of clients into a colorful site packed with streaming music videos, interviews with bands and free mp3 downloads.

Also, in an unusual move for the industry, Zambooie has created its own line of apparel aimed at the fans of its clients, many of which are metal and hard-core bands that appeal to young listeners. Customers tend to see the company as a part of their identity, and so Zambooie-branded apparel has a built-in demographic, the owners say.

Mayers is skeptical of such an approach as opposed to the more traditional route trod by companies such as Musictoday.

"I think they're both interesting models. Musictoday is more of a business-to-business company, and they let the music and the artists (take control) - that's the brand that they're positioning."

Zambooie, however, remains confident in its model. According to Lewis, customers will gravitate toward a Web site that lets them explore new bands similar to the ones they already like and, what's more, they'll spend money at such sites.

"It just makes sense," said Justin Beck of MerchDirect. "Anybody can print a poor (T-shirt) design and get the software to sell things online, but it is going to be the companies with that something extra who will win over the customers and clients."

By Will Ayers

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