In 2017, paid audio-streaming subscriptions increased by 45.5% worldwide. Additionally, digital revenues accounted for over half of all revenue from recorded music. This indicates an important trend: listeners increasingly value access to music online over ownership of physical records. A new generation of listeners is finding their music on the internet through streaming services. Despite a steady decrease in physical record sales over the past two decades, though, they still generate approximately 30% of total revenue from recorded music.
Distribution is the process of making music publicly available in any and all digital and physical media – what happens in between its creation in the studio and the listener’s hearing it. It is vital for anyone attempting to create or license music to understand the ways in which music reaches a listener.
Independent artists seeking an in-depth account of how to get their music into physical retail locations and onto streaming services such as Spotify and Apple Music
Songwriters seeking an understanding of how their compositions factor into the sale and distribution of sound recordings
Any party interested in the ways in which entities in the music industry transfer sound recordings from the creator to the consumer
Types of Distributors
Record Label Distribution
Sound Recording Metadata
The Changing Landscape
Put simply, distribution is the process of getting recorded music to the consumer. In the past, record labels partnered with wholesaler logistics distribution companies and pressing factories for this task. These companies would ensure that records were manufactured and then made available in brick and mortar retail outlets nationwide and around the world. Record labels would then market and promote the record, attempting to get people into the stores to buy it. In the early days of the modern music industry, record deals were the holy grail for artists because record labels had the infrastructure and resources to make music as widely available as possible. These resources were not readily available to individual musicians creating recordings on their own.
But since the internet revolution in the 1990s, this has changed. Digital technology now allows content to flow between computers without a physical medium. And while the large record companies still have a vast network of distribution resources at their disposals, it is much easier for individuals to share content over the internet. This has caused a few fundamental shifts in music distribution:
Peer-to-peer file sharing
Released in 1999, Napster allowed users to share audio files directly with one another without an intermediary server to aggregate or control the content. This enabled users to download music without paying for it, which led to mass copyright infringement. While the company ended up radically changing its business model due to infringement lawsuits, it paved the way for other piracy software companies to use peer-to-peer technology to disseminate music to millions of people over the next decade. Suddenly, large record labels did not control the means of distribution of their products. Anyone anywhere in the world could download a reproduction of a sound recording with ease.
Music increasingly accessed online
Apple introduced the iTunes Store in 2003, giving consumers the legal option to buy songs and albums online. The store interface was easy to use, and it proved to be a massive success. As of 2013, the Apple iTunes Store was the world’s largest music retailer. Developing alongside iTunes, sites like YouTube and Pandora offered different ways to access music. While YouTube allowed music to be uploaded in video form from any user around the world, Pandora was initially a non-interactive online radio station with specially curated playlists made by algorithms. The emergence of these platforms led to more and more people accessing music online.
Streaming and the ownership-to-access shift
Perhaps the most consequential shift in music distribution since the early 2000s has been at least in part caused by the innovations of Spotify. Launched in 2006, the company pioneered the concept of on-demand or interactive streaming. The model is simple: the consumer chooses to either listen free or pay a subscription fee. Signing up with the free tier means having access to any and all music on Spotify’s platform, but periodically being subjected to audio advertisements. Under the paid subscription model, users have access to Spotify’s entire library ad-free.
Today, instead of buying physical records or downloading songs from iTunes, the majority of music listeners prefer accessing it through streaming services. This has fundamentally changed how music is distributed by record labels, independent companies and artists.
There are different distribution companies associated with the three major music companies—Warner, Sony, and Universal. They are wholly-owned subsidiaries of the larger corporations and represent the distribution arms of the record labels. There are also companies that cater to independent record labels and artists, but are still owned by the major music companies and are thus categorized as such. Examples of this are ADA (owned by Warner) and Sony RED.
There are hundreds of companies that offer distribution services to independent artists and record labels. Within the independent category, a few different subtypes exist:
Digital Bulk Distributors
This is the most common type of independent distributor; there are hundreds, located all over the world. A majority of unsigned artists release and distribute their music through these platforms. Although many of these companies also offer physical distribution services through deals with other wholesale companies, they focus on the digital sphere.
These distributors only work with independent record labels or indie artists with clout. They offer a wide range of services, often including physical distribution, and are mostly invite-only and business-to-business oriented.
Some distributors allow individual artists to submit an application online to be accepted onto the platform. These platforms vary in the number of artists they accept. While some maintain exclusive rosters, other have hundreds or thousands of artists.
These companies have vast logistical networks and warehousing resources. They service big box retailers and independent record stores with physical music products, and maintain agreements with record labels to do so. They also often distribute other products such as toys, accessories and apparel for other clientele.
Digital distribution is the process whereby music is uploaded to the platforms of digital service providers (DSPs) such as Spotify, Apple Music, Pandora, and others. Distributors are the link between rights holders (artists or labels and music publishers) and online music services. In the wake of the 1990s internet revolution, many independent companies started emerging that focused on distribution, and inevitably, they would also become digital distributors. For example, when it was founded in 1997, CDBaby (true to the name) focused on selling physical products like CDs. They acted as the intermediary between retailers and artists in the place of record labels. Now that streaming has become the primary mode of music consumption, however, CDBaby and numerous other independent distribution companies have shifted their business models and now focus on facilitating the distribution of digital music.
DSPs prefer certain channels through which they receive music for their platforms. For the most part, these online services won’t accept any submission from a random individual (a notable exception to this rule is SoundCloud). That’s where companies like CDBaby come in. They are responsible for getting both the actual song file data (for example, the MP3 or WAV file) and the associated metadata (title, artist, ISRC code, etc.) from the creator to the DSP. Here are links to Apple and Spotify’s preferred independent distributors.
Many online-focused companies offer services in addition to distribution, and they often charge a premium for them. For example, some can also handle marketing and promotion, publishing rights, and/or synch licensing opportunities.
It is free to sign up with most independent online bulk distributors. This involves signing an agreement and it is important to read this carefully. Submission companies like AWAL and Stem (as opposed to bulk companies like CDBaby) have sign-up forms, and specialty companies, as noted, are invite-only.
After signing up, there will likely be a portal to upload the song file and accompanying metadata such as album art and ownership information. It is important to have this information organized beforehand in order to streamline the process and give the platform full details regarding the work.
The distributor then bundles the content into a sales pitch package and delivers it to all DSPs with whom they have an agreement. The bulk online distributors have developed proprietary software to automate this process. There is often a submission fee associated with uploading content to a given DSP, which is accounted for in the fee or commission the distributor takes from the artist.
The distributor receives royalties from the streams or sales of the artist’s song(s) on the different DSPs. They then issue financial statements, along with payment, to each different artist or label that represents the artist. Depending on the agreement and/or whether there were any upfront fees, the distributor will either pass through all royalties generated or take a commission cut of the royalties before payment.
Factors to Consider
Since there are hundreds of different distributors, it is important to consider a wide range of factors when deciding which service to use. Importantly, these figures are current as of the publishing of this guide in December, 2018, and are always subject to change.
Cost, Commission, and Fees
For the most part, it is free to create an account with a bulk online distributor or submission company. But actually having music distributed requires payment. CD Baby, for example, charges $9.95 to distribute a single and $49 to distribute a whole album, and they take a 9% commission cut of all royalties earned. Others, like Distrokid, simply charge a yearly fee. There is no cost to upload and no commission; the user pays $19.99 per year. The most cost effective options depend on the artist’s release strategy and how much money in royalties the song or album is projected to earn.
Number of outlets
Most bulk distributors serve music to over 100 digital service providers, but some do not. While the most well-known streaming platforms account for the vast majority of total streams, an artist looking to distribute to a more niche DSP, such as Beatport, would want to take note of the different outlets to which a given distributor serves music.
It is important to know when the distributor sends out royalty payments. Most companies have thresholds that royalty payments must hit before a work can receive any payment. Stem, for instance, has a $50 payment threshold while CDBaby and Tunecore don’t have any.
Some distributors are more known for their easy-to-use artist interfaces that allow clients to track in real-time their royalty figures.
Marketing and Synch
For a premium price or membership in a “Pro” tier, online distribution platforms sometimes offer marketing and promotion services. Other times, however, the distribution companies subjectively make decisions as to who is offered these premium services. Services offered can include pitching to Spotify playlist curators and music supervisors for synch placements, merchandising partnerships, and digital marketing campaigns.
This is the process that allows rights holders to collect a portion of advertising money wherever their songs are played online. Distributors can aid in this process by delivering audio and metadata to online platforms, and by managing claims on the artist’s works that are accompanied by advertisements.
If the artist has posted an official music video (or any other type of upload) on their channel, opting-in to YouTube monetization allows the artist to collect a portion of the money that YouTube makes from advertisements appearing with the video. To monetize on videos on the artist’s own channel, one must have over 1,000 subscribers and 4,000 aggregate watch-time hours.
Artists can also utilize YouTube’s Content ID system to monetize ad revenue when their works are used in user-generated content (UGC). To do this, the artist must prove that they are the valid owner of the copyright in question. Some distribution companies have partnership agreements with YouTube, allowing clients to automatically monetize on UGC when they sign with the distributor. This service often comes with a fee.
Facebook and Instagram
Facebook, who also owns the Instagram platform, recently introduced a feature that identifies when copyrighted musical content appears in user posts, subsequently paying the rights holder a royalty in return. With most distributors, the artist can simply opt-in to this feature.
The payments Facebook makes to distributors and rights holders differ between distribution platforms, record labels and publishers. Each music company has a different deal with Facebook, the terms of which are not publicly available. Initially, Facebook paid a lump sum to each company, meant to last for two years. After this time period, Facebook will provide usage reports to the companies and base royalty payments upon those figures. In the meantime, most distributors have enacted a pro-rata (proportional) system for payments to artists from Facebook.
Importantly, there are multiple different copyrights involved in Facebook monetization payments. There is a completely different process to receive payments for compositions, which are owned by songwriters and music publishers. Because this is a brand new revenue stream, the way that it matches up to existing licensing structures can be confusing. CD Baby, for example, views Facebook as a synchronization partner, because works are primarily used in audiovisual content on the platform. The important thing to know is that Facebook monetization for sound recordings is completely separate from other licenses such as performances and mechanicals.
Some bulk distributors also offer services that enable musicians who sign up to manage the rights to their compositions. This situation is applicable to the musician who is both the writer of the song and performer in the recording being distributed. Most charge premium fees for these services.
Only a few online bulk distributors have a feature that allows the artists to allocate royalty percentages to other people like producers and background artists. This is a helpful tool because it means the artist doesn’t have to do it manually each time they get paid.
When an artist delivers music to a distributor, they license that company to distribute their copyrighted material. While most allow for musicians to distribute other works with other distributors, a specific recording can only be distributed with one at a time. An important factor in the contract is whether the artist is allowed to opt-out of the service at any time, or whether there is a specific length of time until the term of the agreement ends.
Note: Many figures in the examples above are borrowed from a comprehensive table created by music blogger Ari Herstand that has information for more distributors as well as more factors to consider.
While physical sales of records have been steadily declining since the 1990s, they still account for around 30% of revenue from recorded music. Vinyl records have undergone a resurgence in popularity in the last few years, indicating that physical records won’t be eradicated by streaming any time soon. Physical distribution is still a piece of the puzzle for the average artist making a living from music.
Physical distributors are essentially wholesale intermediaries between record labels/artists and retail outlets like record and department stores. These companies can vary in type; some specialize in music and entertainment sales and others deliver a host of products to retailers.
Most record labels and independent distributors have agreements with wholesalers, allowing them to stock their physical records in stores across the country and world. For instance, the wholesale distributor Alliance Entertainment distributed 48% of all vinyl records in the year 2015 (a sizable market share to say the least). At this point in time, however, it would probably be difficult to find a music distribution company that only does physical distribution.
Bulk distributors like CDBaby and Tunecore also offer services allowing artists to distribute their physical records to stores. In these cases, the music companies most likely have agreements with other wholesale companies that focus specifically on physical product. For example, CD Baby has a deal with Alliance distribution, giving artists the opportunity to get their records into over 15,000 retail locations worldwide. In addition, the platform Bandcamp allows artists to set up an online store for physical records.
Whereas physical distribution resources used to be fundamental pieces of the value record labels offered to artists on their rosters, this has since changed. Because music is consumed mostly online, and because getting music online takes much less effort and time, the value record labels offer today primarily consists in digital distribution connections and extensive marketing and promotion for their artists. Nevertheless, major and independent labels still have distribution networks for physical records too.
It is possible to get a deal with a record label solely for distribution rights. Whether a deal is specifically for distribution or a standard master-use license agreement, the artist royalty rate is affected by the distribution process. Other factors at play in the record agreement are the term and territory—that is, for how long and where the record is distributed.
An important component of getting music out to the world for people to hear and spend money on is a song’s accompanying metadata – the specific information that helps identify a product. Below is a list of important data points that should accompany the delivery of a recording to a retailer or DSP.
Because the way people consume recorded music is changing, the distribution industry is too. The basic act of distributing music is much more simple today; it can be as easy as sending an email with a WAV file attachment, along with the accompanying metadata. Because of this, music companies are shifting their business models to include distribution in the services that they offer. A key example is Spotify, which is testing a method of letting creators upload directly to the site. They are also testing a feature allowing artists to submit their own songs for playlist placements (typically the job of a label or distributor). Spotify has also offered “preferential platform access” to artists signed up with the distributor Distrokid, another interesting development in this sector of the business.
Luke Evans, Mamie Davis, Jacob Wunderlich, Rene Merideth, Jeff Cvetkovski, & Aaron Davis