So you’re thinking of changing digital distribution. It’s a fairly common thing these days, distribution has changed hugely over the last 10 years. It’s gone from simply getting your releases up on digital stores, to fully featured label services, in-depth analytics and full marketing support across the world. Whether you’re thinking about switching distributor, of thinking about managing digital distribution yourself, there’s plenty to understand before taking the dive.
Before looking at the intricacies for switching distribution, let’s think about why you might want to change. As mentioned previously, distributors have changed massively since the first digital distributors launched in the early 2000s.
Changes at the Distributor
You may well have been with the same distributor since originally setting up your catalogue, and perhaps that distributor has been acquired or merged with another, so you’re no longer working with the same people you signed your label to. This is just a symptom of doing business – companies change, personnel change, and your relationships with your distributor can change with that.
Deal terms have not changed a great deal in any distribution model for the last 100 years – but we’ve seen subtle differences over the last 5 years in digital distribution. Moving forward from the days of simply working to get your releases into stores, distribution deals can now be negotiated into the low teens percentage deals, should your label be particularly important to a distributor, or you can negotiate a lower percentage for back catalogue compared to that of front line. The term of the deal can be particularly important to some people, with 3 years a seemingly long time in digital, and accounting terms varying from quarterly to monthly depending on the company. Which ever way you decide to slice up the deal, you may well have been made an offer you couldn’t refuse that’s making you consider your options.
As the industry has changed over the last 5 years, we’ve seen the launch of many Label Services companies, taking distribution and bolting on many different services in order to expand their service offering, offering labels far more than simply getting their releases into stores. The level of sales and marketing activity has increased greatly, putting an emphasis on international markets, and getting involved in the online promotion of releases. Others are providing marketing budgets and helping to put together press, radio and marketing people. Today, we’re seeing distributors moving into neighbouring rights, providing a ‘bolt on’ service to their core distribution offering, ensuring that you’re being paid for the usage of your recordings on radio and TV in other territories.
Doing Digital Yourself
As your digital revenues have increased over the last few years, it may now be time to start considering doing digital yourself. This can come in all shapes and sizes, from removing iTunes from your digital distributor, through to managing each DSP yourself. We’re going to cover more on this in a future post, on the high and lows of what is required to do this successfully, but in the context of switching distribution, it’s certainly an option that many are considering at the moment.
It’s Just Time for a Change…
The final reason you may well be considering a change, is that perhaps it’s just that time. Relationships don’t last forever, and perhaps you’ve been with the same distributor since the early days of digital, and just want to switch things up. Hell, it’s a big world of distribution out there!
So whichever of the above reasons you’ve decided to make the change, there’s some key things that you’ll need to consider before making that switch. The most important of these is how the handling of your content will change at DSPs, how removing it from one supplier and into another will cause changes to where and how your releases are presented, but you’ll also need to consider downtime during the switch over, and changes in reporting and accounting practices.
How Will DSPs Handle the Change?
As mentioned above, this is a key consideration for you. The main thing to consider here is that no DSP will simply switch everything over to the new supplier. Within their systems they are storing unique IDs against tracks and releases, specific to that distributor, ensuring that they pay the right person each time that something is sold or streamed, so it’s essential that they receive a new delivery from the new distributor to keep their systems watertight. Consider the amount of content that DSPs receive daily, and I think you can understand why they won’t simply ‘switch it over’. In practical terms, this means that your current distributor will be required to send takedown notices on your catalogue, whilst the new distributor is required to make new deliveries of your content.
You may now be thinking, if my current distributor has to take everything down, and my new distributor make a new delivery, won’t that leave me with downtime? The simple answer here is yes, it could. In order to minimise the effect here, you need to ensure that your catalogue is delivered ahead of time, possibly leaving two copies in the store for a short period of time, but two copies is far better than none. You should be able to get a date from your current distributor on when they will send takedown notices, and manage this with your distributor to ensure the new content is in place on that date.
How this subsequent takedown and new delivery affects your catalogue with each different DSP varies wildly and greatly, and rather than go into detail about each DSP in this article (your new distributor should have a good grasp on this), we’ll instead focus on the main ones that could affect your revenues.
Being the largest source of digital income for most labels, this is obviously key to get right. In today’s world of social media, it won’t take more than a few hours before people start to notice and your artists start asking what’s going on. There are 3 key things to consider here -
- Sales History – iTunes data on how many and which consumers bought your releases
- Customer Comments – Customer reviews written about releases
- Customer Ratings – The star ratings from customers
These 3 things are often labelled the ‘aura’, the things that give customers a feeling for you content and ultimately, advising them on whether they should purchase that release. A release with lots of positive comments and 5 star rating can really make a difference to whether a consumer purchases or not, so shouldn’t be underestimated.
Sales history on the other hand, is used to order releases in searches. Now consider this – a customer searches for an artist, and on that first search page is given the top 6 releases, before having to click ‘See More’ to get the full search results. If your album is in that top 6, then that is going to make a huge difference to whether they buy or not. Unless the customer is looking specifically for that release, then they are going to have to scroll to the bottom of the ‘See All’ page. If the artist has only released a handful of albums, then probably no harm done, but if the artist has been on multiple different labels, each with numerous releases, then your releases are going to have to start from the bottom of the search rankings and rebuild their sales history. This is hugely significant for search-term-heavy releases, such as compilations, or for the public domain content. Having worked with many labels switching distribution in the past, I know it can affect revenues on certain types of catalogue by up to 80 or 90%, so not something to be taken lightly.
Up until the last year, it has been impossible to keep either the sales history, or the customer comments and ratings when switching distribution. It’s been a huge factor in restricting labels from switching distribution. But that has changed in the last year or so, with distributors now stating that these will now be kept in place, as long as metadata matches (N.B. I haven’t actually seen this done, so don’t take my word for it, check with your new distributor!). That’s a huge step forward for iTunes to make in helping labels move distribution.
These types of issues are present at other DSPs as well, anywhere where they use sales history to curate listings to the user, so something to come at the very top of your considerations when considering moving distribution.
The other type of service to be aware of are streaming services, and their users’ reliance on playlists. We’re constantly told by streaming services of the power of the playlist and how they generate a huge amount of streams. So your consideration here needs to be on how one distributor removing content and another replacing the content affects users’ playlists. Interestingly, it is the largest complaint from customers of streaming services, when content is in their playlists and becomes no longer available.
Spotify asks that they receive the new delivery ahead of the takedown of the old content, to ensure that content is linked together, so those tracks will still be available in user’ playlists. Pretty simple as long as the new deliveries are delivered ahead of time.
Deep Links into DSPs
The final thing to consider in your changeover strategy, is the deep links to products on artist websites and marketing efforts. As mentioned previously, removing a piece of content and replacing with another essentially means that this is now a different object on the store, so URLs are going to change with that. That means any links you currently have out on the web, will be broken. If you’re using something like SmartURL, you should just simply be able to change within their systems to the new links, but if you’re linking directly into the iTunes product, you will have to adjust these. That’s possibly a big job, but one that can’t be underestimated in driving to your releases.
Reporting and Accounting
The final consideration for you when changing distribution is the reporting and accounting terms. Your current distributor will likely be paying you either monthly or quarterly, and your new distributor may be continuing on the same terms, or this may change slightly. You’ll just need to make sure that it works for you as a business.
When DSPs are accounting to distributors, each distributor can possibly have different accounting terms – perhaps on when they’re reported to or when they’re paid, and this can have repercussions when you’re moving distribution. Consider for example, one of your top DSPs pays on 30 days to your current distributor, but 60 to your new distributor. That could affect your cash-flow massively.
Also, it is important to understand which months your new distributor is currently reporting on. Due to differences in accounting practices, it’s possible that sales are not reported for a further month, leaving you with little in the first period’s statement, whilst your old distributor has already paid everything up to date. These situations shouldn’t cause too much of an issue, certainly the largest DSPs should be reporting and paying equally to all the distributors, but it’s worthwhile just running through this with your new distributor to ensure you don’t hit any roadblocks along the way.
The final thing to consider on the accounting side, is the change in reporting formats. Distributors have fairly varied formats, some condensing their data massively, whilst others choosing to keep the detail, but sending huge reports in the process. These days this data is invaluable, and should definitely be of high priority to let you understand your business better, but it’s also worth considering how you’ll manage that change in amounts of data, and differing formats, through your royalty accounting systems.
These are the main considerations when changing distribution, but it’s important to remember why you’re changing distribution, the rest is just dotting the i’s and crossing the t’s. In part two of this series we’ll be looking at nuts and bolts of what you’ll need to prepare, and how you can go about organising your catalogue so you’re ready to switch the day comes.