The music industry is a multi-billion dollar industry that anybody can key into. The industry is such that is opened to everyone to make money. One of the opportunities anybody can utilize to make money is to become a distributor for music labels. You can get a distributor to become the sole distributor for an album or record label. Most people confuse a music distribution deal with a license deal.

In a distribution deal, the distributor has the duty to get the album or CD to music shops nationwide. The distributors are paid a commission for each sale they make and the Record label is responsible for manufacturing the CDs and also handle the promotion. Whilst a licensing deal, on the other hand, involves that the licensee buys off rights to produce, promote and distribute the music in whatever capacity he wants.

He keeps all the profit he makes from sales of the CD to himself. There are several advantages of getting a distribution deal. One of which is the money the distributor makes. For instance; if the price per CD plate is $10, the Distributor may be paid $2.5 for each CD sold through him, and if the Record label did a massive promotion for the music, the distributor can easily make money.

If you have a penchant for this kind of business, then you may consider getting a distribution deal for music. Here are the top steps you, may consider following.

Getting a Distribution Deal for Music – Sample Business Plan Template

1. Set up a Business Structure

For Record Labels to trust you with a deal to handle their music distribution contracts you will have to register your business under a well-defined company structure. That will include registering your company to operate as a legal entity. So the first step is to register a corporate name with the Company Registration Bureau.

2. Obtain Business License

The next step is to obtain a business permit or license to operate your business. The Town County can provide you with the requirements for obtaining a business license. Don’t forget to obtain a Tax Identification Number for the IRS department as your business is a profitable business.

3. Network with Music Stores

After you are done with all the legal requirements needed to formally run your business, you have built a network with major music shops in the country; you can get their contacts from their website or from phone directories of various States. You have to contact each one of them to make a deal with them.

You may decide to share your profits equally with them for every CD was will be sold in their stores; Keep contacts of those that agree with the deal and delete the ones that don’t. You can draft a legal agreement and send it via email for them to sign as part of the process.

4. Contact Record Labels

At this stage, everything is set for you to start a business. You have to contact major record labels in the area to make a distribution deal for their music. Include the fact that you have a network of store owners nationwide who are willing to display the CDs in their store for better exposure. If the record label agrees; you may have to agree on your commission for every CD that is sold through your channel and other terms of the deal.

If possible, you can get an attorney to draft an agreement between you and the record label to make it legally binding. Before you opt to sign a distribution deal with any music label, you have to consider efforts the label is making to promote the business; signing a deal with a Label that is making no effort to create awareness for their music is just a time-wasting venture that will yield no profit.

5. Ship out the Products

After you have concluded the deal, you may be given a distribution deal almost immediately. You have to partner with some shipping companies like DHL, to ensure that CDs get shipped out to various destinations where the shop owners can place them on display. Your profits should be able to cover the cost of shipping and also leave you with enough extra cash to handle other aspects of the business.

6. Accountability

This distribution business requires some level of trust between the Record label and the distributor. The CDs are given to the distribution company in good faith that they will make a good account of every CD sold. You have to maintain integrity in the business to gain the trust of other record labels and avoid legal matters.

A good 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. Provide a means of payment where the music store owners can transfer sales made regularly, to enable balance up with the Record Label. If done this way, the business will move smoothly without issues.

Remember that you wouldn’t be working with only record labels; you can also strike distribution deals with independent artists that handle their own production, promotion, and sales. Getting distribution deals from major labels is a good way to earn constituent and passive income. In conclusion, these steps listed above are like a basic guide to serve anybody that wants to start making money with distribution deals of major record labels and independent artists.

Frequently Asked Questions

  1. How Do You Get A Music Distribution Deal?

Music distribution deals can come from multiple parties in the industry like Tunecore, Create Music Group, or UnitedMasters.

  1. What Is A Music Distribution Deal And Do You Need One?

A music distribution deal is simply the agreement between artist and distributor to allow you access to the relevant streaming platforms. You would need a music distribution deal if you truly want your music to go far and wide. Please note that with a distribution deal, you only make money on what you sell, and your label is responsible for manufacturing and promotion. If you make a lot of money, you get to keep it all. But if you lose a lot of money on the album, then the losses all come from your pocket.

  1. What Percentage Does A Music Distributor Take?

The average royalty cut is 15%. Some distributors will also ask for an annual upkeep cost to keep the content available in the stores. These costs range from $10-50, depending on the number of tracks submitted.

  1. Can You Switch Music Distributors?

Yes, you can switch music distributors but please note that when you change distributors, it is likely your release will duplicate on the stores for a short period of time. This is because both your new and old distributor both hold copies of your release. You will need to inform your old distributor to remove the content from stores.

  1. How Do You Get A Distribution Deal Of A Record Label?

In order to get a distribution deal of a record label, you should start by checking out your record collection—many albums list the distributor in the liner notes. Independent record stores can also be a great resource—get someone on the staff to tell you which distributors they buy from and what they think of them. Once you have made your shortlist of ideal distributors, start making calls.

  1. How Do Music Distribution Deals Really Work?

It depends on the record label. For example, under an M&D deal, the distributor pays for the manufacturing costs of an album beginning with the pressing process, all the way through to the printing of the labels. The distributor then recoups those costs from record sales – as well as a pre-determined percentage profit.

  1. How Do Music Distributors Make Money?

Music distributors make their money by creating demand and making the music readily available to fans. Illegal piracy and a competitive market full of struggling record labels cut into profits. Large distributors throw millions into advertising to be competitive.

  1. What Is A Good Music Distribution Deal?

Ideally, a distribution deal will include global distribution of your music, data & analytics to use for marketing and setting up tours, artist funding, and some other basic label services. For those who don’t like the major record label deal, distribution deals are tasteful.

  1. What Is The Difference Between Music Licensing And Distribution?

Licensing is when another business – usually another record label, but occasionally a distributor – “buys” the rights to an album from you. If they lose money on the album, then that loss is all theirs – you still keep your licensing fee. Distribution, on the other hand, refers to getting your albums into the shops.

  1. How Do I License And Distribute My Music?

In order to obtain a music license, you need to obtain permission from a legal entity that represents the artist’s work. This can be the artist themselves, a publisher, record label, performing rights organization, or music licensing company.

  1. Where Can You Publish Your Music?

Here are the top 5 places to publish your music;

  • YouTube
  • SoundCloud
  • Audiomack
  • iTunes/ Apple Music
  • Spotify
  • TuneCore
  1. How Do I Submit My Music To A Record Label?
  • Research record labels
  • Follow a record labels demo policy
  • Communicate on the label’s official channels
  • Personalize your demo submission message
  • Send private SoundCloud links with the downloads feature enabled
  • Detail your success in a clear, simple, and concise way
  • Be polite and use appropriate language
  • Seek feedback and advice
  • Establish an online presence and branding material
  • Build relationships and network with people in the music industry.
  1. Can You Use Multiple Music Distributors?

You can use two different music distributors. However, you cannot distribute a single track or album with different music distributors. For instance, you can have distributed a track through a record label, but you won’t be able to distribute this track through for example an aggregate service.

  1. How Do Independent Record Labels Work?

Independent record labels are small companies that produce and distribute records. They are not affiliated with or funded by the three major records labels. Some independent labels, particularly those with successful artists, sign dual-release, or distribution-only agreements with major labels.

  1. How Do Traditional Music Distribution Works?

Traditionally, distribution companies sign deals with record labels, which gives them the right to sell that label’s products. The distributor takes a cut of income from each unit sold and then pays the label the remaining balance.

  1. What’s The Difference Between Independent And Major Labels?

While major labels are global and operate their own publishing and distribution companies, indie labels work with other smaller companies, either in long-term partnerships or in smaller contractual relationships for their distribution and publishing needs.

  1. What Are The Advantages A Major Recording Label Have Over Independent Labels What Advantages Do Independent Labels Have?

There are certain advantages to a major label deal. A major has more financial resources than an independent, more support staff and leverage in the marketplace. On the other hand, some new artists may feel that a major label is not paying enough attention to them and offers less creative freedom than an independent.

  1. Can You Distribute Your Own Music?

Yes, you can distribute your own music, and you can do it via established platforms. Some of the best music aggregators 2020 / 2022 are Soundrop, Awal, RouteNote, Bandcamp, Amuse, Fresh Tunes, Level Music, Distrokid. All these Distribution platforms have no yearly fees and no sign-up fees. Some of them are entirely free digital music aggregators, and others take a commission.

  1. How Much Does It Cost To Start An Independent Record Label?

The record label business is a large industry and there is room to promote and distribute music everywhere. The average startup cost of a record label is between $200 – $50,000. But for large labels, the average cost can be from $100,000 – $500,000.

  1. Are There Any Free Music Distributors?

Sure, there are free music distributors and some of them are;

  • RouteNote
  • Soundrop
  • Amuse
  • Awal
  • Indiefy
  • Fresh Tunes
  • Bandcamp for Digital Distribution, Vinyl, and Merch
  • United Masters
  1. How Do I Get A Distribution Deal With Universal Records?

If you would like to obtain rights to use a song or lyrics from a song that is administered or published by Universal Music Publishing Group you should contact UMPG’s Film & TV Licensing department via the UMPG website by selecting “license request” at the bottom of the page.

  1. How Do You Start An Independent Record Label And Get Artists To Sign With Your Label?
  • Create a Record Label Business Plan.
  • Choose Your Record Label’s Business Structure.
  • Determine Your Business Costs.
  • Create a Unique Name for Your Record Label.
  • Register Your Business and Open Financial Accounts.
  • Purchase Equipment for Your Record Label.
  • Market Your Record Label.
  1. How Much Money Does A Hit Song Make?

An average hit song on the radio today will earn the songwriter $600-800,000 in performance royalties. For example, The Black Eyed Peas song “Boom Boom Pow” has had 6.3 million single sales and 3.15 million album sales to date which equates to $860,000 in songwriting royalties.

  1. How Much Does It Cost To Release Music?

Professional studio rates can range from as little as $50 an hour to upwards of $500 an hour. All things considered; the recording process can run you anywhere from $1,000 to upwards of $40,000 for an entire album. This is where the bare minimum needed to produce an album cuts off.

  1. What Are The Cons Of Signing With A Major Record Label?

The major cons of signing with a major record label is having limited creative control: Signing with a record label gives them control over your music. The label can make deals and decisions with your music without your approval. They also have full control over distribution, marketing, artwork, messaging, and when you sign a major label record deal, you are often signing away the possibility of making any money off of record sales.

  1. What Is An 8020 Distribution Deal?

The concept of 80/20 is based on the Pareto principle, which is found everywhere! For example, usually, 20% of fans make 80% of what an artist makes, 20% of your efforts create 80% of your results, and so on.

  1. How Do You Distribute Your Own Music Independently?

You can distribute your own music independently by leveraging on the following platforms;

  • CD Baby
  • TuneCore
  • Ditto Music
  • Loudr
  • Record Union
  • MondoTunes
  • Reverbnation
  1. What Does A Distribution Deal Do For You?

With a distribution deal, you only make money on what you sell, and your label is responsible for manufacturing and promotion. If you make a lot of money, you get to keep it all. But if you lose a lot of money on the album, then the losses all come from your pocket.

  1. Can You Distribute Directly To Spotify?

Spotify will now let artists directly upload their music to the platform. Spotify has announced a new beta feature that will allow independent artists to upload their music directly to the platform instead of through a label or digital aggregator.

  1. How Do I Promote My Music On Spotify?

Once your music is live in Spotify, you can claim your profile on Spotify for Artists. This platform allows you to pitch songs for playlists, put new photos on your Spotify profile, edit your bio, and more.

  1. Who Is The Best Music Distributor?

CD Baby is the best music distributor.

  1. How Do I Choose A Music Distributor?

Here are six important things you should consider when choosing a digital distributor as an independent musician;

  • Pricing Structure
  • Selection of Digital Outlets Offered
  • Customer Support Quality
  • Company Values
  • Reporting and Metrics
  • Growth Opportunities for Artists
  1. Record Deal Vs. Distribution Deal Which One Is Better?

In my opinion, it depends on what you want. Please note that record labels and distribution companies are distinct entities. The record label signs the artist and provides marketing, advertising, and recording services. The distribution company signed deals with retail stores to sell the albums.

  1. Is Amuse A Good Distributor?

Yes, the Amuse song distribution is great.