When you’re sitting in your car and turn on the radio to listen to some tunes on the way to work, your first thought might not immediately be – how did this music get from the singer to the record label, to the radio? Instead, you just enjoy the melody and the lyrics and forget about everything else.
However, if you are in the industry, you must constantly think about finding new songs and discovering new artists. Finding the new and fresh sound is key to remaining relevant as a producer or as a record label. When you feel like you have found your new vocal star, you need to find the best methods to obtain their body of work and broadcast it to the world.
But the real question is – what is the most efficient and most lucrative way to play songs and broadcast an artist’s work to the entire population? That question is something that has remained in the industry for generations.
Let’s see this critical aspect of a record label’s and artist’s business model and how it can affect the songs you listen to on records, cassette tapes, movies, videos, and downloaded streaming songs on your laptop.
What is music distribution?
Music distribution refers to how the music industry makes the music and content created by artists available to consumers. This aspect of the industry’s business model is imperative because they make money and ensure as many people as possible can listen to their client’s music.
Music distribution is the process of making recorded music available to the public for consumption. Through record deals, transactions, and contracts, distributors allow record stores, music venues, downloading platforms (like Spotify or Napster), and streaming services the rights to obtain and resell music from a recording artist.
If the music distribution companies did not allow this to happen, music produced by an artist might never see the light of day. In this case, millions of hours of work, production, and money would be lost.
How does music distribution work?
Now that you know the definition of music distribution, you need to know the ins and outs of how this influential process actually works in the industry. Usually, distribution companies work together with specific record labels by signing a contract and earning the rights to sell that label’s particular products (i.e., songs created by the artists signed with that record label).
The music distribution company earns a portion of the income for each unit sold, whether it be online streaming songs or physical records, and then pays the label the remaining balance. If the distribution company takes 5% of the earnings, the company will then pay the record label the remaining 95% earned by the artist’s capital gain.
The importance of royalties
A critical aspect of music distribution is the process of royalties. Royalties refer to the rights to a song and can impact whether or not an artist’s album can be broadcast to the world. A music distribution company needs to give the royalties to music back to the rights owners.
As music turned digital in the past 10 years, the clear-cut deals of who owns what was replaced by a more flexible and dynamic system. In the streaming world of Spotify and Pandora, music consumption and purchases go hand in hand. Therefore, the value of the stream of each song depends on various factors that the music distribution company controls.
No matter how you look at it, calculating royalties is crucial in the music distribution process. Instead of giving royalties to every artist on the platform who owns the rights to their songs, they can use a music distribution company to organize their assets.
Music distribution companies help fill the gap between the streaming services, royalty payments, and the owners of songs. This ensures that every payment finds its way back to the recording label and artist without being lost in the shuffle.
By getting the artist’s music and latest album out into the world, whether it be via vinyl records, streaming services, or old-fashioned CDs, music distribution companies have done their job – at least part of it. The other part comes with passing down recording royalties back to the rightful owners of the music.
Once they have distributed the music and paid the artist and record label, the music distribution company has done much of their work. In some cases, music distribution companies have included other services, such as manufacturing and distribution deals, to improve their net worth.
Manufacturing and distribution deals
Most music distribution companies work with record labels who only give them products ready to hit the shelves. This means providing the distribution companies with songs prepared for the radio or prepared for a record in the music industry. However, some music distribution companies offer additional services, like manufacturing and distribution deals.
Manufacturing and distribution deals refer to the distribution company paying the price it takes to manufacture and create an album for the artist. This way, the record label does not have to pay any of the costs upfront to fund the album for their artist, like studio time, music video production costs, paying the artist, etc.
If a music distribution company offers the manufacturing and distribution service, it keeps the immediate income from album sales until the investment is paid off later down the line.
Music distribution companies are wholesalers
Throughout the past century, music distribution companies were the middleman between record labels for recording artists and retail stores that sold cassette tapes, CDs, or digital access to artists’ music. Music distribution companies would communicate between the record label and stores like Walmart, Barnes & Noble, and other electric or music shops.
Music distribution companies can be considered wholesalers when dealing with the music industry. They are usually considered in charge of providing the finished product – the cassette tapes, vinyl records, or CDs produced by the record label – to the retail stores.
How has music distribution changed in recent years?
Downloading music online through streaming services and websites has revolutionized the music industry and the music distribution process. Instead of buying physical albums, like CDs or vinyl records, users are streaming downloads through apps like Spotify, Apple Music, or Pandora.
Although consumers can now pay to legally download music, whether it be per song through the antiquated iTunes or through bigger giants like Spotify, the music industry has still suffered trying to regain its footing through the loss of physical album sales. However, since 2015, subscription services have helped the music industry breathe new life into the market.
With dozens of music distribution companies going under in the past 20 years, only a few associated with the biggest record labels in the world remain standing strong. Even with thousands of independent record labels, the big names in the industry, like Sony, own the biggest and most successful music distribution companies, ensuring they have a monopoly for working with them in the future.
The future of music distribution
As you can see, music distribution has changed in recent years, altering how consumers can obtain music legally. Due to the quick change from physical albums to online streaming services, we see how quickly technology can transform the music industry in such a short period. Therefore, it is unavoidable that music distribution will continue changing in the following years.
There is still a role for music distribution today, with companies helping to provide streaming services with the rights to artist’s music, just as they would between a record label and a retail store. After all, not every record label wants to take the time, effort, and money to distribute their own work to streaming platforms or stores for the general public to buy.
For this reason, music distribution companies can still work together and partner with record labels to bring an artist’s new album to dedicated listeners via streaming services. Some retail stores will continue selling vinyl records, as they have become trendy in recent years, increasing the need for music distribution companies.
Conclusion
Digital music is only going to increase in popularity. Soon, you may never find any cassettes or CDs lying around. Instead, you’ll discover iPhones with downloaded Spotify playlists of your favorite artists. Since digital music is not going anywhere and changing the music industry as we know it, music distribution companies will also have to adapt to the times.
The key takeaway to learn about music distribution is the pivotal role in bringing music from a record label to the listeners. Without this business, artists would have difficulty organizing and paying for the distribution of their music to the world.
Music distribution companies help bridge the gap between the creator and the consumer, playing a massive part in getting music to the public to listen to new music in downloadable forms.
Story by Brad Bernanke
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