The music industry is a multi-billion dollar industry which anybody can key into. The industry is such that is opened to everyone to make money. One of the opportunities anybody can utilise to make money is to become a distributor for music labels. You can get a distributor to become a sole distributor for an album or record label. Most people confuse a music distribution deal with 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 CD’s and also they handle the promotion. Whilst a license 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
Table of Content
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 you 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 can legal agreement and send 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 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 network of store owners nation wide who are willing to display the CDs in their store for a 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 it 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.
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 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 Clients, 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 is like a basic guide to serve anybody that wants to start making money with distribution deals of major record labels and independent artists.
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