Music distributors are commercial, for-profit companies and as such have a business to run ands a profit to churn out at the end of the day. In order to do that successfully, music distributors need to perform a number of functions. Regardless of the type of music distributor, there are a number of different ways in which a music distributor makes its money. It is important for any artist, both those just starting out, those getting traction and those who are firmly established to know as it could impact their earnings (wildly!).
The different ways a music distributor typically makes it money are:
- A single, one-time flat fee
- Percentage of revenue / sales / royalties
- A subscription model
- Fees for additional value-added services, such as marketing and analytics
- A combination of these 4 (for example a $99 starting fee + a 10% revenue share + a monthly recurring $9 dollar marketing fee)
So let’s look at each one of these in more detail.
1. Flat Fee (one-time or recurring)
Some music distributors charge a flat fee, regardless of the resulting revenues from royalties that the song(s) generate. A single, fklat fees, means there is no recurring charge, for example to keep your songs published. However, within a flat fee, there is still a world of distinctions to be made. The three most important ones have to do with the quantity of songs:
- Per song (for example $10),
- Per album, for example ($100)
- Unlimited number of songs (published during a certain period)
Artists who are in the early stages of their career will benefit from music distributors who charge a single fee for a song or album, while artists who publish a lot of songs will benefit from a flat fee payment for unlimited songs.
2. Percentage of Sales (royalty / revenue share)
Some music distributors take a percentage of sales (royalties). This is especially prevalent by music distributors who also provide value added services, such as marketing and promotion of the artists, which (in theory) justifies their ‘cut’.
- The typical split varies between music distributors, but distributors generally keep between 10% to 30% of the revenue, with the rest going to the artist (or label). The most common percentages I have seen comparing music distributors so far are 15% and 20%, although larger artists will surely have customized royalty splits.
For example, if a catalogue of songs generates $12,000 from streaming royalties in a year for the artist, the music distributor (record label) with a 20% deal, will take ($2,400) leaving the artist with $9,600.
3. Subscription fees
Some distributors operate under a subscription model, currently very popular for many services, such as NetFlix, Quest+, ClassPass and Masterclass. With a subscription, artists (and labels) pay a recurring fee (sometimes monthly, but mostly charged annually) for ongoing distribution and other value-added services.
The way to tell the difference between the flat fee and the subscription model is to ask yourself what happens when you stop paying. With the flat fee, your songs will remain published. With the subscription model, if you stop paying, your songs will probably be unpublished.
This model often provides access to a range of additional features, such as marketing tools, analytics, and sync licensing. For example, a music distributor might charge $9,99/month for unlimited song uploads and an additional $4,99 for premium services. It is a good, low cost model for artists, who want to try publishing their songs as an experiment.
4. Additional Service Fees
Most music distributors will try to generate more revenue by offering additional services. For example, marketing, analytics, or label customization. As an example, a music distributor might charge a flat fee for customizing the label name under which your song is uploaded. Another example would be to help you promote your songs by including it on its homepage or Spotify playlists. A third example would be giving you access to a dashboard of data insights across the different streaming platforms about how your songs are performing, how they are being accessed and found.
5. A combination
If anything were as simple as these four models 🙂 But alas, no! Most music distributors will combine elements of these monetization techniques to extract the most money for their services. For example a recurring marketing fee, combined with a single setup fee and a 20% revenue share, all in one plan. That makes it harder to compare music distributors and figure out which one is the best for your career.
The differences will be relatively small potatoes for most artists. The big impact only reveals itself when you start having millions of streams per month, as an “A-artist”, where the difference between a fixed fee or subscription fee will be much cheaper than a royalty share.
