Friday, February 13, 2015

A Musician’s Guide To Digital Distribution

So, you have survived the sleepless nights and long studio hours involved in making a record and finally got your song professionally mixed and mastered. You are then faced with the question, “What do I do next?” The next logical step is to have your music available for sale. With the advance of technology, it is important to have your music available digitally. It is the new age method of selling music. The latest fad is using Beatport, Spotify, eMusic and iTunes for example, to access music. If your music is not on these platforms, you are simply not in the game.

But what are the processes involved and the requirements necessary to make this possible?
I will endeavor to assist in preparing you for this important step of selling your music through an aggregator/distributor. The distributor acts as a middleman between you and the digital music service. It is important to note that digital distributors have far less operating costs than the physical music distributor (the CD guy). This is because there is no physical inventory to store, no actual shipments to be made and no copies to be pressed. The new age distributor collects music through licensing; manages the asset (by assets I mean the metadata, audio file and artwork); delivers the music to online stores; receives the revenues generated through sales and streams; and issues royalty statements and payments to artistes. The greatest costs they face, therefore, are the fees paid to submit music to stores and wages paid to staff.

A distributor will either collect a flat fee for submitted content or take a percentage of royalties on sales. Of course, the flat fee structure varies from one aggregator to another but is usually around the cost of US$10 for single submissions, US$20 for an EP, and somewhere around US$40 for an album. The average royalty rate for aggregators who rather collect a percentage of sales is around 15%. It is also usual to pay an annual maintenance cost to keep your content available in stores, so do not be surprised if you should see these deductions, which can range from US$10-US$50 depending on your type of submission (single, EP or Album).

What are some things to consider when selecting a distributor?

Firstly, it is extremely important to determine which stores matter the most. Of all the online stores available today, iTunes, Amazon, MP3, Spotify, Pandora and Rhapsody contribute the most to the digital music sales market share; with iTunes reported on October 10, 2012, as having a 64% share of the online music market, and a 29% share of all music sales worldwide. iTunes has been the largest music vendor in the United States since April 2008 and the largest music vendor in the world since February 2010, with its 10 billionth song Guess Things Happen That Way by Johnny Cash sold on February 25, 2010. Revenues in the first quarter of 2011 totalled nearly US$1.4 billion and by February 6, 2013 the store sold 25 billion songs worldwide.

If you are an Electronic Dance Music (EDM) artiste, however, then JunoDownload and Beatport are considered the kings of this genre, with Beatport leading by far. Sales in Beatport grew from an annual revenue of $600,000 in 2010 to $6 million in 2012. This makes Beatport the favourite for digital distribution of electronic music. With a number of Jamaican producers and artistes venturing into the EDM genre and a growing interest in EDM promoted events recently, Beatport should be a consideration for local musicians when selecting a distributor.

When choosing an aggregator, therefore, it is important to know what stores they service and whether those stores matter most to you.

Secondly, it is important to take into consideration the delivery times and submission criteria. Different stores have different submission periods; some stores may work with a two-week period while others work with three. It is important to note that the closer the distributor is to the store, the shorter the submission times will be. In relation to submission criteria, some stores stipulate certain formats for music distribution to which an artiste has to conform - whether wav which is required by iTunes or mp3 which is preferred by Amazon. Others are known for screening the music submitted to their store and so request a showcase of an artiste’s catalogue for review. As a result, one must accept that there is no 100% guarantee of acceptance with every store.

Thirdly, it may be prudent to consider whether the aggregator provides UPC/ISRC (Universal Product Code/International Standard Recording Code) codes free of charge or whether it is a paid service and the cost of such service against providing your own codes. These codes allow for easy and internationally standardized means of administering and communicating about your music. It helps track store sales, distribution numbers, and even radio airplay. It's also used by royalty collection societies to identify revenue generated by tracks, to its owners.

Fourthly, it is important to consider the right payment deal based on the distributor models. Whether you prefer a flat fee, royalty cuts or a combination of both is dependent on what the retail cost of your music will be on each store and any recurring cost of maintaining such store presence. It is not possible in this forum to delve into too much detail in this department, but I will advise that from the foregoing, you may apply a formula to determine the deal that would be most profitable.

Lastly, I find one of the most important considerations to be the legal agreement that you will sign with a distributor. This agreement will cover the distributors right to sell and distribute your music to stores and to collect any revenue arising from such distribution. Some of the key components to a distribution contract include:

·  The term of the agreement – the term may be based on a number of years or may be tied to a number of releases (whether one album or two etc).
·  Territory – it is important to determine whether a distributor will have exclusive or non-exclusive right to sell your music within certain restricted territories or throughout the world.
·  Rights – Will the agreement speak to rights to reproduce, manufacture, distribute and sell only or will it also grant the distributor synchronization rights or other rights that have been previously limited to master license agreements?
· Distribution services – Will the agreement make reference to promotion and advertising? This is not a usual feature of distribution agreements.
·  Distribution Fees – whatever payment deal is determined above to be most profitable to the artiste, that deal MUST be included in the agreement.
·  Termination – Upon termination, how much time is the distributor given time to remove music from stores?

These are just some of the thoughts one should have when embarking on this next step in a musical career. If there is still doubt as to how to proceed, it is important to contact an entertainment attorney to obtain legal advice. 

Tova Hamilton is an Entertainment Lawyer. 

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