Definition of Distribution
Distribution is how albums get into shops. Distribution companies sign deals with record labels that gives them the right to sell that label's products to record stores that have an account with that distributor. The distributor takes a cut of income from each album sold and then pays the label the remaining balance.
News on Distribution
Now there is a lot more of illegal distribution than legal, and to respond to this the music industry took up substantial legal action. The industry succeeded in closing down popular file-sharing network Napster, however after this received a significant slow down in revenues which almost proved fatal. By 2012 digital music sales had topped physical sales. This has become more of option for listeners due to the increase in popularity of sites like Itunes and other options available on the android market. However although the increase in digital music legal downloads, the revenues from CD's has not been recovered. The 2008 British Music Rights survey showed that 80% of people in Britain wanted a legal P2P service, however only half of the respondents thought that the music's creators should be paid. This website is useful in regards to the increase in digital music distribution: http://www.bbc.co.uk/news/entertainment-arts-18278037.
Scenario of change in Music Distribution
Assume you live in New York and you make a watch you want to sell. You take your watch to the nearest watch store and ask the owner if you can sell it in their shop. They agree and ask how much you want to get paid if it sells. You tell the owner $10 You return to the store a month later, your watch is gone, the owner hands you $10, however you have no idea how much the watch sold for. Maybe it was given away, maybe it was sold for a million dollars.
The next day you get a call from Joe at Joe Smith Watch Distribution. Joe tells you he is a watch distributor from Chicago who can help you sell more watches. If you are interested, you can send him all your watches and he will store them, insure them, inventory them and more.
In addition to warehousing, he also tells you that he has a sales force of 40 people that walk all around the country to watch stores showing the new watches to the owners and he mails out a paper catalog each month to 4,000 watch stores.
Back at his warehouse, he has 20 more people that pick, pack and process the orders. If a watch is damaged, it is sent back and Joe Smith fixes it. Each time a watch leaves his warehouse, you will get paid regardless of if Joe gets paid.
Finally, Joe will provide you opportunities to market your watch in the store. For example, it will be displayed up front when people walk in.
In return for all these services, Joe asks to be paid 25% of the money earned from each watch sale. If a watch sells for $10, Joe will get paid $2.50 and you get the rest.
This is the music industry - only instead of watches, it's CDs, and record labels hire people to make their "watches".
- http://www.tunecore.com/guides/promote_introduction This website is useful for information on the changes within music distribution
