Digital Music Distribution – Choosing An Aggregator

This spring, SOCAN published on its website “A guide to digital music platforms”. The subject of distribution and retail in the online sphere is an important one to a lot of independent artists and I applaud Canada’s performing rights organization in its efforts to assist recording acts with this kind of information. However, when it comes to choosing a digital distributor (“aggregator”) (i.e., a distributor that supplies music to online digital retailers), there are some things I think artists ought to be aware of when consulting this guide.

The guide profiles four, what it calls “major”, aggregators and does a reasonable job of listing many of the services they offer and the fees involved. Two of these aggregators, TuneCore and Indie Pool, are Canadian-based, and two, Reverbnation and CD Baby, are headquartered south of the border. Unfortunately, the guide neglects to mention a number of other established aggregators in the field that might be good options for some artists and independent labels.

As SOCAN’s guide makes pretty clear, aggregators come in all stripes and may offer to take on a multitude of roles for artists, so here are a few tidbits of information that might prove to be important considerations in your quest for the right distribution partner.

Fees: some aggregators will waive up-front setup fees, whether as a general policy or on a case by case basis. If there is a setup fee, it doesn’t hurt to ask them to forgo charging it. You might be surprised how willing they may be to bend on this, especially if they know you are considering other options. Many also don’t charge any periodic admin or account fees, instead relying for their income primarily or entirely on the revenue derived from placements they get for their clients’ music.

This means it makes sense to choose an aggregator that offers services you actually need and that they can deliver reasonably well, so you aren’t regularly pouring money into a black hole, paying for things that aren’t working for you or aren’t particularly relevant to you. One has to wonder, actually, about the efficacy of utilizing a pay-up-front-per-service distributor as against one that survives by sharing in a percentage of the client’s revenue stream they help create. I’m sure there are some artist success stories out there connected with the former type, but I would hazard a guess that the bulk of artists using such companies probably feel they aren’t getting much in the way of results for the money they have to keep shelling out. This takes us to the next topic, the level of service.

Service: the smart ones in the digital distribution field know that happy customers are their best source of new clients. Conversely, things like lousy service, not delivering on promises, an inadequate online client platform and sloppy accounting can poison the artist-distributor relationship in fairly short order. Bad news travels fast in this business. So, as SOCAN mentions, it pays to do your research and check out what other artists and small labels have to say about their experience with their current or former aggregator. I’d add to this that one shouldn’t put much weight, if any, on sales figures. It really isn’t fair to hang the responsibility for an artist’s poor sales on a distributor, unless they’re lacking somehow when it comes getting music up on sites–it’s fundamentally the artist’s job to garner fan interest and deliver the goods in terms of product appeal.

Song licences: if you cover other people’s songs, or think you may do so in the future, the following is relevant to you.

As with many other matters to do with copyright and licencing, the U.S. marches to its own drummer when it comes to song digital licences. Unlike in Canada and elsewhere where the individual digital retailers are each required to obtain a digital licence from the song owner or mechanical agency that represents the owner, in America the party who controls the track is responsible for ensuring that the digital licence is obtained.

Problem is, almost all songs out there are represented in the U.S. by one or another mechanical rights agency (“collective”) and only a party located in the U.S. can apply for a digital licence from such an organization. Thus, a Canadian artist with covers must assign a U.S.-based party to obtain these licences. This can be problematic, both in terms of the cost and ongoing administration. A company like Limelight, for example, will clear the licence for you for a fee, but leaves you responsible for certain things, like tracking the number of online retailer streamings and for actually paying copyright owner(s) the royalty on those streams. Not only that, you have to pay royalties on a minimum number of downloads and ringtones in advance when you acquire the licence and keep track of how many you do sell so that you know when to renew your licence (another fee!). What a hassle.

Fortunately, a few U.S. aggregators have assumed this licencing/administration role for their clients, and will do it for a nominal fee or even for free (if they normally charge and you talk nicely to them or mention the possibility of taking your music elsewhere, they might even waive that fee for you). This relieves you of all the associated paperwork, as well as any tracking and the submitting of royalty payments (they pay them for you and deduct the amounts from your digital revenue). If they charge for this service, try to have your agreement call for their main track placement service fee to be based on revenues that are net of the digital royalty, otherwise they will end up double dipping (i.e., charging a fee on a fee). Also, always check your statements to make sure they aren’t deducting publishing royalties in error on songs you control.

So, if you’re considering an aggregator and you’ve got tracks of third-party material, ask if they can provide this service. Even if you haven’t any covers currently, it may pay to factor this issue into your decision in case you decide to record some down the road. Without the required licences you may find your album(s) up on U.S. retail sites minus those songs, or you could one day have a publisher or their collective on your proverbial doorstep demanding back royalties and/or notifying the digital retailers to take down the offending tracks.

Revenue reporting: let’s face it, for a significant number of independent artists the revenue from online sales isn’t going to amount to much until their career shifts into a higher gear. That’s understandable, but doesn’t alter the fact that an aggregator should be expected to deliver informative, on-time reports, preferably in a spreadsheet format; so much the better if they provide an online client dashboard that provides the artist 24/7 access to current data. If you are associated with a publisher or other artists or songwriters with whom you are obligated to share a portion of your income from some of your material, easy-to-understand reporting with easy-to-extrapolate data will make your life a lot easier.

Public domain material: if you record classical material, iTunes has just made your life more difficult. Not long ago this powerhouse in music retail instituted a strict (some would say unduly anal) protocol related to classical music metadata, like the names of albums, tracks and composers. The styles, standards and conventions guide my company was told to reference is incomplete and inconsistent, yet you are supposed to know or find out exactly what is and isn’t acceptable for every piece of classical music out there. If your aggregator isn’t prepared to work with you closely on this, it can lead to rejection after rejection and long delays in getting your album(s) onto the online store sites.

Thankfully, music uploaded prior to the advent of these new rules is exempt, as long as it isn’t re-submited for any reason. My company, which works with two aggregators that each represent a portion of our catalogue, ran into this metadata problem recently with a re-submitted classical release. After several months of failed attempts to fully satisfy the new data standards, I decided to hand the album over to our other aggregator, simply because they offer a more hands-on, personalized service, which can greatly help in certain situations.

Activities: different aggregators have different focuses when it comes to activities that lie beyond the core role of distribution to online retailers. It probably goes without saying that each also has their strengths and weaknesses. Two such activities that have paid big dividends for my company and for which we haven’t had to fork out a dime in up-front fees have been track placement in visual media and distributor-developed digital-only compilations. One of our aggregators is more active in the former, the other in the latter. These are good examples of why it is prudent to find out as best you can just how active (and successful) the aggregators on your short list are in the supplementary activities that are most important to you.

I’d like to hear from artists and small labels whose experience with their aggregator has been satisfactory or even exceeded their expectations, or if you have more questions about this subject. Add a comment to this blog or drop me a line.

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