The “Make Believe” Distributor

This is a quick, short post but something I was compelled to write.

Being in this industry for a while, I’ve seen a lot of things.

-Ridiculous services for artists to climb the charts on Beatport
-Boosting of your social followers through fake profiles
-Boosting of your plays on Soundcloud
-Boosting of subscribers on YouTube.

As of late, I have started to now see a new trend and that is the popping up of distribution companies or businesses getting involved in the distribution industry to diversify their core business. I don’t really have an issue with established businesses creating a new vertical even though it does saturate what I do as a profession but what I do have a problem is seeing a “Make Believe” distributor.

So what I referring to?

I consider a “Make Believe” distributor to be a a distributor that says to the public they are a distributor with direct deals, a platform, etc.. and can deliver you to 100+ different Digital Service Providers but really are just a white labeled solution for another existing distribution company.

To give you context, a Distribution company is a middle man that delivers material on behalf of record labels and artists to Digital Service Providers such as Apple, Spotify, etc….There are also companies that work moreso like a delivery system where they do the delivery on behalf of record labels, artists, and distributors into their direct deals. Then there are the companies that are claiming themselves to be distributors but are really under a current distribution company.

Here is a scenario that may shed light.

We have a distribution company in Colombia (let’s call them Wanker Distribution) that uses a distribution company in Los Angeles (we’ll call them Joke Distribution).

So, Wanker Distribution sets up a web-page, with screenshots and all of this fascinating copy about the fact that they can do this or that. They promise the world to an artist or record label. Direct deals, payments, reports, etc….

What the artist or record label doesn’t know (unless they research and ask) is that Wanker Distribution is really just Joke Distribution in the background and, the artist or record label is actually going through various middle men to reach a goal.

And what does that mean for the record label or artist?

Joke Distribution would charge Wanker Distribution anywhere from 10-20% of royalties. (Let’s assume that it is 15% for the sake of this example.)

Wanker Distribution then states that they charge 20% of royalties and the artist receives 80% but really, that’s not at all what the artist is getting. Here’s the math.

-Digital Service Provider keeps 45% of royalties
-65% of those royalties are then paid out to Joke Distribution
-Joke Distribution will keep 15% from those 65% thus leaving 50% of royalties
-Wanker Distribution then ends up keeping 20% of the 50% so there is really only 30% for the record label.
-The Record Label then potentially keeps around 30% (which is low to be honest) which then leaves basically 0-10% of solid returns for the artist.

(As an added bonus, Joke Distribution is based in the USA, and if they are making payments to Colombia, there is an automatic 30% that is being withheld because there is no tax treaty between the US and Colombia).

Do you see why this is a problem?

To give you an example of how my company works (and no, this is not an advertisement).

If you are an artist…..

-You pay $25 to receive 100% of royalties
-You get your music on Beatport, Traxsource, Apple, etc…
-You then make 100% of the royalties.
-So if Spotify pays us $2,000, then the $2,000 is paid to you.
-We don’t give a percentage to someone above us or anything, it goes to you.

(The same tax issues would apply because we are US based and that is the law thus, nothing you can do about that).

In closing, I really just want to warn every record label or artist that reads this that if you are looking to potentially sign up with a company, ask them the following questions:

-Is your system fully owned by you?
-How do you handle US and International Taxes?
-Are all of the deals 100% direct or do you go through another distribution company?
-How many staff members do you have?
-What is your support lead time?

These simple questions will tell you a bit and if a company were to lie to you, then please, reach out, and I’d be glad to call them out publicly.