The primary role of distributors has remained unchanged for over a century, although their operating business models are constantly changing. These changes have had a huge impact on the music industry as a whole – from the “era of CDs” in the 2000s to the “era of streaming” that we enjoy today.
What Is Distribution?
Music distribution has a history as long as the music industry itself. In the past, even those who wrote sheet music used the services of printing scores and delivering them to shops. It was (and still is) the main function of distributors – to deliver music to stores.
However, in modern times, with the development of the digital music industry, most distributors have evolved from supply chain managers to digital infrastructure providers and rights administrators.
Today not only mixing online is possible, but also independent distribution of your music production using web technologies. Making a song available to listeners around the world is as easy as uploading a file to the Internet. And yet, distributors are still needed.
How Distribution Works?
Can’t a singer or composer do digital music distribution independently? In fact, independent distribution is possible, but it is far from always beneficial. Distributors are an important part of the record chain, taking on three main roles:
- distribution of releases;
- distribution of royalties;
In today’s digital environment, there is a well-oiled distribution mechanism aimed at making the release available:
- to all listeners;
- on all platforms;
- on the day of appearance.
Of course, there are direct platforms (DSPs) like Bandcamp or SoundCloud. They don’t need a distributor: set up an artist page, upload your music and you’re done. However, they represent only a fraction of the many digital distribution resources.
In addition, most DSPs do not allow direct download of music, forcing the artist to go through distributors. DSPs would rather work with the distributor than directly with the author to relieve themselves of the hassle of non-standard metadata and payout distribution.
Even Apple will ask you to contact your distributor to make sure the release metadata meets platform requirements.
The second key role of the distributor is to distribute royalties due to copyright holders. As the music market went digital, direct offers to “bring a batch of CDs to the store and get paid” were replaced by flexible payouts. In the streaming world, music consumption and purchase are inseparable. Copyright holders now make money the very moment the user plays the music.
Calculating royalties in such an environment is extremely difficult. Imagine if Spotify, Amazon Music, or Apple had to pay these royalties directly to every artist across the platforms. Even if they manage to get all the metadata and bank details correctly, the administrative costs will go up. In addition, copyright holders themselves will not be thrilled to receive payment separately from each of the digital platforms.
Thus, distributors are filling this gap by acting as a sorting plant for royalties from the DSP to the copyright holders.
The two main roles of distributors are distributing the artist’s music and transferring royalties back to the copyright holders. However, this does not mean that all distributors stop there. In contrast, most players in the market have expanded their offerings far beyond these basic aggregation services, providing professional marketing of music products.
Distributors are well placed to negotiate with DSPs, so most of the trade marketing work rests on their shoulders. A team of artists (whether it be a record company or a management company) can determine the distribution strategy and approach to the playlist, but in 90% of cases it is the distributor who will implement this strategy in direct contact with the DSP.
How Distribution Has Changed?
In 2001, the recording industry was almost exclusively physical. Twenty years later, physical sales accounted for less than 1/4 of all global record revenues – with the share dropping to 10% for mature digital markets. This rule is not without exception, for example, the Japanese music market is still dominated by CD sales. However, by and large, the music industry has embraced the digital environment.
Streaming has made the fragmented music market much more centralized. A handful of DSPs dominate the digital marketplace – and while some of the streaming giants are pushing their algorithms as intermediaries in finding music on the platform, the most popular playlists are still curated by the service’s editorial team.
The Future of Distribution
Streaming services will continue to take the market away from media (disks, flash drives) and finally take it away from the music hosting. This best music distribution will call into question the existence of music radio stations: they will have to master streaming, where they are traditionally not strong.
When looking for new ways to develop the music business, the importance of distributors as intermediaries between creativity and the music market will continue to grow.