Not long ago, record distributors had a straightforward job — they shipped CDs, vinyl LPs and cassettes from label-owned warehouses to record stores. Then came streaming, and while distributors remain middlemen, helping artists and labels post music on Spotify, YouTube and the rest, they’ve expanded to marketing, royalty payments, data analysis and promoting songs to playlists.
Distributors handle so many crucial functions for artists — using their connections to hustle new tracks to playlist curators, supplying metadata from song titles to publishers, keeping track of mixes in new surround sound formats like Spatial Audio and Dolby Atmos — that every major label has to have its own company. Or several. Sony Music and Warner Music Group distribute their releases through internal distribution companies, while Universal Music, the world’s biggest label, has separate distributors for sublabels such as Capitol’s Virgin and Republic’s Immortal, which launched last September.
“There’s a lot of behind-the-scenes work that goes on,” says Colleen Theis, COO of The Orchard, the Sony Music-owned distribution giant that specializes in indie releases and works with artists from BTS to Ozuna. “You need to get music out to platforms and stores and pay the artist or label. And when you’re receiving all that data, you need to be able to chop it up in tactical ways and analyze it so you can help provide intelligence.”
Distribution companies have quietly boomed into a huge growth area for major labels in the last few years — beginning with The Orchard. In 2015, majority investor Sony Music bought the remaining 50% of the company for a reported $200 million; over the next three years, Sony chairman/CEO Rob Stringer announced, The Orchard’s earnings doubled; since then, Theis tells Billboard, the company has “continued double-digit growth,” in part thanks to the COVID-19 pandemic, which “meant people were at home, spending more time listening to music and discovering artists, and that actually helped our business.”
Warner Music’s Alternative Distribution Alliance Worldwide, a 29-year-old company that, like The Orchard, works with indie artists and labels, is similarly “having a moment,” according to Cat Kreidich, the company’s president. With social media “ubiquitous” and tracks uploaded to streaming services “every second,” she says, distribution companies are crucial to help artists and labels manage and market their own releases: “All the barriers have come down. There’s a need for fast-moving, flexible service offerings to help bring all of this music to fans around the world.”
Major labels have spent the last few years using distribution companies to expand their power in different ways. In early 2021, Sony spent $430 million on AWAL, an indie label and distributor, in part to boost its own market share. Stringer hinted at this growth-by-acquisition strategy in 2018, when he told investors: “We bought The Orchard to help with market share — and everywhere The Orchard is now being built up, it’s helping with market share.” In this way, Sony (through The Orchard and AWAL) and Warner (through ADA) profit from their own major-label releases as well as the many independent releases for which they oversee distribution.
Meanwhile, Universal Music Group has such a dominant market share that executives foster competition within its own group in addition to rivals such as Warner, Sony and independents. Thus, UMG sublabels such as Capitol, Interscope and Republic have their own distributors. “When you have 40% of the market share, you can get relaxed and bloated and you can not only compete externally, but you’re also competing internally,” says a source in music distribution. “There’s an intentionality within Universal to have Interscope and Republic at odds with each other. That contributes to having competing distribution systems.”
Sony and Warner have comparably more streamlined distribution mechanisms. “Different parts of the organization have different deals for different reasons — but ultimately, Warner is set up to support artists at every stage in their careers,” says ADA Worldwide’s Kreidich. “The universe of music is vast and expanding all the time — there’s more music and more ways to listen to music than ever before. We have the opportunity to be strategic, to utilize data and understand audiences and help drive fandom and engagement in ways we never could’ve imagined.”
Why are distributors so crucial for major labels in the streaming era? Darius Van Arman, co-CEO of indie label Secretly Group and its distribution company, says it is because distributors use long-standing connections to communicate with streaming services, physical retailers and radio stations, emphasizing certain tracks amid the fire hose of new releases. “Distributors say, ‘We have two hours with you, Spotify, this week. We’re sending 1,000 releases your way, but we can’t talk about all of them, so here’s our priority,’” Van Arman says. “They can’t really have conversations on every release on a deep level. It’s not economically sustainable.”
More than anything, he adds, distributors that have worked thousands of tracks and use data to pinpoint where and how they’re breaking worldwide provide experience that is essential for artists and labels: “You can go hiking through treacherous terrain by yourself and figure it out. Or you can go with an experienced hiking guide who has done it hundreds of times already.”
