Music Distribution: Its Role and the Basic Concepts
Distribution is the route by which recordings reach listeners. Traditionally, distribution companies signed contracts with record labels, giving them the right to sell those labels' releases. Distributors took a share of the revenue from record sales and paid the labels.
Most distributors want finished products that are ready to go to market, but sometimes they offer “M&D” deals. M&D stands for Manufacturing & Distribution. Under this arrangement, the distributor pays the manufacturing costs of an album up front and keeps all the revenue from record sales until it matches the initial investment.
In the 20th century, music distribution companies were the link between record labels and retailers – record shops, retail giants such as Walmart and Best Buy, and bookshops. To understand the role of distributors in the music industry, think of them as wholesalers. In the past, after signing artists, labels oversaw the entire process of recording, marketing and promoting the music.
Listeners could only get their favourite songs on vinyl, cassette and CD, and labels usually paid all the costs of manufacturing them. To get copies of these albums into fans' hands, the necessary agreements were signed between the label and the distributor – in other words, with the retailers who would sell the album.
While some distributors bought albums outright from labels, others distributed them on consignment. The same went for retailers.
A dramatic shift in the industry
In the 21st century, the music industry changed dramatically with the arrival of downloading. Before the restrictions we have today, fans could download millions of songs by countless artists for free through companies like Napster. Today, listeners tend to pay to download music legally through online channels such as iTunes and Amazon.
As a result, sales of vinyl, cassettes and CDs plummeted, costing the industry millions of US dollars. Subscription services like Pandora and Spotify have made the loss of revenue even bigger. Hundreds of music distribution businesses had to close, and only a handful with ties to the major labels survived. Sony, Capitol, Universal Music Group and Warner own the leading distribution companies.
The future of music distribution
In the digital era, there is still a place for music distributors, even in the face of radical changes in the industry. After all, not every label or musician wants to take on the job of distributing their work. That's why the distributors that remain still work closely with labels to bring music to fans.
Some retailers still sell physical copies of albums. They also pass music on to digital distributors, although those businesses often make deals directly with artists. For music distributors – especially those specialising in genres such as classical, Latin and jazz – there are still plenty of opportunities to grow. Some companies have succeeded by focusing their distribution on specific regions and localities.
Source: Loop Central
