The Mechanics of Distribution: How Music Distribution Works?
Music distribution is as old as the music industry itself. Even when the sheet music publishing companies ran the business, they needed someone to print out the scores and deliver them to the stores. That was (and still is) the role of the distributors: getting music into the stores. Simple as that.
But while the core role of music distributors stayed the same for over the years, their workflow and business models have been subject to constant change. Those changes had a massive effect on the music industry. From the pre-2000s “era of CD” to “the post-streaming era” that we enjoy (or suffer) today — we use the dominant distribution medium to define the stages of the industry’s development.
In 2001, the recording industry was almost exclusively “physical”. Seventeen years later, physical sales made up less than 1⁄4 of all global recording revenues — with the share going down to 10% when it comes to the more developed digital markets. The rule is not without exception — the Japanese recorded music market, for example, is still dominated by CD sales. Still though, in the grand scheme of things the music industry has embraced the digital environment.
Accordingly, most of the music distributors turned from supply chain managers into providers of digital infrastructure and rights administrators. That’s why, for clarity’s sake, we will leave the nuance of physical distribution out of scope (for now) and focus on the digital market instead.
Today, making a song available to listeners all over the world is as easy as uploading a file on the internet. So, why is there still a need for the distribution intermediary: can’t the artist just, you know, “Do It Yourself”? Well, not really. The distributors are still an integral part of the recording chain, taking upon themselves two core roles:
1. Distributing Releases to DSPs
Sure, there are genuinely “direct artist platforms” out there like Bandcamp or SoundCloud. They don’t require a distributor: set up the artist page, upload your music — and you’re good to go. However, they are just a fraction of the plethora of digital distribution resources, from streaming services of Spotify, Apple Music, Deezer, Google Play Music, Pandora and Tidal to social media platforms like Instagram, TikTok, Facebook, and everything in between. In today’s digital environment, a well-oiled tech pipeline is a must to make sure that the release will be available to (1) all your listeners, (2) across all platforms, and (3) on the day of the release.
In fact, most of the DSPs out there don’t allow for direct music upload at all, forcing the artist to go through distributors/aggregators. Even Spotify has recently closed off its direct upload program after about a year of beta-testing, stating that “music distribution is best handled by partners”. The truth is that DSPs would rather work with distributors than with artists directly to save themselves the headache of dealing with unstandardized metadata and payout distribution.
Sure, the artists can (technically) upload their music on iTunes themselves. However, even Apple will suggest that you go with the distributor to ensure that the release metadata fits the platform’s requirements. Now, some of the broadest digital distribution networks claim to source more than 600 online stores — and all those different DSPs are likely to have different metadata standards. That makes it virtually impossible to handle the digital music distribution manually.
2. Royalties Allocation
The second core role of a distributor is allocating the royalties due back to the rights owners. As the music market turned digital, straightforward “deliver a batch of CDs to the store and get paid” deals were replaced by a flexible payout system. In the world of streaming, music consumption and purchase are inseparable — and the right owners now earn money the very moment the user press play. The value of that stream will depend on dozens of factors, so we’ve covered them in a separate article on how streaming services pay the artists — check it out if you want to know more.
Either way, the royalty calculation is complicated as is — now, imagine if Spotify, Amazon Music or Apple had to pay out those royalties directly to every single artist on the platforms. Even if they’d managed to get all the metadata and banking details correctly, the administrative costs would go through the roof. Besides, the right owners themselves wouldn’t be all too excited about getting their pay separately from each of the digital platforms.
So, the distributors fill that gap, serving as a sorting plant for royalties floating from DSPs to rights owners, and making sure that every “master” dollar finds its way back into the recording industry (while the composition/publishing royalties go through a separate pipeline of CMOs, PROs, and publishers).
Those are the two core roles of the distributors — getting the artist’s music out there and passing down recording royalties back to rights owners. However, that doesn’t mean that all of the distributors stop there. On the contrary, most players on the market have expanded their offer far beyond these basic aggregation services.
3. Distribution Strategy and Trade Marketing
Flashback to the physical age. A customer walks into the record store and they are presented with hundreds of options. The departments are organized by genre to help them get around, the “stuff selections” section offers an eclectic mix of new releases, the Point of Sale stand promotes the latest blockbuster release and, finally, there is a premium shelf at the entrance of the store. Every single customer will see the records on that shelf. Working with the record stores to get on that shelf was a big part of the artist promotion back in the day, generally referred to as trade marketing.
Back to reality, we don’t have record stores anymore, but the same principle of favorable placement still applies. A person pulls up Spotify, navigates to the browse section, clicks on “New Music Friday” and presses play. The track that plays is the #1 song of the week and this it is the “record that every customer will see” — the 21st-century twin of the premium record store shelf. This spot is the end goal of any modern distribution strategy.
Now, how do you get there? Streaming has made the fragmented music market of record stores much more centralized. A handful of DSPs dominates the digital market — and, even though some of the streaming giants are putting their algorithms forward as mediators of music discovery on the platform, the most popular playlists and the “feature spots” are still curated by service’s editorial team.
So, to get that desired distribution push, the artist needs to go through them. However, the editorial team can’t speak to thousands of artist managers and indie labels every week — just like streaming services can’t distribute royalties directly to rights owners. The scope of their operation simply doesn’t allow it. Pitching to DSPs to ensure beneficial placement on the platform is challenging even for the biggest independent labels — simply because they lack the scope of the catalog.
So, here’s where the distributors come in. As “bulk representatives”, they are well-positioned to negotiate with the streaming editorial — so, most of the trade marketing leg work lies on their shoulders. The artist team (whether it’s a record label or a management company) might be the one defining distribution strategy and playlisting approach — but 90% of the time it’s the distributor that will implement that strategy in direct contact with the DSP.
Almost all of the distribution companies are involved with trade marketing — but the extent of that involvement can be very different. Some of them will provide their clients with a set of promotion tools and best practices on how to pitch to editorial teams — others will get a dedicated team of playlist pluggers behind your release and a rep to consult you on your distribution strategy (if you make it worth their time). The distribution landscape is as diverse as any other subset of the business.
29 Music Distribution Companies: the Complete List
Below, we break down the five distinct types of distribution companies to highlight the industry’s structure and options available to artists and record labels. However, before we get into it, here is a list of 27 distribution companies split into said five categories to give you some perspective. Those are players that have the most impact on the industry — the ones we think every artist and music professional should know.
Disclaimer: when it comes to distribution, there are no objectively bad or good solutions. All of the companies on the list have something to offer: the same distributor can be a perfect fit for one artist and a lousy service for another. The point is — we’re not endorsing anyone. Every career is unique, and the artist’s needs evolve as they move up the ranks.
Major Distributors (apart from the in-house distribution departments at Universal, Sony and Warner):
1. Alternative Distribution Alliance
3. INgrooves
4. The Orchard
Independent Distribution Partners:
5. Absolute
7. Ditto Plus
8. Idol
10. Stem
White-label Distribution Solutions:
13. Sonosuite
14. FUGA
Open Distribution Platforms:
15. CDbaby
16. DistroKid
17. Ditto
18. Horus Music
20. Landr
21. Level Music
22. OneRPM
23. RouteNote
24. SoundDrop
25. Spinnup (the subsidiary of Universal Music Group)
26. TuneCore (the subsidiary of Believe Digital)
27. United Masters
Semi-label Distribution Services:
28. Amuse
29. AWAL
5 Types of Music Distribution Companies
Now with that out of the way, what is the difference between those companies? First of let’s get one thing straight. “Distributor” is not a specific type of company — it’s a role that can be internalized by other parts of the recording chain. The prime example is the major labels:
1. Major Distributors
The majors are perhaps the only players on the recording market that own a catalog big enough to negotiate on par with prominent DSPs and get direct access to their editorial teams. So, they don’t really need distribution partners — the label’s distribution department works 99% of the catalog. In fact, one could argue that this very ability to distribute music globally through direct DSP licensing deals is what turns a label into the major these days.
Besides, it’s not only about distributing their own catalog. The majors also distribute a sizable portion of independents out there. Beggars Group is distributed in the U.S. by Warner Music’s ADA, Fool’s Gold and Mass Appeal — by Universal’s Caroline International, and so on. That makes the distribution industry even more major-centric than the recording business as a whole — currently, on the U.S. market, a whopping 85% of digital revenues goes either through Universal, Sony or Warner (or distribution companies under their umbrella).
Source: BuzzAngle Music 2017 U.S. Report
That massive “share of catalog” distributed by majors makes them extremely powerful when it comes to trade marketing. The “old industry” is coming back in a way: the majors used to rule the game as they held the keys to the media; now, the scope of their catalog gives them the leverage they need to negotiate with the likes of Spotify.
To counteract that, both digital platforms and independents are trying to find a way to level out the playing field. Digital rights network Merlin had great success mediating relationships between independent labels, non-major distributors, and DSPs. On the DSP side, Spotify has recently introduced a unified tool for playlist submission, standardizing playlist pitching across labels and artists of all scope.
That said, the current system is still far from perfection. We have to acknowledge the fact that independent labels don’t have the same 1:1 access to the editorial team that the majors have. On average, it’s still easier for artists to be visible on streaming platforms if they are signed to (or distributed by) the major.
2. Independent Distribution Partners
However, the major deals (even distribution-only ones) are not for everybody. For the top-tier independent artists, there’s another option. In a way, they are the indie counterparts of the major-affiliated distributors — or, instead, they are top-tier distributors that have managed to stay independent thus far. There’s been a continuous trend of majors buying up independent distribution companies as of late — The Orchard became a part of Sony back in 2015, and Universal bought INgrooves in early 2019.
Today, the primary players left in this category are Believe Digital, Idol, Redeye Worldwide and recently launched Ditto Plus (not to be confused with Ditto’s open platform solution). Stem and Symphonic Distribution can also be put in this box — although they cater to a more “middle tier” audience compared to Believe or The Orchard.
The important thing, however, is that for distribution partners, aggregation is a side-service — their real value is in the hands-on approach to promotion, trade marketing, and digital release strategies. From the moment you sign a distribution deal with one of those companies, you have at your disposal a dedicated consultancy and pitching team in direct contact with editorial across the major DSPs.
The deals with dedicated distribution partners — whether it’s an independent company or a major subsidiary — will always be percentage-based. Aligning their interest with the artist, distribution partners take a stake in the recording royalties, which can go up to 50%. Also, the distributor will often offer an advance to the artist, recouped by the future cash flows.
The gates of distribution partners are not open to anyone — a label/artist has to get signed by the distributor, proving that the potential cash flows are worth the distributor’s resources. Arguably, the independent distribution partners are more accessible than their major-affiliated counterparts — but in both cases, the up-and-coming artist will have to make their case as a worthwhile investment.
3. White-label Distribution Solutions
However, not all of the independents are looking for distribution partners — some of the top-level indie labels have a full-blown in-house distribution department that lacks only the technical infrastructure. To bridge that gap, record labels can go with white-label distribution services like Consolidated Independent, Sonosuite and FUGA.
White-label solutions do one simple thing. They provide the technical pipeline, focusing on the administrative role of the distributor — delivering audio and metadata to DSPs, and distributing royalties back to the right holders at scale — while their customers keep complete control over the distribution and retail marketing strategies.
Such companies sometimes don’t even position themselves as distributors, often going for something like “provider of digital supply chain services” instead. Accordingly, their business model targets top-end independent labels with a sizeable catalog and output or other distributors looking for a tech pipeline, rather than someone who wants to distribute a handful of songs.
4. Open Distribution Platforms/Aggregators
Finally, we have open distribution platforms, targeting independent long-tail of the music industry — the brands that are the most visible across the distribution market. Even though the share of the revenue that goes through them is nowhere near the scope of major distributors, every music professional and every artist has probably heard of CDBaby, TuneCore, and DistroKid. As a result, the distribution landscape is often reduced exclusively to those distribution platforms — while, as you can see, it’s just a fraction of the actual market.
The business model of open platforms usually revolves around two types of services. First is the aggregator package: go on the platform, upload your music and we will take care of the rest, making your release available across hundreds of DSPs. This is the basic service that all of the online distribution platforms offer. Depending on the service, the distributor either charge a flat per-song/album fee, annual recurring subscription toll or a percentage-based commission up to 15%. Or any combination of three.
The second package is the premium artist services. Depending on the company, that could mean playlist pitching bundles, publishing administration services, airplay plugs, physical distribution, or anything in between. The quality of those (mostly promotion) artist services will likely be nowhere near what, let’s say, Believe Digital partnership can offer. However, those services are available to anyone with a song and a credit card — so they might be a worthwhile investment on the early stages of the artist’s career.
At the end of the day, you have to admit that the ability of open platforms to properly represent their customers on the trade marketing field is a bit limited. I mean, 20 thousand songs are uploaded on Spotify every single day, and the lion’s share goes through the open platform distributors. Noone knows the exact figures or course, but let’s say CDbaby or TuneCore, or Ditto — each of them processes 1,000 songs every single day. Well, it doesn’t matter how big your team is, you won’t be able to provide personalized promotion services at such scale. Sure, the good distributor might give the artist’s music an additional push if it sees that the release is doing well, especially if they earn commission on sales — but the level of attention and investment will be nowhere near the selective partners’.
Don’t get me wrong; open distribution platforms have earned their place in the music industry. Most of the time, the deal is a great value proposition. “Distribute your album to (almost) every imaginable DSP for $50 and keep 100% of the royalties” — that is by no means a bad deal. However, you have to be aware that when you go with a flat-fee distribution deal — you’re pretty much on your own if you want your content to stand out across the DSPs.
5. Semi-label Distribution Services
This last type of distribution companies is a relatively new and sparse breed. To our knowledge, two companies on the market could fall into that category: AWAL and Amuse. Though their business models are a bit different, both are responding to the recording industry’s shift from making the records to licensing the existing releases — something that we’ve covered in detail in out Mechanics of the Recording Industry.
The idea of semi-label distribution is simple: you don’t need a record deal to release your music (AWAL quite literally means Artists Without A Label). You still need a distributor though — so, let’s get your music out there, and, if it gets some heat, upstream to a record label-type deal. In a way, the “artist services” of open distributors are also a move in that label-like direction — but AWAL and Amuse take it to the next level.
Just like the open platforms, AWAL and Amuse offer a basic service of distribution administration — just getting the music out there. However, as soon as the artist is get’s a distribution deal, the wealth of the consumption data gathered across the DSPs ends up in the hands of the company’s A&R. So, if AWAL sees that the artist is doing well, the initial deal can be upscaled to a distribution partnership, or even a full-blown record licensing deal, including scaled investment into PR, digital advertising, brand partnerships and so on.
That business model proves to be quite successful so far — to the point when it allows Amuse to offer its basic distribution service pro bono for the sake of powering its A&R with data. However, it remains to be seen if it’ll be viable long-term — although we at Soundcharts are obviously big believers in the value of data in the music business.
In my opinion, the AWAL and Amuse are just the first signs of a potential tectonic shift in the recording business. As we’ve laid out in our Mechanics of Recording, the labels have moved away from making the recording, and the artist deals have been by marketing-based licensing agreements. Labels are now focusing almost solely on release marketing — and it’s hard for independents to expand down the chain and take on distribution unless they have special relationships with the streaming editorial community.
Music distribution services, however, can easily expand into the label space — and AWAL and Amuse are living proof. This makes me wonder if in 10 years from now distribution promotion services will be the primary function of the record industry.
