What Every Musician Should Know About Digital Distribution, Part II

Here's the second installment of my article. Enjoy!
--Peter

Part II: What to Look For in a Digital Distributor

If you want your music up for sale in iTunes, Rhapsody, Napster, AmazonMP3, eMusic, Amie Street, Zune, BestBuy.com or any of the stores that have emerged as “big guns,” you either have to build a direct relationship with each one of them, or go with a digital distributor. Most people can’t do it on their own: as I wrote in Part I, stores simply won’t set up a deal with you, as a matter of policy, unless you’re big enough (around 200 releases or with some top-tier material already proven to generate considerable revenue, so as to attract the stores’ attentions). If you’re that big, you have your own legal staff, have been in this business a while and probably don’t need any advice from me.

So if you are a small label or individual artist, you’re going to have to go with a digital distributor. How do you pick one?

Aggregators

The phrase “digital distribution” can confuse: after all, aren’t CDs digital media, and haven’t they been distributed for decades? The companies that sprang up over the last few years to deliver digital music over the Internet to stores that sold downloads or streams call themselves “aggregators.” They aggregate music and materials from lots of individuals and small labels and deliver them in regular packages (weekly, daily, nightly, however they batched them together). As an individual musician or small label, you’d negotiate a deal with the aggregator to deliver the music and data and collect sales figures and earnings on your behalf. The aggregator already had the infrastructure to deliver your content to the stores, so you had to work out some way of getting your music to the aggregator (mail a disk, send the masters FedEx, etc.). Then, when the stores report sales of your music and send money, the aggregator passes it on to you. For all this service, you would pay them something.

Aggregators are in a pretty good position: since the “big gun” stores won’t do deals with individuals or small labels but will work with giant aggregators, they’re in the driver’s seat. They were “gatekeepers,” since you can’t get your music for sale in the big stores without them. Furthermore, aggregators were born into a very well established music business that has more than a hundred years of experience with distribution. There was ample opportunity to set up deals and terms that resembled traditional physical distribution.

So if you go with an aggregator, you’ll probably enter into a deal with them that looks a lot like the deals traditional physical distributors used: you pay an ingestion fee of some kind, are responsible for delivering your product to the aggregator somehow at your own expense, and then the aggregator takes a percentage of your sales, for however long you’re in the stores “through them.” This model is standard in the industry now, and just about everywhere you go, you’ll find some variation on it. I’ve seen percentages as high as 30% and even 50% and ingestion fees that added up to well over $100 per release. That’s a hefty cut, but hey, how else are you going to get your music into the stores to sell so you can make anything at all?

TIP #1: Check the Percentage

When you choose a digital distributor, ask:

• What percentage are they going to keep?
• Is there a cap, or do they take that percentage forever?
• Will that percentage ever go up?
• What are they doing to justify the percentage?

The last point is key: What are they doing to earn that percentage? Remember, this isn’t traditional physical distribution, this is digital. They only need to send the stores your music and data ONCE. They don’t have to have a warehouse to store it, only a hard drive (and trust me, storage is pretty cheap!). They don’t need trucks to ship it, though they do need bandwidth, ONCE, to send it along. They don’t need to package it in cling wrap or load it on pallets, but they do have to format the data to the stores’ specifications (again, ONCE). They don’t have to keep a staff of salespersons wandering from store to store to make sure your music is on the shelves as promised, it can be checked automatically, instantly. They don’t have to deal with insurance for your product (a leaky roof in their warehouse could destroy your stock of CDs, but in the digital world there’s no stock). About the only thing that isn’t changed is delivering money and sales data back to you: that’s the same for all distribution (more on this later).

So why are they taking a percentage? Because they can: because they are gatekeepers and you’ve no choice but to use them. There is one other reason, and it’s the most important: do they MARKET or PROMOTE your music? That’s where most aggregators say they work for you, and the reason they deserve a percentage.

In Part III: More about how digital distributors and aggregators market and promote you…or not!

Comments

[Gransvill Jones ( CEO of De'jaVu Records Entertainment,LLC)]

Hello and thank you for that great info in to the digital world of Distribution. It is very hard for any small indie label to get this right and to get this info this can make you or break you. After all their is so much more that comes before you can even get to this part. you have open a very big door to all of us that are trying to make this a life changing career move. So I would like to thank you for putting this info out for all of us out here trying to make it in this business.

[Rob Mazurek]

Firstly would like to say- Great article !
Many independant artists like myself love to create music, but are not experts on marketing/distribution. Having checked out some Distributors though, realized that Tunecore truly is "The Distributor" that is in the artists corner (not trying to rip you off) that offers the best service,price,and advice like the articles posted above. In other words, they just dont take your money and leave you wondering how your music is really selling.

I just signed up to Tunecore in June and released my first album "Out For Blood" recently and found their service so far to be excellent !! ,they are straight up with you regarding fees,they inform you what date your music is scheduled for release to stores. Overall the best Price,service,advice,and most importantly "Honesty" from a distributor you could ever hope for !

From what I seen so far here,I am very Happy with them and will deliver all my music through them here in the future ! I have already referred their website to a few friends who also are about to record some music of their own. Keep up the great work Tunecore !

[Andy C]

Hey,

Great article. All valid points.

We (dittomusic.com) are actually the largest digital distributor at the moment. We distribute to over 700 retailers and unlike many other distributors we register the music with catco and ppl after assigning ISRC and UPC codes.
This means that you can gain chart position if you sell enough.

We also run our own SKY TV shows that go out live and showcase the best in new music. We are always looking for new bands and artists to appear on the show so head on over to www.dittomusic.com to check out what we do and how you can get involved!

Cheers,

Andy C

www.dittomusic.com

[Mike Rondell]

Why do you hate TechCrunch and Michael Arrington so much????

[Mine Erkaya]

Hi, That's a great article! It is very clear why musicans need online music distributors but I really confused about the difference between an aggregator and a distributor? Could you just briefly explain the difference? Thanks.

[Brian David Singer]

Thanks for your candid comments on Aggregators. Honestly I run a successful business outside of my music but as a musician, guitarist and songwriter i need a lot of help in getting my music played. Any help advice or words of encouragement, possibly even a nice plug of my music or referral would be very much appreciated.

Many thanks
Brian David Singer
www.myspace.com/briandavidsinger
763 226-9369
Minneapolis, MN

[Golden Boy (Fospassin)]

I am an artist and owner of my own label.The world of digital distribution today is made of mafia.The artist has to pay a fee to publish his album,the distributor takes a percentage and by the end the artist never get paid.My friends artists please stop dealing with all these digital distributors out there.They have big names but thieves.You can choose Tunecore or Emubands who are the only ones who provided me a part of what i was looking for.The best choice is Tunecore.I get paid very often and i receive advices every time.I went into differnt different distributors before and i had to share my sales with more than 2 and by the end no sales reports,no streaming and other places i was paying $7.95 every month.I know a lot about that game today.Tunecore is very different from them.