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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.
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Distributors have sales people who call buyers
at the retailers and get them to order inventory of their labels CD’s and stock
them in their stores. Retailers will
often tie the amount of inventory they order to the amount of money the
distributor is willing to pay in marketing programs and advertising with them.
These marketing programs include special product placement within the
retailer’s stores, listening posts, giveaways and promotions, and often include
print and online advertising. Distributors have a staff to coordinate the
retail marketing programs with their labels, agree to marketing budgets, get ad
artwork and send retailers the artist one sheet summaries of the release and
promotional CD’s to the buyers at the retailers. The costs of these marketing
programs are charged back to the record labels and usually become a recoupable
expense against the artist’s royalties from sales .
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Distributors must keep up with the constantly growing options for digital music and make
sure their content is appropriately licensed and distributed by the wide array
of digital music outlets available to music fans. Distributors who sell music
through digital retailers and mobile providers must build and
maintain an accurate database of each track and its related metadata (artist,
album, track name, art, publisher and related information.) and create an ISRC
code for each track in their catalog. The tracks and metadata must then be
formatted to meet the format standards for each digital retailer and mobile
provider before transmitting a file to them since there is not an industry
standard that has been developed. Many distributors have developed web-based
tools that allow each record label they distribute to upload their
catalog and new releases directly to the distributor’s database.
Today there are a growing number of companies who have
bypassed the traditional retailers and focus all their efforts on digital
distribution like the IODA Alliance.
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