MUSIC – What is a distribution deal and do I need one?
As a musician or producer, once you have finished your latest track or EP, the next step is to push your music for release. For signed artists, this is usually taken care of by your label. For independent artists, this is something you need to arrange yourself.
Nowadays, it’s all about the streams, especially in the early stages of your career. The royalties you perceive per stream are quite low, and certainly lower than traditional record sales or even downloads. This means that to make money from your music through online platforms, you will need a very high number of streams – so this is worth looking into as soon as possible.
Most commercial streaming platforms (like Spotify) do not allow you to upload your music directly. This means that you will need a distributor to upload your music for you.
Beware the difference between distribution deals and… distribution deals
One type of “distribution deal” or “distro deal” is quite simply the agreement between artist and distributor, to allow you access to the relevant streaming platforms.
However, as with many things in the music industry, it’s not always that simple. There are broadly three different types of agreements which can be referred to as distribution deals or distro deals. It may seem silly to say, but it is important to know which one you need – and which one you end up signing!
This article is here to give you an overview of the three types of distribution deals you may come across, to make sure you get it right first time.
- the Distribution Deal to allow access to streaming platforms
This is usually the first one you need, and nearly every independent artist will need one. This type of distribution deal allows you to upload your music to the distributor’s online platform, and they will then use their distributor account with the relevant streaming platforms to upload your music so that you can start racking up those numbers, and start perceiving royalties.
There are a large number of companies out there which offer this service, like Ditto, CD Baby, Distrokid and many, many more. Unlike a label, they don’t have to like your music – this is just a service they offer.
The ‘deal’ itself is usually in the form of Terms & Conditions of use, which are found in the small print of the website – you will usually find a link at the very bottom of the home page. By signing up to a distributor, you agree to their T&Cs, so make sure you read them properly to make sure there are no nasty surprises!
Nowadays, the fee you pay is usually a fixed annual fee (around £20 of $20) for unlimited uploads and distribution. In the majority of cases, these fixed fees mean you get to keep 100% of your royalties. I would therefore never recommend entering into this type of distro deal which claims a percentage of your royalties – a fixed annual fee is the better and cleaner option here.
To give you an idea, to recoup a £20 fee on Spotify alone, you would need roughly 4,000-5,000 streams in total, on the basis that Spotify currently reportedly pay approximately $0.00437 per play.
Usually these deals also allow for a clean break if you want to switch distributors, or if you sign a record deal in the meantime and your new label wants to take over your distro. Just make sure you are not signing away any pesky options on future releases, and are not getting tied in for too long.
- the Distribution deal which is actually something else
This is a tricky one. I mention it because I frequently meet artists to review a deal they have been offered which calls itself a “distribution deal”. Upon closer inspection, it becomes clear that these deals actually contain clauses which you would not expect in a distribution agreement – some of which are quite alarming.
It is of course impossible to generalise, and the specifics change from agreement to agreement. Broadly speaking however this type of deal is often the result of distributors promising to use their network, contact and infrastructure to get you more streams (through radio plugging and playlisting on streaming sites) or more synchronisations for your music.
In exchange, they will take a chunk from your royalties (anything between 10% and 30%) and will sometimes tie you in to an exclusivity clause.
These agreements also often entice you with a relatively short initial period (sometimes as short as 1-3 years) but then keep you locked in through option periods for future releases, which means that you could potentially be tied in for 10+ years.
The problem with this is that, if a label offered you a record deal, you may find that your distribution deal can cause issues and dilute your royalties, especially if both your label and your distributor are taking a cut.
Of course, it may well be that the distributor you are speaking with has all the right contacts and industry knowledge and will actually be able to take your music to a whole new audience – this will depend on the distributor, but also on where your career is and what you want the next step to be.
Generally speaking however, if you want more streams, you may also consider a radio or playlist plugger, and if synchronisations are your priority, speaking to publishers or synchronisation agents is likely to be a better move.
- the traditional Distribution Deal, which should not be relevant to you as an artist
Finally, there is also the traditional, old-school (meaning pre-digital era) Distribution Deal which, as I mentioned before, should not be relevant to independent artists or indeed artists as a whole. I have included it for completeness only, as you are still likely to come across this in your research.
Traditionally, a record label’s role is to deal with the recording, producing, mixing, mastering etc. of music, as well as its promotion and marketing. Labels would however rely on distributors to ensure that physical records made their way to the shops where consumers would ultimately buy them.
As such this type of old school distribution deal would be between a label and a company who would ship the records, keep track of inventory, and cut deals with large retailers (from media retailers to supermarket chains).
Given the music industry’s recent move to online platforms, this type of distribution deal is no longer as vital in many artists’ commercial success.
In any event, smart money says this is not the type of distribution agreement which you are looking for information about today.
To summarise, although you are likely to consider a distro deal early in your career to get your music onto streaming platforms and build your fanbase and start earning some royalties, you do need to make sure you understand which type of distribution deal you need.
Of course, if you have any questions about distribution deals or need advice on any other legal issue you are facing, get in touch with Briffa for a free initial chat, to see how we can help.
Written by Joshua Schuermann Solicitor