Chapter 81: Sales Model

No... no... Pei Songren shook his head repeatedly upon hearing this. What should be done now is to build good relations with major retailers, not to act out of spite. Without the retailers, how could they sell the albums to fans, and how could the company make money... The only method Pei Songren could think of was to compromise and negotiate with the retailers, even if it meant giving up a bit more profit.

Although he was the president of LOEN, at this moment he was facing the major retailers nationwide, and he did not have the courage to challenge them. If the relationship turned sour, and these retailers united to stop selling Lee Yunjae's albums, or even refused to sell any LOEN artist's albums in the future, he would have nowhere to turn.

Lee Yunjae shook his head helplessly and countered, "President, let me ask you, if we compromise, how much profit do we need to give up to satisfy those retailers? How much of our own profit will be lost, and how many albums do we need to sell to break even?"

Although Lee Yunjae's albums were sold for 20,000 won each, in reality, the profit LOEN made was not much. After deducting the internal production costs (artist royalties, signing fees, songwriter royalties) and external production costs (styling, photography, costumes, design, MV shooting, mastering, CD production, case, packaging, printing, artwork design, promotion, personnel marketing, etc.), the net profit was only about 40% (with a 6:4 split between LOEN and Lee Yunjae).

According to the current market, the production cost of one album was around 80 million won. If the cost of just the plastic disc was 600 won, including basic production and printing, then selling 133,000 albums would break even, and only after that would there be a profit.

Although this number might seem absurd—133,000 albums, each at 20,000 won, totaling 2.66 billion won—it was not at all exaggerated. This 2.66 billion won also included activity costs in various regions, advertising expenses, warehouse costs, labor costs, manager bonuses, travel expenses, red envelopes for music critics, journalists, and TV stations, etc.

After selling 133,000 albums, for each album sold, LOEN would make a 40% profit, which is 8,000 won (with a 6:4 split, Lee Yunjae would get 3,200 won), while the retailer's profit would be around 5%, or 2,000 won.

If negotiations were to take place, LOEN would inevitably have to make concessions on profit points. In the end, the retailers might break industry rules and demand a 5% cut from LOEN's 40% profit. This would be a significant loss for both LOEN and Lee Yunjae. If the album sold well later, hundreds of millions of won would flow into the retailers' pockets.

"I understand this, but you must know that if the retailers take your album off the shelves, it means no album will be sold, and we will be the ones to suffer. Rather than being passive later, we should negotiate with the retailers now, even if it means sacrificing some profit. It's better to take a loss now to avoid bigger problems later!" Pei Songren was also pained, as a 5% profit cut was a significant amount of money.

"President, let me add one more point. This time, the retailers are not paying in cash for the goods. This is already the greatest sincerity we can show, and they should be satisfied!" Lee Yunjae said firmly.

Indeed, the retailers were not paying in cash for the goods. They just needed to put Lee Yunjae's albums on the shelves and wait to collect the money. It was as if LOEN had rented a counter in their retail stores, and for each album sold, the retailer would take a 5% cut (of course, this was factored into the price, otherwise it would be a loss, and ultimately the fans would pay). This was essentially giving them money for free. In the past, retailers always paid in cash for the goods, and this time LOEN had made a significant concession.

Thinking about this, Pei Songren was also frustrated. To get Lee Yunjae's album on the shelves of every retail store, Pei Songren had allowed the retailers to take the goods first and pay later. This was a significant benefit for the retailers, as they could get a batch of Lee Yunjae's new albums without spending a penny. If sales were good, everyone would be happy, but if sales were poor, LOEN would be in a difficult position, and the retailers would return the albums. If the retailers had paid in cash, they would have to ask LOEN if they could return the goods. Unfortunately, the initiative was now in the hands of the retailers, and LOEN was in a passive position.

"They are taking advantage of the situation to make more money. Although I don't know who is leading this, how many retailers are involved, or how many are blindly following, we absolutely cannot give in. Why should we let them, these ungrateful people, take a share of our hard work? President, aren't you angry too?!" Lee Yunjae clenched his fists and gritted his teeth.

Of course, Pei Songren was angry, but what could he do? Retail stores controlled the sales of albums, and all the albums produced by the record companies ultimately ended up on the shelves of retail stores to be sold to fans. Could they open their own retail chain? That was clearly impossible. The massive investment required would be enough to drive LOEN into bankruptcy.

Although Pei Songren also wanted to break free from the control of the retailers, there was no way to do it.

"If we don't negotiate and don't give in, we will inevitably have a falling out with the retailers, and we will be the ones to suffer. Storing albums in the warehouse also costs money... Rather than storing the albums in the warehouse, we might as well give the retailers a little sweetener this time, and it will be easier to work together in the future!" After much thought, Pei Songren could think of no other good solution besides compromising.

Lee Yunjae shook his head. He understood what Pei Songren was concerned about, but the feeling of being controlled was really unbearable. Moreover, this time the retailers were acting out of self-interest. Although they did not explicitly demand higher profits, it was obvious to everyone that the removal from shelves was just a pretext, and they wanted to gain some profit from LOEN.

Profit, in the eyes of merchants, was always the only concern. In the dictionary of retailers, there was no such thing as credibility. To fight against the retailers, they would need to unite all the talent agencies, or at least the major ones, to refuse to supply the retailers, which was clearly impossible.

The relationships between the major talent agencies and the retailers were generally good, and LOEN's artists were fewer, so their relationship with the retailers was not as strong. If Pei Songren called on the presidents of S.M., JYP, DSP, YG, CCM, Star Empire, etc., to unite against the retailers, no one would respond. This time, the loss was LOEN's, not theirs, and they were more than happy to watch from the sidelines as LOEN and the retailers fought, but they could already predict the outcome—ultimately, the retailers would benefit.

"President, I have a good idea. Do you want to hear it?" Lee Yunjae said mysteriously.

Pei Songren glared at him angrily, "At a time like this, why are you being so secretive? Just say what you're thinking!"

"Actually, we don't need to care about those retailers. If they want to return the goods, let them. Although the negative reviews online have spread to real-world music and entertainment magazines, I believe that in a few days, when the major music critics publish their fair reviews, and considering the quality of my songs, all this will be just a cloud. The accusations and slanders are just to undermine our confidence, to make fans think I'm a mediocre singer, ultimately leading to the album not selling and me being put on hold by the company.

Within three days at most, the situation will reverse. The retailers are taking advantage of the situation to make a profit. This arrogant attitude must not be encouraged, or we won't be able to release albums in the future, and each time, they will take away tens of millions, or even hundreds of millions of won in profit. Just thinking about it makes me angry!" Lee Yunjae said with a deep sense of frustration.

Of course, Pei Songren was also frustrated, his teeth clenched, "So what's your plan?"

"Actually, we don't have to sell albums through physical retail stores. We can open our own online store, a section on our own MelOn, specifically for selling albums. If we sell them for 18,000 won online, while they are 20,000 won in physical stores, the profit we make will be much more, at least 50% per album, and it will also benefit the fans.

If we sell them for 18,000 won online and 20,000 won in physical stores, where will the fans buy them? And buying online is just a few clicks on the computer, no need to go out. In this era of advanced internet, online shopping is becoming increasingly popular.

No talent agency has ventured into selling their own products yet. We can be the first to enter this field, grow big and strong, not only selling our own albums but also selling albums of other talent agencies to make a profit.

Since the retailers are so low, we should cut them off at the root and completely change the traditional album sales model!" Lee Yunjae said fiercely, his tone filled with a chilling coldness.

Upon hearing this, Pei Songren's eyes lit up.

PS: Since the book started uploading, it has received only opinions and encouragement, and no negative reviews. However, a few negative reviews appeared yesterday and today, and I didn't delete them... But I find it amusing. The people who left negative reviews are really boring, all saying that I write too dark... Where is it dark? The parents' issue was resolved in the second half, not dark at all... And those who say I abandoned the story... I have nothing to say. For my first book, I stopped updating due to work, for about a month, and couldn't write at all... My second book was completed, and my third book was stopped because everyone said it was too dark, and they cursed me every day. I struggled to get it on the shelf, but I still stopped updating... It was hard to get it on the shelf, and the stop in updates directly led to no recommendations for this book... My frustration, who can I talk to... So depressed!