LP "Cutouts"

Often I see used records with the corner clipped or a whole punched in the corner. What was/is the significance or history of this?

The company printed too many copies of an LP, and they cannot sell them for full price because the market is not there so they punch a hole or cut the corner and pretent it happened accidentally in the factory...

No significance, just another way to make their money back... andd then sell 'em cheaper than normal

Wrong. Records are a fully returnable commodity at wholesale, so a title needs to be 'deleted' in order to reduce a label's exposure to future potential returns from stores (and accompanying return credits, which may be applied against future purchases).

When a record is deleted, notice is given by registered mail, and then there is a period during which stores are allowed to return the titles in deletion - these days as long as 9 months. After that the record may no longer be returned for credit to the label.

Deleted titles suffer various fates - they may be discounted, they may be scrapped en masse, and they may be sold to 'cut-out' distributors. These distributors (Performance was a notorious one in the 1980s - read the superb book 'Stiffed' to find out how one cut-out distributor used by MCA was tied up with the Mob) specialize in buying excess stock of deleted (unsaleable) titles) from labels and offloading them at anywhere from a quarter to a buck a unit.

Deleted titles are often marked with a punch or a clip to show that they cannot be returned anymore for credit. Hence the term "cut-out."
They are called cut-outs and basically are overstock. Don't think there is anything deliberately deceptive. I suspect that they marked them that way so people could not return for full credit. Its still done sometimes with saw-marks in teh corner of a cd case.
Sarmarks in the corner of a CD case!? Nah, that's just from me trying to get the darn thing open!
I agree with Swampwalker, typically the cutouts, whether they are holes or saw marks on the edges, were used to denote overstocks that would be sold by stores at reduced prices and were a way the stores could tell that, if someone returned one.

If you buying LPs only for the music, cutouts are in my experience a good way to get somewhat cheaper vinyl. Keep in mind though that cutouts typically command a lower price as compared to the same LP in same condition noncutout - good if you are buying and not so good if you are selling. Why? 1) Because some people are collecting the cover as well as the vinyl and holes or saw marks can detract from the look and 2) albums typically became cutouts at the end of their popularity which translates to later pressings of the album which may denote larger press runs per master which in turn may denote lower quality. I have not found that to be an audible fact with reasonable care of the albums and a good player.
records being pressed today have no return priviliges. a dealer must take the loss, if he has to take a return from a customer, or buys too many. a distributer or middleman may make exceptions, but the label sales are strictly one way given the small pressing quantities. cut outs were sold to deplete inventory when a title was temporarily or permenantly discontinued. sold at a lower cost, the artist or artists saw no royalties from these sales.
Why did a retailer have to "cutout" the album. Why didn't he just reduce the cost??

I mean, I buy things on sale all the time. I don't remember having the shirt I bought having a piece cut out. If I have to return it, I have a receipt that shows how much I actually paid.
Cutouts were also noted as promotional items as well; I won a bunch of albums in the 80s during phone call in contests (before they wised up and started asking for the nth caller...).

Most of them were cutouts and likely not overstock (in fact some were pretty good sellers)
the retailer didn't...the label did.....since todays pressings are one way, there are no cut outs. back when cut outs were part of the business, even a tiny seller from a major label was 20 to 30 thousand units...today 1500 to 2000 units is a successful lp.
"records being pressed today have no return priviliges" -- Sorry, but once again, this is wrong. I work at a record label and I know. We sell our vinyl with 100% returns. It's true that many distributors now sell vinyl "one-way", but not all of them. And all CDs, of course, are 100% returnable, just as records were in the old days.

As to whether artists see royalties from overstock or cut-out sales, either on LP or CD: this varies by contract.

If I were you, jaybo, I'd make fewer generalizations about the industry.

patrick..what label do you work for? honestly everything from the majors is one way.
one more thing....cut outs were never sold title specific(which makes it impossible to track royalties) ....cut outs were sold in bulk, mixed in 100 count cartons, etc.....no item numbers except for one which was the mix itself. most, if not all of the artist agreements to this day are written with provisions for overstock and cut outs(even though vinyl royalties won't buy a ham sandwich)....heck, i've been doing this since 1969, and agreements with artists, and agreements for intellectual properties have been my main focus for at least 15 years. if you're taking returns on vinyl in this day and age, thats scarey.
So Jaybo, the labels always looked out for their artists, and made sure that all royalties due to the artist were paid in a timely fashion...right :-)
Hi jaybo,

I work at Matador, and we've never stopped taking returns on vinyl. That's standard in the indie world... and frankly the only way you're going to get significant vinyl sales happening.

Cut-outs could certainly be ordered title-specific - I remember browsing through the Performane catalog in the '80s! I do have to admit that I'm not familiar with any current cut-out distribturos... are you jaybo? I remember that we talked to a couple in the late '90s to clear out some overstock, but decided it wasn't worth it - cheapens the brand (important to a label that actually has a brand that people identify in and trust...i.e. not the majors)

I've seen every kind of clause relating to cut-outs and royalties... on vinyl or CD.

btw are you an artist attorney? at a major label? or?

here's the way the majors worked in regard to the infamous cut out....primarily made up of returns, etc, the royalty was paid on the original sale(back when the lp was sold the first time at the regular price) the royalties (performance/publishing mechanicals/etc per unit. when returns accumulated that were not believed to be re-sellable, they were stamped or cut in some manor and sold for a fraction of the normal whlse price. the accounting to the artist and their management would reflect all sales, less returns, and inventory. most artist agreements allow the label (even today) percentages and reserves to cover everything from promos to future returns. clauses for liquidation and recoupment of advances and production costs make getting on the gravy train tuff. today its even tuffer with digital delivery (is anyone making anything on this?). i admire your company patrick, and wish you the best. i still work in the industry on the licensing side, and i have dealt with all the majors over the last decade in some form or another(a&r,production,sales,marketing,management,you name it.. i do know that the major labels relunctantly make vinyl and sell it one way, or license it to outside companies who pay royalties on gross receipts...not to mention guarantees.....the stories i've heard and people i've worked with over the years in every capacity of the business (several folks in the book 'hitmen'), make for some great stories.....as to the history of royalty payments, lets just say leadbelly wasn't the only artist who got screwed. the good news is companies today play tuff, but play by the rules......KEEP BUYING NEW VINYL!!!!!
hey patrick...contact me through agon, and you'll find out what a small world this is. thanks