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Digital Distribution Deals – Approach With Care

April 13, 2012

It is increasingly common that we speak to artists who have been offered a “digital distribution” agreement by a small (or large) label or distributor. Usually, this type of thing comes into play after a band or solo performer has created a recording, whether an EP or LP, and is thinking “now what?”


As an artist, it’s flattering when someone takes an interest in your tunes and is keen to help you get them out there. Many artists are also (understandably) attracted by the idea of being “signed”, which for some suggests a fast-track to the big time, or at the very least someone to help you do poster runs. But if you’re thinking about signing a digital distribution deal, it’s worth giving some serious consideration to what is actually being offered – it might not be what you think.


In the past, labels and distributors justified taking a “cut” of an artist’s royalties on the basis that such payments were a return on money invested through the costs of recording, manufacture, promotion, artwork, videos and the like. In this respect, they were gambling on the future success of the artists on whom they plumped their cash – if the artist sold plenty of records, it was payday; if not then they’d done their dough.


However, a number of changes in the music industry have meant that the tendency of labels and distributors to “invest” has been in steady decline. These changes have included:

  • the ability of artists (and tendency of many indie bands) to create their own, high quality recordings, which means that recording costs can be avoided;

  • the reduced demand for physical format CDs, tapes and vinyl, which means that manufacturing and distribution costs can be greatly reduced, , if not avoided;

  • the ever-shrinking bottom lines of seemingly everyone connected with the music industry, which means returns on investment through sales (the lifeblood of labels and distributors) has been compromised.


These changes in many respects have been the genesis for “digital distribution” deals. A digital distribution deal, by definition, means distributing recordings online (i.e. making them available for purchase). To do this, the label or distributor is provided with a “licence” by the owner of the recordings (the person who has paid for them, generally in this situation the artist) and can thereafter secure a cut of any money these recordings make, with some limitations.


You don’t need to know much about the music industry to figure out that putting your recordings online doesn’t cost much (if anything), and when the artist has already paid to create the recordings, it’s obvious that the “investment” by the label or distributor is pretty minimal. When you consider that you can actually distribute your stuff online yourself through sites like Bandcamp, it does beg the question – what are you getting out of one of these deals?


If you find yourself with a newly created recording and a label or distributor keen to “put it out”, then that is exactly the question you need to ask. The answer should satisfy you that, if nothing else, they are going to do something that you want AND couldn’t do yourself. This might mean a commitment to spend money on marketing and promotion (a dollar figure is always preferable to vague promises), a video, the manufacture of CD’s or similar.


Most importantly, if a label or distributor asks for a lump-sum payment “up-front” before they will distribute your tunes online, run a mile (or at least see a lawyer)! 


Ben Strong is a musician and Senior Associate with GI & Sanicki Lawyers. For more information about their firm and the services they offer head over to their site.

The views expressed in this article are the views of the author and not necessarily the views of Melting Pot.

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