Distribution
“I feel like that guy in Don’t Look Up,” says Andrew Batey, co-CEO/co-founder of streaming fraud detection company Beatdapp. “I’ve been yelling about the comet coming for years, and so many people haven’t taken it seriously. Now, I think it’s arrived.”
On Nov. 4, Universal Music Group sued TuneCore and its parent company Believe in a $500 million copyright infringement lawsuit, claiming that TuneCore’s “business model” of letting users upload a massive volume of songs for a low flat rate is powered “by rampant piracy” and that TuneCore “makes little effort to hide its illegal actions.”
According to the lawsuit, some of these uploads are remixed or sped up versions of UMG hits and titled with slight misspellings of the artists or works they are infringing — like “Kendrik Laamar,” “Arriana Gramde,” “Jutin Biber” and “Llady Gaga.” UMG also alleges that TuneCore has “taken advantage of the content management claiming system” on YouTube “to divert” and “delay… payment of royalties” that belong to record labels.
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The nine-figure lawsuit serves as a searing indictment of the way one of the world’s largest DIY distributors is allegedly conducting its business. It’s also being viewed as an indictment of the business model of DIY distribution as a whole because, as Jamie Hart — founder of publishing administration company Hart & Songs — explains, “These problems are definitely not unique to TuneCore.” Throughout her career, Hart has spent time at SoundCloud and at Downtown’s YouTube royalty collection service AdRev (now part of FUGA), learning about the intricacies of rights management online, and why it can get so messed up. “This is happening across all self-upload distribution companies at a big rate, and it has been happening for years.”
Along with users profiting from content containing copyrighted material that doesn’t belong to them (sometimes colloquially referred to as “fraud,” “fraudulent content,” or “modified audio” in certain contexts), experts say DIY distributors are also usually the pipes that let in an excessive amount of songs that will be used in “streaming fraud” schemes — a term used to describe the process of artificially juicing stream counts to siphon money out of the royalty pool.
Batey and fellow Beatdapp co-founder/co-CEO Morgan Hayduk see this is the start of a serious crackdown on distribution companies like TuneCore, with “a small window for [distributors] to get on board” and clean up their issues with infringement and fraud before it leads to serious consequences. For those unwilling to put in the extra effort to prevent much of the illegal activity on their services, the Beatdapp leaders fear the financial penalties from streaming services or lawsuits from rights holders, like UMG, could be harsh enough to put some of the small players out of business and lead to consolidation.
“We don’t want to see consolidation,” Hayduk says. “It’s healthy to have a lot of distributors in the market, for users and for our business, too. We want to see them clean up their act, but they need to start now.”
Over the last few years, there have been a number of efforts made to address the growing problems in DIY distribution — from streaming fraud to copyright infringement to sheer volume. Last year, TuneCore, Distrokid, CD Baby, Symphonic, Downtown and more joined together to form the Music Fights Fraud coalition, an attempt to self-police these issues through a shared database. (Since then, Beatdapp alleges that there has only been an increased amount of streaming fraud across the industry.) Spotify also announced new amendments to its royalty payment models in an effort to curb these issues, including financial penalties for distributors and labels that perpetuate fraud.
But this fall, a number of high-profile instances of anti-fraud regulation have started popping up in quick succession. In September, federal prosecutors indicted a North Carolina musician in the first ever federal streaming fraud case, alleging he used two distributors to upload “hundreds of thousands” of AI-generated tracks, and then used bots to stream them, earning him more than $10 million since 2017.
Then, in October, TikTok cited issues with “fraud” as its reason for walking away from renewing its license with Merlin, a digital licensing coalition representing thousands of indie labels and distributors. Instead, TikTok reached out to Merlin members individually — something which TikTok says could help them curb fraud from specific members, but which Merlin calls an excuse to “fractionalize” its membership and “minimize” TikTok’s fees for indie music.
Experts are torn about whether or not the problems at these DIY distributors will be easy or hard to solve. One DIY distribution employee, who requested anonymity, says stopping bad activity is a never ending game of “wack-a-mole” and that it is “impossible to catch everything” even with a quality control team. “There’s so much content pushed through at once that a lot slips through the cracks.” They add, however, that there is too much of an emphasis on “quantity over quality” at these companies and that they need to hire more quality control personnel than they have right now.
But Larry Mills, senior vp of sales at Pex, a company that provides tools for content identification and rights management, believes “it actually isn’t that hard of a problem to solve. Some distributors and DSPs are just making a business decision to use lesser technologies that aren’t tuned to finding modified audio or covers until they are forced to.”
Beyond contracting a third-party service, like Pex or Beatdapp, or spending a millions on more full-time staffers, there are also much more simple measures that can be taken. Greg Hirschhorn, CEO/founder of distributor Too Lost and a member of the Music Fights Fraud coalition, said in an October interview that his company has seen significant success by simply requiring users to submit a photo ID and a selfie before uploading songs to Too Lost. “There’s no hiding from it, and it’s easy,” Hirschhorn says. “If you break the law using our site, I have your information, and I can just send it to local law enforcement or to the streaming service.” Hirschhorn claims he has offered to implement this same service for fellow MFF members, but he says no one has taken him up on it.
According to Mills, the new UMG lawsuit against Believe has encouraged more action. “Thankfully, people are starting to take this seriously. Our phones are certainly ringing more since [the UMG lawsuit],” he says.
An employee at one of the DIY distributors also has seen a change in attitude about these problems in light of the UMG lawsuit. “A lot of us [in distribution] have been talking about this lawsuit,” this person says. “This is a systemic issue in distribution. No company is blameless … Other distributors should be f-cking nervous.”
For those in the business of helping artists and writers collect their rightful royalties online, like Hart and Jon Hichborn, founder of royalty tracking company Records on the Wall, “There’s too much responsibility on the rights holder,” as Hichborn puts it, to police their copyrights. “It’s mind boggling. I track down royalties 24/7. Imagine if I wanted to be a musician who was writing and performing? There would not be enough time in the day to do it all.”
Still, the continued dysfunction and challenges stemming from DIY distributors has birthed a lucrative cottage industry for companies like Pex, Beatdapp, Hart & Songs, Records on the Wall and more that are designed to clean up the mess that is protecting copyrights and collecting royalties on the internet today. “My business unfortunately does thrive on everybody screwing up,” laughs Hichborn. “It’ll never go away.”
It’s unclear what the future looks like for DIY distributors. While Beatdapp foresees “extinction” for distributors that don’t get their act together, Hirshhorn predicts great change “in the amount of quality control, the amount of KYC [“know your customer” checks], the amount of diligence required,” but he doesn’t see it as an apocalyptic event. As he’s found with the implementation of ID checks, even if the scale of songs a distributor releases goes down some, a distributor can still thrive. Too Lost, he says, is doing better than ever, earning over $50 million in annual revenue this year.
“At the end of the day, you just shouldn’t be able to make money on the internet — whether it’s from music, gaming, or the creator economy — if you don’t disclose exactly who you are,” Hirshhorn says. “That just makes total sense… The music industry is always slow to adopt any changes, but this is what the future will look like.”
This story was published as part of Billboard’s music technology newsletter ‘Machine Learnings.’
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Last week, Universal Music Group filed a $500 million lawsuit against TuneCore and its parent company Believe over alleged copyright infringement of UMG’s recordings. The lawsuit presented two core issues: first, that bad actors used TuneCore to upload songs to streaming services that were simply sped up or remixed versions of UMG-copyrighted recordings, often listed under slight misspellings of the real artist, like “Kendrik Laamar” or “Arriana Gramde.” Second, it claimed that “Believe has taken advantage of the content management claiming system” on YouTube “to divert” and “delay… payment of royalties” that belong to record labels.
If you’ve been following the issues in this case over the last few years, this lawsuit feels like a long time coming, and the issues that UMG raises are certainly not just a TuneCore-specific issue — they’re an industry-wide DIY distribution issue. With the vast scale of songs being uploaded through these companies, and staffs that are too small to catch every bad actor, infringing material has, according to just about everybody, flooded onto streaming services.
The distributors know it’s a problem, too. It’s why TuneCore, DistroKid, CD Baby, Symphonic, Downtown and more formed the Music Fights Fraud coalition in 2023 and say they have increasingly invested in preventing fraud and infringement. Unfortunately, Beatdapp, the industry leader in identifying streaming fraud, believes the problem has only worsened since then. UMG is also not convinced that TuneCore is doing enough, saying that the company’s business model incentivizes them to “turn a blind eye” to this damaging activity.
Below, I’ve condensed some of the arguments I’ve heard among industry leaders both for and against DIY distribution continuing just as it is today. I’ll let you judge which outcome is better.
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Argument #1: Why its essential to protect DIY distribution as is
It’s easy to take for granted today that anyone who wants to release a song can do it themselves, but that wasn’t always the case. When physical records reigned supreme, record label contracts often favored the companies involved, and seldom went the artists’ way. At the time, artists were essentially forced to sign to a record label if they wanted a chance at shelf space in stores — especially worldwide. This left artists vulnerable to unequal label deals that locked them in for many albums while the label took the lion’s share of the royalties and the copyrights, often in perpetuity.
When Distrokid, CD Baby, TuneCore and the like emerged in the 2000s, they let anyone sign up for distribution services to digital outlets like the iTunes Store for a flat fee and forever altered the power dynamic. Today, the playing field has leveled significantly: hobbyists can get their music out to the world and artists with professional aspirations can wait as long as they want before they have to give up a single percentage point of their master recordings to a label. These companies helped shift negotiating power to the artists, and for the first time, started the process of allowing music fans to decide what songs would pop, rather than the labels that pulled favors with the gatekeepers who worked in radio, retail and the press.
The shift also presented a new, lucrative business opportunity. Music companies no longer need superstars in their catalogs to make their numbers. In fact, they don’t need catalogs at all. A company can now make money by providing services, like distribution, to the masses of previously-overlooked musical hopefuls instead, relying on volume to make up the numbers.
But that volume allowed for the proliferation of fraud, which is a problem that evolves every day, and bad people will always find loopholes. Already, most distributors have implemented common-sense regulations and checks to curb fraud and invested money into quality control teams. But for many experts, it feels impossible to totally solve the problem. As it’s commonly said, this is an endless game of “wack-a-mole.”
But if the barriers to DIY distribution are too significant — like limiting the number of releases, gating who can use it, hiking the platform fee, adding a streaming threshold, or slowing down release time — it could take power away from indie musicians that they have become accustomed to. Such a move would be a step backward for artistic freedom, and the cost of implementing these regulations could threaten to put some of the smaller distributors out of business. Less choice and competition in DIY distribution isn’t better for users.
It’s impossible to put the DIY distribution genie back in the bottle. Artists, who have become used to the current system, would still find ways to get their music out there quickly and cheaply — whether fraudulent or not. Likely, that music would go out on social media or to social-streaming hybrids like YouTube and SoundCloud, both of which pay out royalties and can still be cheated. Streaming services, like Spotify, Apple and Amazon, would risk losing listenership and music discovery to social media platforms — something they already struggle with in today’s TikTok era — and it might not even solve the problems it targeted.
Argument #2: Why the DIY distribution system is in need of serious reform
Currently, over 120,000 songs are uploaded to streaming services every day, a rate that has rapidly increased for years and will likely continue to do so. This is mostly due to DIY distributors. While it is great that aspiring artists can get their music out there cheaply and easily, this has also led to rampant fraud and copyright infringement that puts excessive burdens on rights holders to police their own catalogs online. What happens when we inevitably get to a point where 1 million songs are uploaded every day? We can’t keep going as we are now, and we are in need of serious reform.
While DIY distributors have announced initiatives like Music Fights Fraud and have hosted panels at industry conferences to explain the new methods they are using to stop bad actors, some people say these companies have an incentive for at least some of it to slip by their watch, given their business models rely on receiving fees in exchange for uploading as many songs as possible. Self-policing is not enough, considering this problem only seems to get worse.
The introduction of generative AI has made this matter even more pressing. While it’s impossible to know how much of the music being uploaded today is AI-generated, and to date the streaming services have no regulations against this, it is certainly contributing to the rising number of songs released to streaming services per day. AI songs are believed to be exploited by bad actors to commit streaming fraud, as we saw in the September lawsuit which alleged a musician named Michael “Mike” Smith stole $10 million in streaming royalties by uploading AI-generated songs using a distributor and then used bots to stream them. Bad actors upload AI songs en masse to spread out artificial streams and make their schemes tougher to detect.
It’s hard to argue that it makes a user’s streaming experience better when a platform has a vast number of AI songs and tracks that not a single person has streamed, and it’s clear that these songs, largely stemming from DIY distributors, are diluting the royalty pool at the expense of what some stakeholders have called “professional artists.” The negligibly low payments earned by hobbyists who have accrued hundreds or just a few thousand streams are sometimes lower than the fees one would incur from transferring the royalties into their bank account.
These distributors, the argument goes, should be penalized for the bad actors they let through. This has been proposed in many forms so far, including a financial penalty instituted by streaming services, requirements for significant “know your customer” checks to slow down uploads and verify users’ identities, a minimum stream count threshold before artists can be eligible for royalty collection, a limit to the number of songs a user can upload at a time, an additional fee for storing massive uploads to streaming services, and more.
It’s not a viable business if you rely on a massive scale of song uploads but can’t afford the proper staffers and tools to police them.
Independent music publisher Primary Wave Music has partnered with the estate of country/folk singer-songwriter Jerry Jeff Walker on Walker’s music publishing catalog, recording copyrights and artist royalties. The partnership provides the Walker estate access to Primary Wave’s marketing team and publishing infrastructure to work on new marketing, branding, digital, synch opportunities and film/TV projects. The deal also features an agreement for Walker’s recorded masters, in partnership with his label Tried & True Music, to be released and distributed through Sun Records; Sun Records will provide overall catalog marketing strategy, including streaming, social media marketing and physical releases. The deal includes some of Walker’s biggest hits, including “Mr. Bojangles,” “Railroad Lady” and “Sangria Wine.” – Jessica Nicholson
AI-powered social music app Hook partnered with Glassnote Records to add new tracks from artists including Tors, bby, Hayes Warner and Dylan Cartride to its library, with more acts to be added soon. Glassnote’s roster also includes Mumford & Sons, Childish Gambino and Phoenix. Hook allows users to remix existing songs by speeding them up, slowing them down, mashing them up with other songs and more to post on social platforms, effectively opening up another revenue stream for participating artists. In a statement, Glassnote founder/president Daniel Glass called Hook “a comprehensive solution to the use of remixed music across social platforms in a way that emphasizes artists’ control and compensation.”
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Leading music licensing platform Slipstream acquired Anthem Entertainment‘s production music businesses, including U.S.-based Jingle Punks and 5 Alarm Music and U.K.-based Cavendish Music. The acquisition encompasses more than 650,000 tracks along with music production capabilities. The purchase was made possible by financing and expertise offered by Pollen Street Capital, while Moelis & Company served as the exclusive financial advisor to Anthem on the negotiation. The acquisition represents a full-circle moment for Slipstream co-founders Dan Demole and Jesse Korwin; Demole co-founded Jingle Punks and previously served as president of Anthem Music Group, while Korwin served as Jingle Punks’ MD. Anthem Entertainment will make an investment in Slipstream as part of the deal.
Reactional Music, which allows video game developers to create interactive music soundtracks in their gaming titles, struck a global licensing partnership with Naxos, a leading rights holder of classical and regional music. The two companies are also exploring a collaboration on the composition of interactive soundtracks that would allow gamers to personalize Naxos-owned music in real time while playing, without affecting the master recording. Reactional has previously struck licensing partnerships with companies including Beggars Group, Hopeless Records, Hipgnosis Music Group and production music groups like APM Music, Soundstripe and Alibi.
Global investment firm CVC has invested alongside KKR to support live entertainment group Superstruct Entertainment in its next phase of development. KKR acquired Superstruct, which owns and operates more than 80 music festivals across Europe and Australia, in June 2024. CVC’s previous investments include Stage Entertainment, Formula One, Women’s Tennis and LaLiga.
SoundExchange and the Societies’ Council for the Collective Management of Performers’ Rights (SCAPR) announced that SoundExchange has become the first non-member collective management organization (CMO) to be able to create and issue international performer numbers (IPNs) — unique universal identifiers associated with performers, created and administered by SCAPR, that are used to identify them in data exchanges with other CMOs globally. Through the deal, SoundExchange will create and assign SCAPR’s IPNs to further link performers to their recordings, thereby improving identification of their creative contributions. “IPNs represent another tool in our expanding arsenal helping to get the right people paid the royalties they deserve,” said SoundExchange president/CEO Michael Huppe in a statement.
Downtown-owned business to business distributor FUGA partnered with Manila, Philippines-based management and production company ASINTADA while announcing new hires across the APAC region, including Noorcahyo Istyabudi and Jaya Singh, who will lead business development in Indonesia and South Asia, respectively. FUGA will provide global distribution and bespoke marketing services to ASINTADA, which will also have access to FUGA’s trends and analytics platform. ASINTADA represents some of the biggest hip-hop artists in the region, including Filipino rapper Gloc-9 and rising OPM (original Pilipino music) talent including Shanti Dope, Flow G and Skusta Clee. FUGA also announced a partnership with the Jesuit Communications Foundation, the media arm of the Philippine Province of the Society of Jesus; Crown Studios Inc., a full-service talent and management agency; and record label and production house 314 Studios.
Global children’s audio platform Yoto secured a $15 million funding package from HSBC UK‘s Growth Lending Fund to support its international growth. The funding will allow Yoto, which is based in the U.K. and currently operates in five countries, to extend its reach beyond those markets. Yoto additionally plans to expand the manufacture of its audio players and content cards to satisfy growing demand. The company says it expects to double its revenue with the funding.
DistroKid, the world’s largest independent distributor, has placed 37 union employees on “administrative leave” just an hour before the union was set to meet with company’s lawyers for new contract negotiations, according to an Instagram post by the DistroKid Union on Saturday (Oct. 26). The information provided in this Instagram post was verified by two employees at DistroKid.
The union says that these employees are set to be “replace[d]…with overseas labor” and that this move has impacted about a “fourth” of the company’s staff. Another source close to the situation believes the total is closer to 15% of staff affected. According to an employee at DistroKid, those impacted were part of the company’s Quality Control and Artist Relations (customer service) teams. Another employee claims there were also Quality Assurance Engineers impacted as well. The union adds in the post that DistroKid told them that the reason they want to eliminate these positions is to instead “to spend their salaries on marketing.”
In response to Billboard’s request for comment, a DistroKid spokesperson said: “DistroKid is committed to continuously enhancing support for independent artists around the world by expanding to 24/7 customer service with faster response times. To achieve this, we have identified solutions that allow us to deliver more scalable and exceptional service, ensuring that artists around the globe receive the high-quality support they deserve. This includes considering difficult decisions that may affect valued team members as we continue our focus on providing the best artist experience possible.”
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For the last year or so, DistroKid has contracted a third party customer service team, based in the Phillippines, to help with artists’ needs. This move to place 37 works on administrative leave seeks to eliminate its in-house, U.S.-based Artist Relations team and replace it with more third party and international workers. The company believes this will help them with the influx of international DistroKid users who need round-the-clock services in multiple languages.
The DistroKid Union was formed in February as part of the National Association of Broadcast Engineers and Technicians, a union within the Communication Workers of America (NABET-CWA). According to an announcement from NABET-CWA about the formation of DistroKid’s union, “workers at the company were subjected to a ferocious anti-union campaign that included multiple, one-on-one anti-union meetings and near-constant anti-union propaganda. The company president also sent several anti-union letters to workers.”
“Despite attempts to dissuade workers, they returned a vote 45-28 in favor of joining NABET-CWA. This effort succeeded due to the unified efforts of the organizing committee, which kept the entire campaign hidden from management until it went public, a rare early coup for the team,” the announcement continued. The DistroKid workers all work remotely, but their union joined the NABET-CWA local 51016, based in New York City.
This news comes after a few years of rapid expansion for DistroKid, which now distributes 30-40% of the world’s new music. Two years ago, it introduced DistroVid, which enables artists to upload an unlimited number of music videos to leading digital service providers for a flat fee. Then, last year, the company launched an iPhone app that featured an AI-powered mastering tool, called Mixea, to help artist prep their songs and announced that it had acquired music web platform Bandzoogle, an e-commerce business that helps artists create websites and sell their music and merchandise.
Update: This article was updated at 1:55 PM e.t. to include the claim that there were also Quality Assurance Engineers, a different role from the Quality Control team, that were placed on administrative leave.
The pop duo LANY released their first four albums on a major label. But when they completed their contract, they decided to hunt for a different kind of business partner, one that would give them more control over their operations. “Autonomy is the future,” manager Rupert Lincoln told Billboard. LANY ultimately chose to work with Stem, a distribution company.
For decades, major labels demanded long-term contracts, obtaining multiple albums from the acts they signed, and made most of the money from those acts’ sales. The balance of power has shifted dramatically in the modern music industry, however, and so have artist contracts. More and more acts want distribution deals — short-term agreements where they retain ownership of their work and keep the majority of the income their music generates.
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As these have become more desirable, competition for high-performing artists seeking distribution deals has gotten fierce, according to a pitch deck Stem has sent to potential investors, which was obtained by Billboard. Stem “has lost numerous deals historically as it wasn’t able to be competitive with advances,” the deck states.
Other companies have also seen prices rise. “It is a much more competitive market” than it used to be, says Jorge Brea, founder and CEO of the distributor Symphonic. “All distros have to be well-funded to ensure they can put up money for deals.”
Historically, digital distributors didn’t help artists much with marketing or radio promotion; they were basically tech companies that made music widely available on places like iTunes and Spotify in exchange for a small percentage of sales. These low-overhead operations were a world away from an old-school major label, which had lots of manpower to promote artists around the world.
But ironically, as the distribution landscape has become sexier — “There have been more entrants,” Brea notes — many of these companies are starting to resemble labels. Increasingly, they try to differentiate themselves from rivals by offering bigger up-front payments to artists and more label-like services: assistance with digital marketing, playlist pitching to streaming services, or radio promotion.
Concerns about up-front payments and services feature prominently in Stem’s pitch deck. The company estimates that it lost out on $45.6 million dollars worth of business in 2022: $19.2 million in scenarios where Stem couldn’t meet an artist’s ideal “check size,” and $26.4 million in situations where it couldn’t compete on “check size + other services (Intn’l, radio).”
By Stem’s count, the number of lost business opportunities ballooned in 2023, tripling to $134 million. (If accurate, this number helps demonstrate how popular distribution deals have become recently.) “We’re tracking all the lost deals that we were actually in the conversation on,” says Kristin Graziani, Stem’s president.
The pitch deck zooms in on two artists in particular whom Stem lost to rivals: Aaron May, a rapper with a laid-back delivery who took an advance of $2.2 million elsewhere, according to the deck; and 6arelyhuman, an electronic act specializing in glitchy, thumping tracks who took an advance of $1 million. (A source close to May contends the number cited in the pitch deck isn’t accurate.) In both these cases, Stem couldn’t match the final check, though the presentation doesn’t say whether those artists also wanted services that the company couldn’t provide — or picked a rival distribution outfit for another reason altogether.
In July 2023, Stem announced that it had set up a $250 million credit facility from Victory Park Capital to provide artists with advances. But “some of the dynamics of our deal with Victory Park were still a little bit constraining in terms of allowing us to win the type of deals that we were seeing,” says Stem CEO Milana Rabkin-Lewis. “There are many other types of capital out there that have less restrictions,” she continues, “and those are the conversations we’re having” now.
Other companies are doing the same — Billboard reported in August that at least half a dozen independent music distributors that have been fundraising or exploring a sale. That said, investors may be wary of providing some of these businesses with additional money to help them win bidding wars over talent, according to Erik Gordon, clinical assistant professor at the University of Michigan Ross School of Business.
Stem’s adjusted EBITDA — earnings before interest, taxes, depreciation, and amortization — was -$5.2 million in 2022 and -$4 million in 2023, according to the company’s presentation; it’s projected to be -$3.8 million in 2024. In Gordon’s view, “investors are likely to take three consecutive years of EBITDA that is negative, even after management adjusts it, as a sign of problems.”
Rabkin-Lewis says that, although “the distribution business is profitable, the overall Stem company is not because we’ve invested a lot into Tone, which is a newer product.” (The adjusted EBITDA for the distribution part of Stem’s business was -$1.3 million in 2022 and $400,000 in 2023, according to the deck.) “We’ve been prioritizing gross revenue growth,” Rabkin-Lewis adds. The deck indicates that gross revenue rose by a little more than 4%, from nearly $88 million in 2023 to a projected number around $92 million in 2024.
Meanwhile, distribution deals for proven artists continue to get more expensive. “A lot of companies are throwing out cash-heavy distro deals that we have never seen before,” says Karl Fowlkes, an entertainment attorney. At Symphonic, Brea has watched some of his competitors enter into agreements he believes are “ridiculous.” “We’re aggressive when going after deals,” he adds, “but not to the point where it’s not going to make [economic] sense.”
Distributors have to be especially careful when it comes to chasing expensive deals, because the short-term nature of their contracts gives them little time to make their money back. And successful artists often decamp for a rival company, lured away by a bigger check or the promise of a more powerful services division that can propel them to even greater heights. Brent Faiyaz, who worked with Stem among other companies in the past, subsequently partnered with UnitedMasters, for example.
On October 4, Stem updated its terms of service to say that it is guaranteed a five-year license on any new music uploaded through its system. (As always, artists with more leverage can negotiate a shorter term.) This change raised eyebrows in some corners of the music industry, because the ability for artists to disentangle relatively quickly is a big part of why they choose to work with companies like Stem. “We feel like we’re finally at a point, from a services perspective, where we can demand longer licenses,” Graziani says. A five-year term is more in line with what a major-label-owned distributor like AWAL would ask for in negotiations with an artist.
This points to another lane for competition — not just check size and services offered, but license length. Independent distribution companies face an ongoing challenge: It can be hard to prevent artists from heading elsewhere without offering agreements that look more like the ones handed out in the major-label ecosystems.
“The supply of distribution is now almost infinite — you can get it anywhere,” says Emmanuel Zunz, founder of the independent label OneRPM. “In order to make money in distribution, you have to create value elsewhere. If you’re unable to create additional value, you get stuck.”
The Zombies have enlisted Q Prime for label and distribution services, it was announced Tuesday (Oct. 22).
Under the agreement, Q Prime will manage marketing, manufacturing, distribution and licensing for the 2019 Rock & Roll Hall of Fame inductees’ new imprint, Beechwood Park Records. The imprint includes the pioneering British band’s catalog, which the group acquired the rights to last year from Marquis Enterprises Ltd. “There’s a very narrow window in a Venn diagram where love, admiration and business overlap. That’s what the deal is all about,” said Q Prime co-founder Cliff Burnstein in a statement.
Starting next year, Q Prime will physically reissue four of The Zombies’ albums, remastered from the original tapes. This includes the band’s seminal 1968 album, Odessey & Oracle, in its original mono mix; the LP, which was recorded for 1,000 British pounds, includes the classic songs “Time of The Season,” “Care of Cell 44″ and “This Will Be Our Year.” Its release will coincide with a new Zombies documentary, Hung Up On A Dream, directed by musician and filmmaker Robert Schwartzman and co-produced by Schwartzman’s Utopia Films, The Ranch Productions and Tom Hanks’ Playtone.
Chris Tuthill and Cindy da Silva of The Rocks Management, who have represented the band for the past 11 years, oversaw the deal along with attorney Monika Tashman of Loeb & Loeb. “We went through a painstaking process to find a strategic partner who would truly understand the unique qualities of these beloved recordings,” said Tuthill in a statement. “Ultimately, we knew we had to stay true to the band’s history. They have always benefited from a non-traditional and independent approach to both music and business, which is one of the reasons their songs are continually rediscovered by new generations of fans.”
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After former publishing executive Rick Krim introduced the management team to Q Prime, da Silva added, “We were incredibly impressed by the team and infrastructure that Q Prime assembled with their long-term clients Metallica to nurture and grow their own catalog, and their genuine desire to collaborate with us and the band to do the same for The Zombies.”
The Zombies’ four surviving founding members are lead singer Colin Blunstone, keyboardist Rod Argent, bassist Chris White and drummer Hugh Grundy. The band first appeared on the Billboard charts with 1964’s “She’s Not There,” which peaked at No. 2 on the Billboard Hot 100.
Ricardo Arjona, the Guatemalan singer/songwriter who has defined Latin music as much for his signature songwriting permeated in storytelling as for his longstanding history of sell-out tours, has signed an exclusive, worldwide distribution deal with Interscope Capitol Labels Group.
Under the new agreement—signed via his label, Metamorfosis, which he created in 2011—Arjona’s vast catalog of nearly 300 songs, plus his future releases, will fall under Interscope Capitol Labels Group, Billboard can reveal. Likewise, Arjona will now be part of the label’s roster.
Arjona’s move to Interscope Capitol follows stints with Sony Music, which was his longtime label and most recently distributed him, and Warner Music.
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The partnership with Interscope Capitol will launch with Arjona’s new studio album, SECO, slated for release in early 2025. The album was written during a difficult time for Arjona, when he was wheelchair bound after a back injury at the end of his tour last December and thought he would no longer be able to perform.
In that period, he wrote “Todo termina,” (Everything Ends). The song is one of three singles from SECO that will be released in November; the other two are “Despacio que hay prisa” and “Todo termina”. Plans call for two additional singles to be released in December, before Arjona kicks off 2025 with a SECO residency in New York and his native Guatemala.
Arjona, whose chart history dates back 30 years, to 1994, has placed five No. 1s and 18 top 10s on Billboard’s Hot Latin Songs chart. His last entry on the chart was in 2016. On Top Latin Albums, he’s placed five No. 1s and 15 top 10s. His latest album, released in 2022, peaked at No. 46 on the chart.
But Arjona’s musical output continues to be prolific and his touring record continues to be extraordinary. Last year alone, he landed at No. 11 on Billboard’s year-end Latin touring chart, selling 224,341 tickets and grossing $27.3 million, according to Billboard Boxscore. He is currently the No. 15 highest-grossing Latin touring act of all time, according to Boxscore.
“I speak on behalf of the entire Metamorfosis team when I say we are deeply motivated and profoundly appreciative to collaborate with Interscope Capitol Labels Group,” comments Ricardo Arjona Torres, who is Arjona’s son and runs Metamorfosis. “This resilient team not only showcases a curated and dynamic array of artists but also truly understands their vision.”
“We are incredibly honored to welcome Ricardo Arjona to the Interscope Capitol family. As one of the most iconic artists in the Spanish-speaking world, Ricardo has shaped the musical landscape in ways that transcend generations. We are committed to promoting his legendary catalog while partnering with him on the exciting projects he has in the works,” said Nir Seroussi, executive vice president at Interscope Capitol Labels Group.
“This partnership isn’t just a milestone—it’s a testament to our commitment to artistry, passion, and pushing boundaries,” added Jose Cedeño, SVP of Interscope Capitol Labels Group in Miami. “Ricardo Arjona’s music weaves deep connections between people, and together, we aim to amplify that reach,” he added.
LEVEL, a distribution company owned by Warner Music Group, announced on Thursday (Sept. 26) via Instagram that it will be shutting down in 2025. In a letter to its clients, obtained by Billboard, LEVEL notes that it is no longer accepting new songs for distribution or edits as of the date of the announcement and it will cease all operations on July 31, 2025.
The letter also said that all live releases will automatically be taken down on Nov. 18, but artists are “welcome to request a takedown” of their content before then. It also notes that access to the LEVEL Wallet, which is how the company pays out royalties, will be shut down on July 11. “We’re honored to have supported all of the talented people who have used LEVEL to share their music with the world over the years,” the company said.
In a statement provided to Billboard, WMG said: “We’re focusing all of our efforts behind the ADA brand, as we continue to strengthen our global suite of services for artists and label partners across the independent community. We’re taking a truly global approach, and investing in our team and technology, with some exciting announcements in the works.”
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In late 2022, multiple LEVEL artists and former employees told Billboard that the company was experiencing operational issues. This included the random removal of artists’ songs and projects distributed through the company and increasing difficulty in getting in touch with staff to remedy the takedowns and to generally receive service. Two former employees believed at the time that this was due to a reduced headcount at the company. A number of artists also took to the company’s Instagram comment sections to voice their concerns about the company. Those comments have all since been deleted.
In January 2023, the company addressed these complaints in an Instagram post, saying, “when it comes to customer support, we acknowledge we need improvement… we are refining our process for how we approach withdrawals [as well].”
LEVEL was started in 2018 by WMG in an effort to work more closely with young, unsigned artists. During the course of its operations, it released early songs by Remi Wolf, Stephen Sanchez, brakence, Dreamer Isioma, Boyish and more.
News of LEVEL’s shut down comes amid a widespread restructure of WMG’s Atlantic Music Group, which includes Atlantic Records, Elektra Records 300 Entertainment, Fueled by Ramen, Roadrunner and 10K Projects. Over the last few weeks, around 150 employees under the Atlantic Music Group umbrella have been let go, and a number of high-profile executives are also stepping down from the company, including Atlantic Music Group CEO Julie Greenwald, who co-led Atlantic for nearly 20 years; WMG’s CEO of recorded music Max Lousada, who had been at WMG for decades; 300 Elektra Entertainment chairman/CEO Kevin Liles; Atlantic general manager Paul Sinclair; and Atlantic co-president of Black music Michael Kyser, along with several department heads at both Atlantic and Elektra Records.
Atlantic Music Group will now be helmed by 10K Projects founder/CEO Elliot Grainge.
Alliance Entertainment recovered from a post-pandemic slowdown through higher demand for direct-to-consumer (D2C) fulfillment, cost savings and continued demand for vinyl LPs and CDs.
For the fiscal year ended June 30, the Plantation, Fla.-based distributor had net revenue of $1.1 billion, it announced Sept. 19, down slightly from $1.16 billion in the prior fiscal year. But by emphasizing cost efficiencies and high-margin products, Alliance increased gross profit 24% to $128.9 million and gross profit margin by 270 basis points to 11.7%. As a result, net income jumped by $40 million to $4.6 million from a net loss of $35.4 million a year earlier.
“Our strategic shift toward higher-value offerings is proving successful, and we expect to benefit from new hardware releases in the coming year,” Alliance CEO Jeff Walker said in a statement. “Similarly, in consumer products, we improved margins and pricing, demonstrating the effectiveness of our inventory rationalization efforts.”
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Music accounted for 42% of Alliance’s consolidated revenues—30% for vinyl records accounted and 12% for CDs. AMPED, Alliance’s independent music distribution business, had net sales of $78 million in fiscal 2024, up from $75 million. AMPED is the exclusive distributor for over 90 record labels and has exclusive relationships with such artists as Usher and ATEEZ.
Video games were the company’s biggest segment, accounting for 31% of consolidated revenue in the fiscal year. DVDs and Blu-Ray products were 19% of revenue. Collectibles and consumer products were 4% of consolidated revenues.
Higher-margin D2C sales accounted for 36% of fiscal year sales, up from 31% in the prior year, and helped improve profitability. “This shift highlights the effectiveness of our approach in meeting evolving consumer preferences, and it is helping to diversify and strengthen our revenue base,” Alliance chairman Bruce Ogilvie said in a statement.
A leading distributor of entertainment products with more than 325,000 SKUs in stock, Alliance counts Walmart, Amazon, Best Buy, Target and Shopify as clients. The company also has a number of owned brands. The DirectToU divisions consists of ImportCDs, Deep Discount, Collectors Choice Music and Collectors Choice, among others. Mill Creek Entertainment is an independent studio for DVDs, Blu-Rays and digital distribution. NCircle is Alliance’s children’s and family entertainment brand.
The latest earnings improved on a sharp drop in sales and a net loss after sales spiked during during the previous two years due to the COVID-19 pandemic. From fiscal 2022 to 2023, sales fell from $1.42 billion to $1.16 billion in fiscal 2023 and adjusted EBITDA plummeted from $60 million to a loss of $17.6 million. The company’s debt ballooned to $133.3 in fiscal 2023 from $45.6 million in fiscal 2020. Inventory rose, too, to a peak of $249.4 million in fiscal 2022 from $62.8 million in fiscal 2020. Both debt and inventory came down dramatically in fiscal 2024, to $79.6 million and $97.4 million, respectively.
Shares of Alliance, which trade on the Nasdaq, closed at $2.76 on Monday, up 35.3% since earnings results were released. The company’s shares briefly traded over the counter after a merger with the NYSE-listed Adara Acquisition Corp, a special purpose acquisition company, or SPAC, fizzled and left the company with a float too small to trade on the NYSE. The company had a small offering on the Nasdaq in June of 2023 and has a float of 3.1 million shares out of 50.9 million shares outstanding.
Townsend Music, a U.K.-based distributor and direct-to-consumer retailer, has been acquired by Artone, a Dutch business with a portfolio of companies that caters to the physical music marketplace. Terms of the deal were not disclosed.
Townsend Music founder Steve Bamber called the acquisition “a clear opportunity to push its European expansion strategy forward quickly, with Artone’s well established sales, distribution and manufacturing facilities already in place.”
Artone can quickly scale up and meets its goal of becoming a global D2C company, according to sales director Bruce McKenzie. “Artone’s suite of services from vinyl manufacturing, EU physical distribution, and label services gives us perfect synergy to offer both our D2C clients and super-fan customers a super charged service,” he said in a statement.
Artone was formed in 2022 from the merger of Bertus Distribution and Record Industry, a vinyl pressing plant based in Haarlem, Netherlands. The portfolio of companies also includes Sound Factory, which provides artists and labels with solutions to sell exclusive content directly to consumers; two labels that release music in physical formats, Music on Vinyl and Music on CD; and V2 Benelux, which provides label services in the Netherlands, Belgium, France and Germany.
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“The acquisition is another welcome step for Artone’s continued expansion of its service portfolio and gives us presence in the UK market,” CEO Jan Willem Kaasschieter said in a statement. “This acquisition strengthens our position as a global leader in physical music distribution. We’re excited about the opportunities this will bring and look forward to driving the future of physical music together, developing further global reach and innovative solutions for the benefit of the music industry.”
Physical music sales continue to show strong growth as streaming takes a larger portion of the global market. In the United Kingdom, vinyl sales grew 13.5% and CD sales improved 3.2% in the first half of 2024, according to the Entertainment Retailers’ Association.
With vinyl sales continuing to rise and streaming growth slowing, the music industry is putting increased focused on reaching “superfans” willing to pay more for premium experiences and tangible products. The unmet opportunity to monetize superfans was a key talking point in Universal Music Group’s Capital Markets Day presentation on Tuesday (Sept. 17). “We’re creating and monetizing new ways to meet the superfans pent up demand for products, experiences and access that brings them closer to the music and to the artists that they love,” said CEO Lucian Grainge.
Warner Music Group CEO Robert Kyncl has also made superfans a priority during his tenure. “One of the most important things is to figure out a direct relationship with the most valuable fans,” Kyncl said at the Morgan Stanley Technology, Media and Telecom Conference on March 6. “Because it’s not only important to monetization and new revenue stream, but it’s also important to launching new music, which is the core of what we do.”
Effectively reaching superfans could be a lucrative endeavor for record labels. In its latest “Music in the Air” report, Goldman Sachs analysts put the global superfan addressable market at $4.5 billion—nearly 16% of the $28.6 billion recorded music market in 2023, according to the IFPI. Much of that revenue could come from music subscription services’ high-priced, high-value offerings that go beyond the current premium subscription tier.
Physical goods are a proven way to connect with superfans. Market research firm MusicWatch found that 20% of U.S. music fans are superfans for their favorite artists who go to concerts, buy merchandise and albums and would be wiling to spend more for VIP experiences from the artist. At the same time, more superfan sales are coming from the types of direct-to-consumer stores offered by Townsend. In the first half of 2023, U.S. direct-to-consumer sales tracked by Luminate increased 20% year-over-year.