Distributors are responsible for selling, positioning and marketing a record label’s or artist’s music with any outlet where music fans buy music including traditional retailers, online download services, online subscription based services, ringtone providers and mobile downloads. Most major music outlets, traditional and online, won’t deal directly with record labels or artists and order exclusively through distributors. Distributors range in size from those owned by the big 4 record labels to independents to those that only distribute to online outlets. They typically charge the labels they distribute a percentage of price the retailers pay, 20% for example.

Inventory and billing management are keys to a distributor’s success since retailers can return unsold inventory they purchase at any time. It is not uncommon for a retailer to return an order to the distributor prior to their invoice coming due then turnaround and place the same order they just returned. Since the distributor must accept any and all returns from retailers they typically require exclusive distribution agreements with the record labels they distribute. Retailers also typically want to deal with only one distributor on a CD release so they know who to order from and where send returns to as needed. Distributors must manage their inventory levels to make sure they can fulfill orders from retailers but not have too much inventory in stock that’s not selling. They must coordinate shipments to and from both record labels and retailers. Many times distributors will also coordinate the manufacturing of the CD’s for their labels since they can often times get better pricing due to the volume of CD’s they can produce.