Distribution 101: Pt. 2

Last month I discussed two distinctly different types of physical music distribution – “traditional” and “one-stop.” This month I will delve a little deeper into some of the various deals potentially offered by traditional distributors. While it remains true that opportunity has never been greater for the average indie musician or label, a traditional distribution deal is still very hard to come by. A general rule of thumb indicates that an artist or label typically surrenders control and profitability in direct proportion to the amount of outside investment agreed upon and/or required to record, market and promote an album. For the purpose of this segment on distribution, the terms “distributor” and “record label” are often used interchangeably.

In a “packaging and distribution deal” (sometimes referred to as a “P&D deal”), the artist or label maintains more control over a project since the distributor is only fronting the costs for manufacturing. Due to the limited exposure, the distributor allows more freedom to the artist/label since the risk for marketing and promoting the album is assumed by the artist or label.

Under a “profit-sharing” model, more of the burden is assumed by the distributor. The artist or label will typically enter the agreement with a finished project in-hand and maintain ownership of the master recording. The distributor agrees to invest in the marketing and promotion of the project and profits are then shared between distributor and artist/label.

In a “license deal,” the artist or label licenses the rights to exploit the content to a distributor or label while retaining ownership of the master recording and songwriting revenues. Once the license term concludes, the rights then revert to the artist or label. This model can be very advantageous if the artist/label is able to properly market and promote the title independently.

The next model is what most people would be familiar with when discussing a “major label deal.” In this model, the label/distributor funds virtually every aspect of the recording and marketing process and, as such, inherits a great deal of influence over each and every aspect of the recording and marketing processes. One of the hot-button issues for many past, present and future recording artists operating under this model is the ownership of the publishing rights and copyright of the master recording. Most deals under this model require that the artist or label surrender ownership of the master recording and, often, the publishing rights as well. If and when this occurs the distributor will maintain ownership indefinitely for all aspects of the master recording.

One of the newest models in vogue is the “360 deal.” Under this model, the artist is basically “branded” by a team consisting of artist management, producers, promoters and a marketing team. The team assumes “ownership” of the brand and work together to create success on behalf of the artist. At this level, virtually any and all merchandise branded with the artist’s name or likeness becomes a profit center for the label. This model involves the most financial investment by the label/distributor and, proportionately, the least amount of creative control for the artist.

Next month I will discuss self-distribution and the truly independent artist.