State of Music Distributors Today

water_pump.jpegOk, it seems like Beatport now only will allow new labels to be included either if they are big sales-wise, or are using an aggregator. An aggregator is a company that sits between the distribution and the label, making specific distribution deals to various distributors. Big companies like iTunes and eMusic already has had this system in place for a longer time.

What it means for smaller labels is that it will get harder to get into distribution rights with various big digital distributors, unless they just bypass the aggregators and use TuneCore, CD-Baby and similar services where there’s no need to have an aggregator. Or, make deals with aggregators. But, as I know Beatport does not have contracts with CD-Baby or TuneCore.

The problem with making deals with aggregators is that they usually also want the big fish, labels that have a large sell volume, to justify their administration costs. So for a new label it’s a little bit like the chicken-and-the-egg; you don’t get a deal with an aggregator unless you have sales volume, or are well-known of some reason or another. But to get to that point you need distribution so the sales will increase. The other problem I’ve seen with aggregators is that they are still very CD-release centric. For many of us producers, we and consumers like the model of releasing individual tracks, instead of CDs with filler material. But the aggregator models, in the cases I’ve looked at their contracts, favor CD-centric releases.

I don’t personally see any big changes with the current digital music business model — it’s common with evolving markets. In the early days it’s all fair game, any new game players have a chance to get into the club, later companies and markets consolidate and it’s again hard to enter it, unless someone jumps into a new ‘disruptive service’, let’s say ad-generated market sales using YouTube content.

So, if you want to start a record label — do it, it’s never been easier. But set realistic plans, expect to release quality material on a monthly basis, on a long term, and things will be fine as you get the reputation and the sales to get into the aggregators’ cone of interest. Success on a very short time frame is very rare, I’m afraid.

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