In the 21st century, when we hear the words “music distribution,” we understand that it means digital distribution, i.e., the supply of music to streaming services and other digital platforms. Today, almost everyone has heard of such giants as Spotify, Apple Music, and YouTube Music.
However, none of these streaming services has a service for artists to upload music directly, such as a video on YouTube or a song on SoundCloud. If a musician wants his or her tracks to be available online, there are two ways to go about it:
1) agree with a label or distribution company that it will do everything for the artist
2) upload their music independently through intermediary services (with a percentage to distributors or aggregators).
In the first case, the label or distributor company will do everything clearly, quickly, and professionally, but the musician must be prepared for the fact that such a label company will take its percentage of the income (in addition to the distributor’s percentage, of course) received by the artist. This method saves time for creative work, but it comes at a price.
In the second case, the artist does everything himself, but again, everything will end up with the participation of a distributor or aggregator (and he has to pay taxes and again pay a percentage (but a smaller one) for such an action) and spends some time and energy to understand all the details of the technical process.
Global players in the distribution services market
Three global major labels (the largest companies that share the lion’s share of the global music market: Universal Music Group, Sony Music Group, and Warner Music Group) have their own distribution tools. But they hardly ever work directly with Ukrainian artists (especially when they are not companies (legal entities), but just people (individuals)).
So most Ukrainian artists face a choice: a label, a direct distributor, or an independent service. And it all depends on the artist’s willingness to bear the costs: precious time or the opportunity to do what they love without being distracted by such concepts as money and its influence.
Until February 24, 2022, there were two major digital distributors (aggregators) on the market, and one smaller one. Namely:
– Believe Digital (an independent global company with a headquarters in France and an office in Ukraine).
– The Orchard (owned by Sony Music Entertainment, headquartered in the United States, had a curator from Russia who was in charge of Ukraine and one consultant in Ukraine).
– OneRPM (head office in the United States).
After February 24, 2022, Believe Digital and The Orchard condemned Russia’s aggression, but only The Orchard left the Russian market. The others openly continued to work in the aggressor country.
Independent services allow artists to upload music manually and choose where it will go. There are dozens of such services, the most famous of which are TuneCore (owned by Believe), Distrokid, CDBaby, Amuse, etc.
Who should I choose – a distributor or an independent service?
From a purely practical and productive point of view, a distributor seems to be the best option for an artist. Why?
The respective company, having the appropriate human and technical resources, takes full care of the release management, which takes the work off the artist. Representatives of the distributor have direct access to managers of streaming services, so they can “pitch” music to them for playlists. And playlists are crucial for increasing the number of listens. Representatives of the distributor can help promote music by Ukrainian artists on the international market. In practice, according to the agreements that we, as lawyers, see in our activities, the distributor most often takes from 15% to 30% of the streaming revenue.
As for independent services, they work on a fixed fee basis and usually do not take a percentage of revenues. But it depends on the chosen plan and the corresponding agreement that the artist signs with such a service.
Advance payments – how it works and what are the benefits
The issue of receiving remuneration for their work is the most important for the vast majority of musicians. Until a certain point, Ukraine was mostly a concert country, meaning that concert activity was the main source of income for artists. However, since 2020, there has been a transition to digital, and since February 24, 2022, there has been a very significant leap in this direction. According to various estimates, in 2022, the revenue from streaming services will be more than $6 million, and by 2026, the number of subscribers to streaming services should increase to 10 million users (data provided without taking into account the large-scale invasion of Russia).
Historically, most of the revenue has come from concerts and corporate events, but their number has dropped significantly since the pandemic began. More and more Ukrainian artists are starting to earn money from streaming. But now there’s another way to get funds for releases: advance payments.
What is meant by this? For example, Believe or another distributor offers an artist money upfront (an advance) for recording and promoting an album. While this money is being “worked off,” the distributor takes 100% of the streaming revenue. Then, when the entire amount of the advance is repaid, the distributor and the artist divide the profits according to the terms agreed upon when signing the relevant contract.
The amount of such advances can range from several hundred euros to several tens of thousands. We can state that Believe actively and quite massively offers advances. An advance for the release of an album, even for a relatively young band, can start at 5000 euros. However, the system of advances may vary from distributor to distributor, depending on the strategy of the distributor itself.
An independent distributor as an alternative
After leaving Russia, The Orchard stopped being particularly active in Ukraine. Therefore, the corresponding gap in digital distribution was actively filled by Believe, which remains the largest player in its niche in both Russia and Ukraine.
However, at the same time, more and more independent labels are emerging. The Polish label/distributor Independent Digital is becoming more and more prominent.
Independent Digital is the largest independent aggregator (digital distributor) of content in digital formats in Poland. They work with more than 700 music labels and artists, mainly from Poland, Italy, Germany, and the United States, and supply music directly to iTunes, Apple Music, Spotify, Amazon, Google, Pandora, Tidal, Deezer, and many others around the world.
Independent Digital has a real impact on better content exposure and can reach a wider audience for the artist they work with. Their special feature is their 360˚ model, which means that in addition to technical support for distribution, the aggregator guarantees additional services related to optimization and promotion, which are handled daily by a dedicated team of 30 specialists. They own the largest multi-channel music network in Poland and one of the largest in Europe. In addition, Independent Digital works with non-music networks, thanks to which they can offer interesting promotional solutions by connecting musicians and YouTube authors.
In fact, Independent Digital has worked in Ukraine before, with a 4-person representative office. In an interview with Neformat Ukraine, the regional director of Independent Digital Ukraine, Dmytro Banyas, said the following:
“We have been discussing the issue of opening a representative office of Independent Digital in Ukraine for a very long time. The events of February 24 forced us to make a decision – we are going to develop distribution in Ukraine.
Until February 24, our showcase on digital platforms was managed from Russia. Now our market is being managed by an Eastern European office headquartered in Poland. As for opening a local editorial team in Ukraine. I think our society should refuse piracy as much as possible and pay attention to streaming. If there is demand, there will be a product.
I think the Ukrainian showcase will be run by Ukrainians living in Europe. Ukrainian songs will be on the editorial playlists of Poland and other Eastern European countries, which will reach a larger audience.
It all depends on the genre: if it’s pop or hip-hop, the chances are greater, if it’s a narrow genre, the probability of getting into European playlists is less. You shouldn’t be afraid of this because there are private playlists and mood playlists from services. They are not updated so often and on some streaming services are partially automatic (based on previous release statistics and discography),” Dmytro notes.
Today, Independent Digital is cooperating with such artists and functionaries of the Ukrainian music market as kontrabass promo, YULA, Tember Blanche, Renie Cares, Brunettes Shoot Blondes, Vitaliy Kozlovsky, Olga Tsybulska, and others.
Dmytro Banyas says that Independent Digital, in particular, can advance payments to artists, but this is a matter of personal agreement.
The fact that music by Ukrainian artists was uploaded to Russian streaming services after February 24, 2022 may be the responsibility of both artists and distributors. Some artists simply did not check whether this was happening. In some cases, the distributor automatically uploaded “everywhere”. And even on independent services (for example, Distrokid), you can forget to uncheck Yandex.Music. None of the heroes we interviewed confirmed that they deliberately uploaded music to Russian services.
In summary, we can say that yes, Believe is currently the largest player on the market, and the company does invest in Ukraine, provides bands with advances and helps with promotion on streaming services. But it continues to work in the Russian market, where it has a serious position, and this position does not suit Ukrainian artists.
Nevertheless, there are still options to choose from: from lesser-known distributors to independent services such as Independent Digital.
In any case, it all depends on the artist’s desire to earn money from their work and on the criteria for choosing a suitable service: the level of management, the range of services, the possibility of entering the international market, etc., as well as on how important the artist’s affiliation and position on various issues is to them.
As lawyers, we can say that no matter which label, distributor or independent service an artist chooses, the main thing is that when signing a contract with a particular organization, it is imperative to first review it with an independent lawyer, sparing no expense for a truly qualified specialist. Because any “promising” prospects have their own “nuances”, the mechanism of which is better to know, and most importantly, to understand immediately before signing.
copyright / distribution / independent digital / intellectual property
