How Music Distributors Work
by Diane Dannenfeldt
The new-wave band, Devo, peddled their own 45 records before
finding a music distributor.
© Jim Dyson/Getty Images
Introduction
In the mid-1970s, before the rock group Devo had a record contract,
co-founder Mark Mothersbaugh traveled around Ohio from record
store to record store to peddle 45s that the new-wave group had
pressed at $400 per 1,000. Band members also created the cover
graphics and folded and assembled the records and covers.
Working as an apartment building maintenance man gave
Mothersbaugh enough time to make the store-to-store treks, but
often the response was something like, "No. Still got the copy you
brought us last week." It might not have been the most efficient
system, but that, Mothersbaugh says, was Devo's early independent
distribution network. Eventually a record contract with Warner
Bros. brought the trips to an end [sources: Jodi Summers and
Devo].
Like yet-undiscovered Devo, many music groups face the dilemma
of how to get their music to their audience once they're done
writing and recording. The answer is the music distributor, who can
make the connection between the band and the fans, increasing the
group's visibility and putting cash in its pockets with CD or
individual track sales.
The world of music sales has changed dramatically since those
hand-assembled and personally delivered Devo 45s. Mergers and
acquisitions have reduced the number of major music distributors to
a handful, and vinyl has given way to CDs and online single-track
downloads, but much of the distributor's work remains the same.
You may be wondering: How does music distribution work? What
types of distributors are there? And how does a band or record label
work with a music distributor? Keep reading to find out.
When releasing their new album in 2007, the Eagles signed an
exclusive distribution agreement with Wal-Mart.
© Karl Walter/Getty Images
Types of Music Distributors
A music distributor links a record label or independent musical
group to consumers. The record label signs the group and then
oversees recording sessions, marketing, promotion and distribution
of the group's CDs to retail stores. Major record labels usually have
an in-house music distribution division or an ongoing relationship
with an outside distributor. A band without a recording contract,
like Devo in the mid-'70s, has to find an independent music
distributor to get its message and its music to its fans.
The goal is the same: to sell recordings and to increase the group's
visibility and popularity by convincing stores to stock and promote
its recordings. Promotion can include in-store displays, media
advertising, listening stations within the store, sale pricing and even
special high-visibility placement of the group's records or CDs.
Much of that comes through the distributor's sales reps, who build
relationships with the chains and independent stores. The stores
either buy with a purchase order or on consignment, only paying
when the CD has sold [sources: Jeff Johnson and
Musicpowers.com].
Although music downloads eliminate physical records or CDs in an
actual store, much of the music distributor's role remains the same,
substituting an online music seller, like iTunes or Rhapsody, for the
retail store and converting store displays and advertising to pop-ups
and e-mail or text message offers.
Music distributors can be categorized in several ways:
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Major label vs. independent -- Consolidation has left only a
handful of major music distributors affiliated with the big
record labels: Capitol/EMI Distribution (Time Warner),
Sony/BMG Distribution, UNI Distribution (Vivendi
Universal) and WEA Distribution (Warner Music Group).
Independents can be national or regional. Among the
independents, the largest is Curb Distribution.
Subdistributors -- These are the middlemen between large
distributors and retailers. They could be one-stops, which sell
from a number of different distributors, or rack-jobbers who
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actually own and run the record department within a larger
department or multipurpose store.
National, regional or international -- While the major
distributors operate on a national basis, area distributors are
smaller and focus on a specific region of the United States,
perhaps even a single metropolitan area. International
distributors handle one or more overseas markets.
Online, Internet or digital distributors -- These distributors
supply iTunes, YouTube.com, Rhapsody, Napster and other
Web music stores with the tunes that they offer. These
distributors may also offer physical CDs, or they may operate
only in the cyber-sphere.
Niche distributors -- Some distributors specialize in and can
be categorized by the type of music they handle, such as
classical, Christian, country or alternative music.
Printed or sheet music distributors -- Although they only
account for a small share of the market, some distributors are
actually publishers or work for publishers to sell musical
scores, band music, pop songs for guitarists and vocalists,
and other "on paper" works.
Music distributors like Alan Becker, left, and Bob Morelli,
center, both of Reed Distribution shown here with Ed
Christman of Billboard, work to get their clients' CDs in
stores.
© Gary Gershoff/WireImage/Getty Images
Working with Music Distributors
One way to think of a music distributor is as a wholesaler. That's
because the distributor buys CDs from a record label or the band
itself, either directly with a purchase order or on consignment, and
then sells them to retailers, who offer the CDs to consumers.
The price goes up at each step of the process. The label, for
instance, sells the CDs for 50 percent of the retail price. The
distributor adds a fee to the price, perhaps $2 per CD, and sells to
the retailer, who then sells the CD to a customer for full retail price
or at a sale rate. The record label usually pays the charges for
shipping CDs to the distributor, who often does not pay the label for
the CDs until they have been sold [source: Musicpowers.com].
The distributor needs information from the record label, including:
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The label's trademarked name
A catalog number (three letters followed by numbers) for
each release
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A Universal Product Code, or bar code, on the CD label so
that its sale can be tracked by the Soundscan software used to
monitors music sales
The record label or independent music group also puts together a
so-called "one sheet" that the distributor and retailer use to sell the
CD. Here's what the one sheet usually includes:
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The label's logo and contact information
The CD title
The artist's name and band logo
The catalog number and bar code
The list price
The format
The date released to radio
The street date, if different than the radio release date
A short description of the artist's background
Brief descriptive information about the music on the CD,
including genre
Selling points, such as discounts and marketing and
promotional plans for the CD
[sources: Musicbizacademy.com, Hitsquad.com and Leeway's
Home Grown Music Network]
If you're new on the scene and trying to attract a music distributor's
attention, you'll need to provide more. Distributors prefer to work
with bands that can show they've had radio play and success in
selling their CDs at live shows or online through their own Web site
or sites such as iTunes, cdbaby.com or MySpace.com. And they'll
want to know that you have a promotional campaign. So in addition
to sending the one sheet and a sample CD to the distributor, include
data about your group's radio play, promotions and CD sales
[source: Musicpowers.com].
As you look for a music distributor, you may want to:
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Start with niche distributors that specialize in your band's
genre of music.
Look for a distributor that offers the flexibility of online CD
and digital distribution as well as CD distribution to stores.
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Check the distributor's financial status and contact its
references.
And be prepared to sign a written contract for an exclusive
agreement, allowing the distributor to represent your group
exclusively.
Finally, recognize and be ready to go with the changes sweeping
the music industry. Artists are turning to alternative distribution
strategies. Consider Paul McCartney's release of an album on
Starbucks' Hear Music record label and the Eagles' exclusive
distribution deal with Wal-Mart.
And music is available almost anywhere, not just in stores and at
online music sites, but also through streaming interactive
subscription services such as Rhapsody, satellite radio subscription
services like Sirius, video games, social network sites like MySpace
and mobile phone carriers such as Verizon Wireless with its VCast
music store.
Related HowStuffWorks Articles
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How Music Licensing Works
How Music Producers Work
How Music Royalties Work
How Record Labels Work
How Recording Contracts Work
From: http://entertainment.howstuffworks.com/music-distributor.htm