So you want to start your own music distribution company? The first thing you need to know is that it’s not going to be easy. However, using existing music distribution infrastructure, like , can help you realize your dream.
This guide will explain what a music distribution company is and how the whole process works, from how to start out to accounting, marketing, and more.
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At its most basic, music distribution is the process involved with making recorded music available to the listening public. This process can involve free or paid music, physical distribution to shops, and digital distribution to online stores.
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Music distribution used to be a purely physical industry. However, the internet vastly changed the music industry. People used to consume music on vinyl, CDs, tape cassettes, and other formats. However, the arrival of the internet and the mp3 changed things dramatically.
During the days of physical mediums, record stores needed the rights to resell an artist’s music. These brick-and-mortar stores had a system of contracts that ensured payments for artists and record companies.
Some of these arrangements are still active. However, the bulk of the distribution is now done to various online music downloading platforms or music streaming services.
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Music distribution works reasonably simply. Distribution companies sign a deal with a record company or similar entity. These deals give them a right to sell the label’s music, with the distributor taking a cut of each sold unit.
In general, music distributors expect a label to offer them products that are finished and ready for the market, like vinyl and CDs. However, some distributors also provide marketing and distribution deals, aka M&D deals. With these agreements, the distributor pays for the product’s physical costs and recoups their investment through early sales.
For a large part of the 20th century, this was how things worked. Distribution companies were the intermediaries between record companies and retailers, like music-only stores and large retailers like Walmart.
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Some of these deals were on consignment, i.e., the retailer would only pay for what they sold, while other deals involved retailers buying directly.
Of course, the rise of mp3 and online file-sharing changed distribution forever. High-speed internet and digital mp3 players removed the physical restriction on media. Sites like Napster allowed consumers to download as much music as they could illegally. The music industry was thrown into chaos.
Over the last few years, a new model emerged. Sites like Spotify and Pandora emerged to offer music fans a new way to consume music. These businesses were a welcome development for distributors and record labels because they allowed them to monetize their music again.
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Distribution used to be an agreement between record labels and retailers. However, as music could be easily shared over the internet, it opened up a range of possibilities.
Freed from the requirement of physical copies, artists could get their music to listeners in new ways. In fact, digital distribution meant that artists could get their music to the listener without any intermediaries at all.
Of course, it’s not just music that has undergone this transformation. All sorts of content, like books, TV shows, video games, and films, can now be delivered “on-demand” via streaming or direct download.
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As the music industry grappled with digitization and piracy, many people thought it would bring about a monumental change in how artists and listeners would interact.
In theory, distributing a song is as easy as uploading a track that people can download. However, while this might work for artists with a considerable existing fanbase, it’s not quite that simple.
Digital music distribution is still a hugely important part of the infrastructure that gets recorded products to the consumer. Here are three ways that mean music distribution is still essential.
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Direct-artist platforms like Bandcamp and Soundcloud have helped many artists gain an audience. And before them, places like MySpace were also responsible for delivering music from artists to fans.
Platforms like these don’t require a digital distributor. Making music available is as simple as creating an account and uploading music. From there, fans just need to find it somehow.
However, for the handful of success stories involved, hundreds of thousands of artists failed to make an impact. Additionally, these channels make up a small number of people who listen to digital music.
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Most digital service providers don’t allow artists to upload their music directly. Spotify trialled the facility for a year but stopped in July 2019. There are a few reasons for this, from quality control to payout distribution and even how metadata is inputted.
The following reason why a digital music company is still required is royalties. Royalties are the amount of money that the music right’s holder gets when a song is played or downloaded.
For streaming services, paying artists directly would present a lot of work. Keeping track of the plays and monies due is fairly simple with the right accountancy software, but managing the metadata and making continuous bank transfers would be a mammoth task.
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For example, there are 8 million artists on Spotify alone and 60, 000 tracks added daily to their platform. Spotify updates with reports (for our customers) around every six to ten days. then reports monthly, and DSP’s typically report all earnings and line items 30-45 days after every month. Then the DSPs send payments about 20-30 days or more after that, depending on the DSP. Imagine doing that without a distributor? That is an unbelievable amount of administration that most companies would struggle to pull off.
So, this is another one of the roles that a music distribution company plays. They get the music from the artists and get it onto the platforms where people listen. From there, they aggregate payments and get the money back to the artists.
Marketing music has never really been as simple as letting the cream rise to the top. There has always been a need for promotion to introduce listeners to artists, whether through the in-store placement of records near the checkout or other promotional places.
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The same principle still applies today. While many DSPs use algorithms to match artists with users, there is still a curated element to what is featured. With a few DSPs having such a share of a market, being placed front and centre in the recommended pile can make or break an artist.
So, how does an artist get to convince the editorial team to promote their music? As we said earlier, there are millions of artists on just Spotify alone. Spotify releases about 60, 000 songs per day. There’s just no way a DSP can deal with each artist directly.
A music distribution company is often the only way a DSP can really have these conversations. While the label or management company might be the parties driving the marketing push, in most cases, the distributor is the one contacting the DSP to make their case.
How To Start Your Own Music Distribution Company?
The music industry, in general, is a tough, competitive market. It could take a long time before you are able to make a profit, if you can at all. So, the first step you need to take is to understand why you want to start your own music distribution company.
While making money is certainly possible, it will take a lot of work. So, going in without passion might not be the best way to do things.
Whatever your reasons, the first thing you’ll need to do is establish some sort of platform for starting a business. This work could mean getting involved with your local music scene or even new, fresh artists who are posting tracks on social media.
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Discovering new talent is an excellent starting point. Additionally, you can consider becoming a music promoter so that you can showcase gigs, help artists record, and become a channel that attracts talent.
If you want to distribute music, you’ll need to understand the music industry. Knowing your music is one thing, but understanding the economics, contracts, and various arrangements is vital if you want to succeed at starting a music distribution company.
If you want to start a music distribution company, you’ll need to define what your role will entail. Some of your duties could include:
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While not all music distribution companies will do all of this work, you’ll need to decide what type of company you’ll be. Also, it doesn’t hurt to be unique, so now is the time to plan your offering.
The most important thing is that you act responsibly, reliably, and professionally. Take care of your clients and artists, and you’ll be able to keep hold of them.
Market research is an essential aspect of any business. Before you start to invest your own money in selling a product, you need to establish that a market need actually exists.
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You can do this on a band-by-band basis or even for a particular genre. Additionally, you can use social media analytics to decide which artists are creating a buzz or resonating with audiences.
Overall, it’s up to you how you want to create your roster. You can go general or try to serve a genre. Most people start out with a genre or a specific sound. There are lots of reasons why this is a
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