Manage for Success: Digital Distribution, Newsletter #65, September 2006


"Manage for Success" is a free monthly newsletter for record label executives who want to operate their companies efficiently and successfully. It's published by Keith Holzman of Solutions Unlimited, a management consultant, troubleshooter, and trusted advisor, and is based on his many years as a senior executive in the music industry.


Copyright 2006 by Keith Holzman, Solutions Unlimited. All rights reserved.


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I keep getting questions from clients and would-be clients wanting to know more about digital distribution. Who should they go with? How should they go about doing it? Which sites are the most effective in selling downloads? Should they go through a distributor or an aggregator, and so forth?


These are all very good questions, and I wish I could say that I’ve got all the answers. Unfortunately, I don’t believe anyone really does since things are changing very rapidly. However, I’ll take a stab at trying to simplify and explain matters.


First of all -- the websites. There are quite a few and I won't take the space to mention them all here. Some allow paid downloads of individual tracks, or of complete albums. The best known and most successful of these is, of course, Apple's iTunes Music Store which represents by far the major percentage of all legal downloads, and which pays labels 70 cents per downloaded track.

http://www.apple.com/itunes/store/


Others sites use a subscription method whereby you "subscribe" for a certain set fee per month which purportedly allows you to download as many tracks as you want. The catch here is that if you forget or neglect to pay a month's fee, all the tracks you've spent hours downloading will no longer be playable. RealNetwork's Rhapsody, Microsoft's MSN Music, Napster, and Yahoo Music are examples of these, but some allow individual track purchase as well. Another such site, particularly of interest to independent labels, is eMusic.com.

http://www.rhapsody.com/

http://music.yahoo.com/

http://www.napster.com/

http://music.msn.com/

http://www.emusic.com/


Which of these sites should a label pitch to have their music included? Why, all of them, of course! The more the merrier since the more accessible your music is to a buying public, the more exposure you'll get for your artists, along with the opportunity to reap financial benefit for all concerned.


So, you ask, how do I go about getting my music up on all these sites?


First, you can take a DIY (Do It Yourself) approach. Contact each music site and wade through the frequently lengthy contracts they require once they've agreed to take you on. Then you'll have to prepare your tracks using the tools and methods each one requires. And they're usually different.


Second, your distributor might be a prime conveyer. Many companies that distribute CDs now require exclusive downloading rights in addition to those for "hard" goods. Many do a fine job, performing a real service to which they're entitled to a reasonable fee. Others perform little service but take a large percentage of the action. This is something you'll need to thoroughly research, assuming your distributor provides the service.


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Do you need help sorting out your digital distribution situation, with starting a label, or solving business or administrative problems that your label may be experiencing? Then take advantage of my four decades in the record business by phoning or sending me an email. As a trusted advisor to many record companies over the years, I treat all clients and all assignments confidentially. I look forward to hearing from you.


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Next week I start teaching "The Independent Record Label: From Startup to Mainstream," Course #X448.73, at UCLA Extension. Those interested should get their Fall catalog, or go to <
http://www.uclaextension.edu/index.cfm?href=/courseListings/course_display/CourseDetails.cfm?reg=S3305 > or contact me (see email address below) for more information. The text, not surprisingly is my own "The Complete Guide To Starting A Record Company" available as an eBook in PDF form, and as a printed, spiral-bound volume. Read the complete Table of Contents and download the Introduction at

<http://www.recordcompanystartup.com/index.html >. You can obtain your very own copy at the same site.


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Third, are the "aggregators." These are middlemen who can make your music available to all the primary sites, taking care of track preparation and distribution.


There are many of these, so I'll list just a few -- CD Baby, DMI (Digital Music Works), Ingrooves, I AM Music Online, IODA, The Orchard, TuneCore, and AWAL (Artists Without a Label.)

http://cdbaby.com/

http://www.dmgi.com/index.aspx

http://ingrooves.com/index_music.html

http://iammusiconline.com/

http://www.iodalliance.com/

http://theorchard.com/

http://www.tunecore.com/

http://www.awal.com/


CD Baby is primarily a distributor, so small labels can kill two birds with a single stone by selling their CDs through them, taking advantage of their online distribution as well. CD Baby supplies digital tracks for their distributed labels to all the major online stores, and handles all the paperwork and creation of appropriate digital formats, taking a modest percentage to cover their costs. They do require exclusivity, however, in order to avoid confusion created by multiple aggregators attempting to sell to the same online account.


Certain aggregators specialize in specific genres of music. IODA (Independent Online Distribution Alliance,) for example, focuses on classical and world music, while others, such as DMG's OnRamp, make the process fairly easy for labels to deal with.

http://www.dmgonramp.com/home.aspx


From a consumer standpoint there are problems associated with many of these systems, the greatest ones being that of interoperability and digital rights management (DRM,) the latter being something required by the major labels in an attempt to reduce piracy and freeloading. iTunes, for example, although both Macintosh and PC friendly, will work only with Apple's iPod. Microsoft's upcoming Zune player will work only with Microsoft's store. Rhapsody won't work on iPods or Zune but shortly will work only with a new player being built by SanDisk, and so forth. Compounding these problems are that other governments, particularly some in Europe, complicate DRM even further.


eMusic is interesting in that it provides straightforward MP3 files without any form of DRM, making its downloads playable on virtually all portable players.


In any thing connected with business, particularly the music industry, it's "caveat emptor." I suggest you check any firms out carefully by doing your homework. Look at their websites and talk to your network. Find out what the terms are, how much is collected in fees, and how often and how readily you'll get paid.


My colleague, Moses Avalon, recently posted a handy chart that might help you choose the right aggregator for you should you decide to take that route. He mentions some of the above companies, plus others as well.

http://www.mosesavalon.com/index2.htm and look for Digital Distribution.


After you've thoroughly analyzed all of your options, decide which might be the best firm for you to work with. Then do it.


Until next month,

Keith Holzman -- Solutions Unlimited

Helping Record Labels Manage for Success.

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Copyright 2006 by Keith Holzman, Solutions Unlimited. All rights reserved.