Do you want to start a music distribution business? If YES, here is a complete guide to starting a music distribution business with NO money and no experience.
Okay, so we have provided you an in-depth sample music distribution business plan template. We also took it further by analyzing and drafting a sample music distribution marketing plan backed up by actionable guerrilla marketing ideas for music distribution companies. In this article, we will be considering all the requirements for starting a music distribution business. So put on your entrepreneurial hat and let’s proceed.
Why Start a Music Distribution Business?
Distribution in the music industry or rather digital distribution (also called content delivery, online distribution, or electronic software distribution (ESD), among others) is the delivery or distribution of media content such as audio, video, software and video games. It is used to explain distribution over an online delivery medium such as the internet, thus bypassing physical distribution methods such as paper, compact discs and VHS videocassettes.
With the advancement of network bandwidth capabilities, online distribution became prominent in the 21st century. Also understand that content distributed online may be streamed or downloaded, and sometimes made up of books, films and television programs, music, software and video games. Also note that streaming is made up of downloading and using content at a user’s request, or “on-demand”, rather than allowing a user to store it permanently.
Indeed specialist networks also termed as content delivery networks aid distribute content over the internet by making sure of both high availability and high performance. New technologies for content delivery include peer-to-peer file sharing technologies, but we believe that content delivery platforms build and syndicate content remotely, acting like hosted content management systems.
Also have it in mind that the term is also used in film distribution to explain distribution of content through physical media, in opposition to distribution by analogue media such as photographic film and magnetic tape.
A music distribution company may be a wholesaler of major label CDs and vinyl records, often called a “one stop.” Also know that it can be a digital music distribution network such as CDBaby or iTunes, or an independent label distributor of music files, vinyl records and CDs.
Analysis has it that album sales started reducing in the early 90s with the growth of digitization in music production, but that increased the number of independent label distributors. Which brings us to this business idea and how best to start this lucrative business.
Starting a Music Distribution Business – A Complete Guide
- Industry Overview
Businesses in this industry sign musicians and artistes to recording contracts, allocate budgets for artistes’ recordings, produce and master artistes’ work, distribute artistes’ music to retail and promote the artistes’ work through various advertising campaigns. We believe that this industry also includes music publishing activities which involve the leasing of music as intellectual property for use beyond live performance such as in promotional material and other forms of media.
From our research, we were able to note that revenue in the Global Music Production and Distribution industry fell over the five years to 2017 due to many of the industry’s biggest companies have failed to make use of a crop of potential new revenue streams to make up for the extreme drop in physical album sales over the past five years. But, the five years to 2022, revenue in this industry will continue contracting.
Music companies’ performance over this period hinges on their ability to embrace new technology. Also know that the industry is dominated by businesses based in the United States and Europe. We believe that almost three-quarters of revenue in the industry is located in these areas, with Africa, the Middle East and Oceania combined representing a distant third. A lot of the industry’s biggest players are headquartered in the United States and most earn the bulk of their revenue in the United States.
Reports have it that the United States is made up 41.3% of total industry establishments, while North America as a whole represents 46.5% of the industry’s locations. Note that the US is the largest single user of music licensing in advertising, and has pioneered the use of music as a marketing tool.
Starting a Music Distribution Business – Market Feasibility and Research
- Demographics and Psychographics
It is very important to state that the main work of a music distribution business is to negotiate recording, publishing, licensing and distribution contracts; to produce and master artistes recordings and to distribute recordings to outlets, as well as managing and promoting artistes rosters. All you need to understand is that you have to make sure that all projects run smoothly, deadlines are met and campaigns come together. You need to take care of your artistes and make them your utmost priority.
A lot of genres of music appeal to many groups of people at their own diverse time and mood. This is explicitly how the market is segmented. But when it comes to looking for artistes to sign on to your music distribution company, it is no longer news that you will probably get a good catch from the 16 – 35 age brackets. Estimate has shown that these people are ready to take the music career really seriously.
List of Niche ideas within the Music Distribution Business
Generally, the industry is very rich and also challenging. If you plan to start any business in the music industry just to make some quick money, then you should have a rethink because tons of people go into the music business yearly with the same intention but only few ever make it big.
We advise that you take your time to understand the industry in and out even before you think of starting this business. You also need to understand and choose a niche market in the vast music distribution Business. These niches may include;
- Physical sales (including CDs, vinyl, cassette tapes)
- Performance rights
- Digital music downloads
- Synchronization etc.
Level of Competition in the Music Distribution business
Reports have it that the US is the world’s largest recorded music market by sales, followed by Japan, the UK, Germany, and France, according to the International Federation of the Phonographic Industry (IFPI). Have it in mind that the adoption of streaming services such as Spotify, Amazon, and Apple Music in both established and emerging markets is driving global industry growth. Digital channels account for 50% of global industry revenue.
We were able to find out that the US music production and distribution industry includes about 3,600 establishments (single-location companies and units of multi-location companies) with combined annual revenue of about $13 billion.
It is believed that the growth and demand in this industry is driven by consumer spending. Note that the profitability of individual companies rest on discovering and promoting new musical talent and generating revenue from the company’s asset base of recordings and publications.
Bigger businesses in this industry have advantages in marketing and distribution; while little companies, many of which are independent record labels (often referred to as “indies”), can compete effectively by focusing on artistes within local markets or music genres. The US industry is highly concentrated: the top 20 companies account for more than 80% of industry revenue. A lot of the major companies involved in music production and distribution operate internationally.
List of Well Known Music Distribution Businesses
All around the globe, you will see that there are key players in various industries. This is also the case with the music distribution company. Here are some well-known music distribution brands in America;
- Sony Music Entertainment
- Universal Music Group
- Warner Music Group
- Avex Group
- GMM Grammy
- 3sixty music group
- Big Noise
- Columbia Records
- MAAD Management
- Countdown Entrainment
- OAG Management
- Mad Decent
- CSP Management
- Macklemore LLC
- Empire Artist Management
- Headline talent
- BBA management and booking
Indeed the general music industry is made up of a lot of businesses, companies and independents. The music industry over years have adjusted and adapted well to the many changes and trends. Downloading brought radical changes to the music industry at the turn of 21st century. But right before the crackdown, we believe that music fans downloaded millions of tracks from a large range of artistes at no fee through companies such as Napster.
Even though clients now pay to download music legally from outlets such as iTunes and Amazon, sale of vinyl records, cassette tapes, and CDs have plummeted, and the music industry has lost billions of dollars. Also know that subscription services such as Pandora and Spotify have further reduced music industry revenue. We believe that with hundreds of music distributor businesses dying, only a few affiliated with the largest record labels remained. Sony, Capitol, Universal Music Group and Warner own the largest music distribution companies.
We strongly believe that there is still a role for music distributors in the digital age, even in the face of radical industry changes. At least not every record label and musician wants to pick up the task of distributing their work. It is for this reason that the music distributors that remain still work hand to hand with record labels to bring music to fans; a lot of retail stores continue to sell physical album copies.
They also distribute music to digital download outlets, even though such businesses also offer distribution deals directly to artists. We believe that the chance for growth remains for music distributors that specialize in certain types of music such as classical, Latin, and jazz. Some distributors have found success by focusing on certain regions and distributing music locally.
Starting your Music Distribution Business from Scratch or Buying a Franchise
Even without being in the industry, you can easily note that the music industry is a multi-billion dollar industry in the world. A lot of people make millions of dollars from the industry and they are not even artistes or singers. This is why we believe that the music industry generally has many facets that work hand in hand to make it successful, and this provides multiple chances for any career focused entrepreneur willing to leverage on the industry.
However, if after going through this article you decide to start your own music distribution business, we advise you to start from the scratch. This is because recently in the industry, you will hardly find any music distribution franchise being sold. This is why we believe that building you own business is a great way to break into distribution and it will gain you some real experience.
Possible Threats and Challenges of Starting a Music Distribution Business
We feel very eager to let it sink that the music business is a great industry to work in, and being a music distributor needs drive and determination which should be moved by love and passion for songs. Also know that the music industry is fiercely competitive but once you have made it, it can be one of the most fulfilling and often financially rewarding industries in the world. The possible challenges you might face may include;
- Writing a business plan
- Registering your company
- Getting a good location and registering focused workers
- Getting contracts
- Establishing a band look
Starting a Music Distribution Business – Legal Matters
- Best legal entity for a Music distribution Business
When starting this business, know that your main job will be to make sure the artistic products of your clients get to the nook and crannies of the whole world, and just like we know, most companies prefer to sign business deals with legal entities, not just private individuals. Your business legal entity will go a long way to describe how good and eager you are to be successful, and the more contracts you get.
Indeed the best legal entity for you to choose might differ according to the place you intend to start this business in the world. But for the sake of this article, the best legal entity to use in the United States is perhaps a Limited Liability Company (LLC). You can also consider starting a corporation; it all depends on your business vision and mission.
Catchy Business Name ideas for a Music Distribution Company
Start off in business with a catchy name and you can be sure to attract a good number of fans to your music distribution business.
- Alfredo Music distribution
- Magnificent Music
- Platinum Theatre
- Candy Music Centre
- Cold way Music Group Inc.
- Gold Records
- City centre Theatre
- Men to kings Media
- KMP Music Group
- Purple Sea Musicals
- Award Lane
- Exquisite Productions
- Thunder management Group
- Bennett Music Company
- Illegal All Starts
- White sky Management
- Blue Blood Management
- Otis Theatre
- Crown Promotions Inc.
- Warrior Entertainment
- Lion Multimedia Group
- Phantasm Sound Production
- Source Interlink Co Inc.
It is very obvious that the general music industry and insurance to a very great extent work hand in hand. Which is why as a focused entrepreneur, you need to stay insured at all times because of some unforeseen instances. Here below, are some of the insurance covers that an average music distribution company should have;
- General insurance
- Health insurance
- Liability insurance
- Workers compensation
- Overhead expense disability insurance
- Business owner’s policy group insurance
Intellectual Property Protection
In this lucrative industry, you should be prepared to secure your intellectual property if you plan on venturing into the music distribution business. Indeed, if all music released by your artistes is not protected by the law, then you should be ready to get your artiste’s songs pirated in the market.
Music tend to be pirated just almost immediately they drop, but when pirates know that music under your music distribution business is protected by the law, they will be wary of getting themselves into trouble, which on its own is a benefit of having your intellectual property protection.
You should also make sure that the logo for your music distribution company is well and totally secured and legally recognized as part of your company property by the law. It is important that you trademark your company logo as well as get the copyright protection for each new song that is being produced by your artiste.
Is Professional Certification Needed to Run a Music Distribution Business?
In order not to waste your time or beat about the bush, we believe that you do not in any way need professional certification to open or manage a music distribution company. We believe that this industry is that plain and simple, which means that any entrepreneur who has an interest in music can launch his or her music distribution company without acquiring any special certificate.
Legal Documents Needed to Run a Music Distribution Company
These are some of the basic legal documents that you would need to successfully run a music distribution company in the United States of America:
- Certificate of Incorporation
- Business License
- Business Plan
- Non – disclosure Agreement
- Employment Agreement (offer letters)
- Operating Agreement
- Insurance Policy
- Employees Handbook
- Contract Document
- Trademark registration for your logo
- Tax Payer’s ID number
Financing a Music Distribution Business
As a focused individual willing to pitch a tent in this industry, you need to source for start – up capital in every way legal when it comes to starting up this business, but the truth is that if your business idea is highly workable and promising, you may not fight to raise the needed start – up capital. Also know that if you want to raise funds, the first thing is to draft a detailed business plan for the business.
When you have a good business plan, you can easily convince investors to invest in your business. There are several options when it comes to getting money to finance your music distribution business. Some of the options are;
- Getting money from personal savings and sale of personal stocks
- Getting money from investors and business partners
- Applying for loan from bank
- Applying for business grants and seed funding from donor organizations
- Sourcing for soft loans from family members and friends
Choosing a Suitable Location for your Music Distribution Business
One of the things you should have in mind is that location is a very important issue when starting a music distribution business; you don’t have to break the bank to pay for rent. A music distribution business can flow in any location as long as there are youths or pool of aspiring artistes. Some of the factors you should have in mind when considering a location for a music distribution company are;
- Know that your location should have an appreciable number of youths and aspiring musical artistes.
- Know that your location should be close to the hub of music in your city or state
- Know that your location should be easily accessible and secure
- The location should be notable for producing some of the finest musical artistes in your city, or state
- The location should be free from noise; noise can frustrate your effort
Starting a Music Distribution Business – Technical and Manpower Requirements
We believe that the distribution business needs some level of trust between the record label and the distributor. Note that the CDs are given to the distribution company in good faith that they will make good account of every CD sold. This is why you have to maintain integrity in the business to gain the trust of other record labels and avoid legal matters.
We believe that the best and unique way to maintain accountability is to have an up to date bookkeeping record to show the units of CDs received from each client, and also record the exact unit you shipped to each shop you partnered with. You also need to understand and create a means of payment where the music store owners can transfer sales made regularly, to enable you balance up with the record label. If done this way, the business will move smoothly without issues.
You should also remember that you wouldn’t be working with only record labels; you can also strike distribution deals with independent artistes that handle their own production, promotion and sales. Also have it in mind that obtaining distribution deals from major labels is a good way to earn constituent and passive income.
Understand that these steps listed above is like a basic guide to serve anybody that wants to start making money with distribution deals of major record labels and independent artistes. Also know that this business can also be run from the comfort of your home, this is to show how little your manpower can be in this line of business.
You can also run most of your employees as contract staff. You will surely need an administrator, promotion manager and tour manager, talent manager/sales and marketing executive and a music producer/beat maker, music writer and sound engineer cum maintenance engineer that is if you plan to inculcate music recording into the things you do.
You will also need a lawyer, an entertainment accountant and a brand manager. We believe that you will need very few office equipment if you are starting a music distribution business, unless you still plan to inculcate music recording into your business, then you will have to buy most of the electronic gadgets needed to set up your record label brand new or as fairly used.
The Service Process Involved in the Music Distribution Business
It is very important to note that the primary characteristic of online distribution is its direct nature. To make a commercially successful work, artistes usually must enter their industry’s publishing chain. Also know that it is your job to help artistes advertise, fund and distribute their work to retail outlets. While in some industries, particularly video games, artists find themselves bound to publishers, and in many cases unable to make the content they want as the publisher might not think it will profit well.
This can quickly lead to the standardization of the content and to the stifling of new, potentially risky ideas. But by choosing online distribution, an artiste can get their work into the public sphere easily with potentially minimum business overhead. We believe that this will often lead to cheaper goods for the consumer, heightened profits for the artistes, as well as increased artistic freedom. Also note that online distribution platforms often contain or act as a form of digital rights management.
We strongly believe that distribution also opens the door to new business models (e.g., the Open Music Model). For instance; an artiste could release one track from an album or one chapter from a book at a time instead of waiting for them all to be completed. Note that this either gives them a cash boost to continue their projects or warns them that their work is not financially viable. Also know that this is done before they have spent excessive money and time on a nonviable project.
Experts believe that video games have increased flexibility in this area, demonstrated by micropayment models, which shows a clear result of these new models is their accessibility to smaller artists or artist teams who do not have the time, funds, or expertise to make a new product in one go. A perfect example of this can be found in the music industry. Indie artistes may access the same distribution channels as major record labels, with potentially fewer restrictions and manufacturing costs.
We also have been able to note that there is a growing collection of ‘Internet labels’ that offer distribution to unsigned or independent artistes directly to online music stores, and in some cases offer marketing and promotion services.
Also to push forward, a lot of bands are able to bypass this completely and offer their music for sale via their own independently controlled websites. We strongly believe that an issue is the large number of incompatible formats in which content is delivered, restricting the devices that may be used, or making data conversion necessary.
Starting a Music Distribution Business – The Marketing Plan
- Marketing ideas and Strategy
Do not be scared of this business. You need to understand that the music distribution business is identical to other businesses in some ways. We believe that they all need a strategic marketing plan to always sell music and gain opportunities for their clients.
We also believe that the success of your music distribution business and your clients rest on the number of units of music sold. Note that funds and fame also come from tickets sold at events, and also note that the more events an artiste does, the more likely fans or new fans purchase the artiste’s music, thereby maximizing profits. When marketing your clients and your business as well, try leveraging the following platforms.
- Make use of Live Events and Concerts
We believe that any individual who knows the industry will surely tell you how crucial live events and concerts are for artistes, because it is a moment that allows music lovers to connect and engage with artistes and their music. It is important to note that these events also promote the sale of music.
- Leverage on Website
One of your major marketing strategies for your artistes should be a website. We all know that on a website, you can promote your client’s music by using various forms of content such as press releases, web content, an event calendar, music videos, audio downloads, artiste’s professional pictures and blog posts from the artistes. For your website to be unique, it should have a well-written bio and media kit of the artiste, which is useful for media features.
- Try to make use of Social Media platforms
Experts have noted that social media profiles connect artistes with their fan base and allow fans to share content about the artiste also in the same platform. Try to make use of the social media to share your client’s videos and images on location and behind the scenes.
It is also possible for you to create online events by creating real time chats with your clients where their fan base can engage with them, because the closer the artistes can get to their fans the more engaged they become, which helps create viral promotion opportunities that will in turn bring in profits.
- Know how important Online Videos are
In the music distribution industry, videos have always been an effective marketing strategy for selling music since the 1980’s. It is well known that online videos are a great way to promote and sell any product or service because they can articulate an artist’s brand, message and the meaning behind their music in an intimate and engaging way that keeps people captivated.
Strategies to Boost your Music Distribution Brand Awareness and Create a Corporate Identity
Many entrepreneurs do not know what brand awareness is. This is what makes your business what it is and attract customers for you. Note that the best way to achieve brand awareness is to make yourself visible to your target market, which is the sole reason why it is important to create a substantial marketing plan to reach them.
In promoting your brand and corporate identity, you should leverage on the various print and electronic media. Note that it is better and cost effective to use the internet and social media platforms to promote your company, and besides it is pretty much effective and wide reaching.
We also suggest that you need to promote your brand and corporate identity by sponsoring community musical shows or even organize your own musical talent hunt reality show, to be able to reach and discover new talents. You also need to make your clients trust you and believe in you. Listed below are the few qualities you need to leverage on;
- People skills
- Business and Financial Management Skills
- Work drive and ethics
- Dedication to your clients
- Creative Problem Solving and Fast Decision Making
- Patience and knowledge