Monday, January 3, 2011

Music Business/Law Tips - "How Distributors Pay" (Part 1)

For an artist to increase his or her chances of selling records, a record distributor should be utilized. This article will attempt to simplify how the artist gets paid by the distributor.

The artist/distributor relationship at its most basic is as follows: (1) the artist records a record; (2) once the record is manufactured, a distributor will sell/ship the record to a store (brick and mortar or e-commerce); (3) the store will, in turn, sell the record to a record buyer. Hence, the distributor's main job is to sell. Ancillary to the function of selling, the distributor will also warehouse the record (if CD), ship the record, collect the money from the store, and pay the artist. Occasionally, a distributor will also promote and advertise an artist, but that is the exception.

Once the distributor receives an order from a store for a physical record, it will sell the record to the store at a wholesale price (far less than the retail price), but for e-commerce the record is basically in the "cloud" waiting to be downloaded/sold.

From the wholesale price it is paid by the store, the distributor will then deduct its fee, which is generally about 25% of the wholesale price.

[part 2 next week]

Ben McLane Esq

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