Distribution
Last October, Tyler Brown and Harold Serero launched the independent label Heatwave Records. A few short months later, the company accounted for three of the top five records on Spotify in Nigeria for part of January: Fido’s “Joy Is Coming” and “Awolowo,” along with Kvng Vinci and Zerrdyl’s “Hausapiano” remix.
In the past, ambitious executives might have stayed inside a major label or management company for most of their careers. (Brown used to work as managing director of Syco Music, while Serero was an A&R executive at Ultra Music Publishing.) But more and more, they’re stepping out to start their own operations, pursuing a path that offers not just more freedom, but more potential upside if they catch a hit.
Still, running a record label is not easy, and all these fledgling operations would once have turned to more traditional record companies for the resources, back-end infrastructure, and promotional support that are required for success. These days, however, many of them have decided that partnering with a major is no longer necessary. And recently, a number of them are turning to a relative newcomer, the distribution company Too Lost, for those services.
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“We’ve beaten major labels to deals because of how quickly we move once we’ve discovered something,” Heatwave’s Brown says. “We aim to get that deal done within 24 hours. Too Lost backs us charging after these records and supports us fully — not only from an administrative point of view, but financially and in terms of manpower.”
Co-founded by Greg Hirschhorn, 26, Bjarki Larusson, 29, and Alex Silverstein, 27, Too Lost has grown rapidly since launching publicly at the end of 2020. More than 300,000 labels and artists — including established names like Chief Keef, Lil Tjay, YG and Ye — now distribute music through the platform, and its annualized gross revenue, based on the fourth quarter of 2024, was $56.1 million. The company’s emergence has helped enliven digital distribution, an absolutely necessary but resolutely unglamorous sector of the industry that seemed fairly settled just a few years ago.
At the most basic level, digital distribution companies provide artists with a technology service: the capability to upload their songs to streaming services and other digital stores around the world. Artists already had myriad options before Too Lost made its debut. The DIY side of the market — which is often hobbyists who make music for fun and push it to streamers for a low flat fee — relied on stalwarts like DistroKid and TuneCore. More commercially successful acts often found a home at long-running major-label-owned alternatives like The Orchard or ADA.
The distribution landscape “definitely was saturated,” says Connor Lawrence, COO of indify, a platform which helps pair emerging talent with financial and marketing resources. “But there are so many artists out there, I think if you deliver a good product, people will gravitate towards it.” He likens Too Lost’s appearance and upward trajectory to that of canned water company Liquid Death: There were more than enough water brands around in 2019, but Liquid Death launched and became wildly popular anyway. (Too Lost is an investor in indify.)
Hirschhorn, Too Lost’s CEO, prefers a coffee analogy. “There’s Starbucks, there’s Dunkin’, but you can be Blank Street,” which was established in 2020, he says. “You can still build a great coffee business, even in an ecosystem where there’s already existing competition. You need to execute differently, and you need to really emphasize what makes you stand out.”
Unlike many of its competitors, Too Lost aims to help both the DIY side of the market and successful artists who have achieved name recognition and charting hits. (Most distributors focus on one camp or the other.) Too Lost delivers music to, and provides analytics from, a number of streamers and digital stores that other distributors don’t always reach, including FLO and Melon in South Korea, AWA in Japan, or the exercise company Peloton, providing independent artists with more chances to earn revenue, and more opportunities to learn about their listeners.
Too Lost also has a publishing administration option, so artists don’t have to go to another platform to earn songwriting income; a block list function, which will automatically strike an artist’s track if it’s uploaded to Twitch or SoundCloud by a third party; and a breezy catalog ingestion tool, which lessens the technical headaches caused by moving music from one distributor to another. Artist collaborators can easily create free accounts just to receive royalties from projects they worked on — a featured artist might use this if their duet partner is on Too Lost, for example — even if they distribute elsewhere.
“My idea was always to capture market share by just building a very frictionless product,” Hirschhorn says. “People then build loyalty to something that fundamentally just works.”
Too Lost has started to take deals away from established competitors, and that fact, combined with Hirschhorn’s boyish demeanor — his old Instagram picture was Matthew Broderick in Ferris Bueller’s Day Off — has sparked skepticism in the music industry. “Other distributors aren’t the biggest fans” of Too Lost, Lawrence acknowledges. “That means that they must be doing something right.”
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On a Tuesday in December, Laurent Hubert, CEO of the publishing company Kobalt, stopped by the Too Lost offices in Manhattan to meet Hirschhorn in person for the first time. Too Lost added its publishing administration option at the end of 2022 to provide distribution clients with a way to take home songwriting income. Over the last two quarters, that part of the business has grown from generating $200,000 in net revenue to $1 million.
Too Lost currently partners with BMG to collect publishing. (Coincidentally, while Hubert was visiting the office, BMG sent over cupcakes to celebrate the Too Lost founders’ appearance on Forbes‘ latest 30 Under 30 list.) Still, Hubert was interested in learning more about the new company on the block. The result was a genial CEO sparring session, heavy on economic jargon, that ranged from the cost of office leases in Manhattan to the bloated executive salaries at the major labels to the increasing importance of catalog.
The first time Lawrence got on a Zoom with Hirschhorn, he remembers the Too Lost co-founder “speaking a million miles an hour.” (“I ramble,” Hirschhorn says at one point, chalking up some of his conversational velocity to the military-grade cold brew in the Too Lost office.) While chatting with Hubert in December, Hirschhorn sometimes fired off a new idea before the Kobalt boss finished a thought.
But Hubert held his own. He has a gift for distilling economic wisdom into pithy manifestos — “We must crush the majors on cost of capital!” — and slick catchphrases: “We build businesses on trend lines, not headlines.” “I might have to steal that one,” Hirschhorn says later.In a way, he already has. Because Too Lost was a late entrant in the distribution landscape — TuneCore and DistroKid, for example, are both well over a decade old — Hirschhorn says he was able to survey the available options and see what was working, and what wasn’t. His goal was to build “a DIY distribution service that could also service the upper middle class of artists.”
Historically, that has been tough to achieve. Several distributors abandoned the DIY side of the market — a low-margin volume game that comes with common headaches like streaming fraud and copyright infringement — to focus strictly on higher-performing clients, where they can take a cut of royalty income. And the distributors that do offer DIY services often lose clients once their songs start performing well: Wealthier competitors or major labels lure them away by offering a large advance or more personalized help with their careers.
Part of the reason it’s tough to cater to the DIY artist market and the “upper middle class” simultaneously is that their needs are fundamentally different. Hobbyists just need basic functionality, the ability to get their songs on a streaming service and ensure that royalties from any subsequent streams flow back to their bank account. But the upper middle class might want advance funding for their next album, help protecting a viral song from bad-faith takedowns, access to Spotify’s Discovery Mode program, or marketing money to fan the flames of a TikTok trend emerging in Indonesia, for example.
Nevertheless, Hirschhorn set out to satisfy both constituencies. He started working on Too Lost in earnest during the first months of the pandemic, putting $25,000 of his own money into the company. (Hirschhorn started a record label and sold it to Sony as a teen, leaving him some funds to play with.) “It was the first year I could grow a beard, and I grew a full beard,” he recalls. Subsisting largely on Chinese takeout, he gained weight.
Hirschhorn met Silverstein, who was working at +1 Records, through a mutual friend and convinced him to join up as a co-founder, offering a chance to be his own boss. (For a while, Silverstein slept on the couch in Hirschhorn’s midtown one-bedroom apartment.) Larusson was working as a freelance data scientist before he came aboard as chief technical officer.
While many companies call themselves distributors, they often rely on a third party like FUGA and AudioSalad to provide the digital “pipes” that beam music to streaming services. Choosing to provide services and outsource the distribution work means these outfits have to give FUGA or AudioSalad a cut of their earnings, reducing already thin margins. But this way, anyone can launch a distribution offering quickly and then focus on building a profile in a crowded marketplace — often by signing prominent artists.
For many distributors, “It’s less about, ‘Let’s build this out,’ and more about, ‘Let’s raise a lot of money and go do a lot of deals,’” Hirschhorn says. “I’m a true believer that distribution is a technology business, not a music business.”
As a result, Too Lost “built without dependency on any partners,” guided in part by Larusson, who had a computer science background and worked as an engineer on projects for banks, among other endeavors. The founders even built their own payment processing engine, so they didn’t have to pay fees to third parties for financial transactions.
“Greg was late to the game,” notes Josh Feshbach, who manages the singer Pink Sweat$ and works frequently with Too Lost. “What he did better than anyone was understand how today’s DIY artist operates and how they need to run their business. Then he basically tried to put every piece of functionality they would possibly rely on into one platform” — analytics for more than 15 streaming services, funding for advances, copyright registration, publishing administration, cover song licensing, Spotify Discovery Mode access, royalty splitting, reports on songs’ usage on social media, and more.
And it all comes on the cheap: The basic Too Lost account costs $19.99 a year. (For comparison’s sake, it’s $22.99 on DistroKid and TuneCore, though those companies are still much bigger than Too Lost). A label can sign up for an account for just $35.99 a year.
“You can run your entire business from Too Lost’s dashboard,” Feshbach says.
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Two days after the Kobalt meeting, Hirschhorn rolled into the office fashionably late, a little rough around the edges. While it was an especially festive week for him — an event celebrating Forbes‘ 30 Under 30 inductees, Too Lost’s holiday party — he says he’s usually a homebody: “I put sweatpants on after work. I watch Netflix or answer emails from my couch with a blanket over me.”
But the previous night, Leon Morabia, an attorney at Mark Music & Media Law, had invited Hirschhorn to the firm’s East Coast holiday party, which didn’t start until 10:30 pm. Ron Perry, chairman/CEO of Columbia Records, and Tyler Arnold, president of Mercury Records, had both made appearances. “It was a very impressive group of folks,” Hirschhorn says. “I was like, ‘Well done. I can barely get these guys in a room one on one.’”
Early in 2024, Morabia had reached out to Corey Goldglit, Too Lost’s manager of A&R, to discuss one of his clients, the rapper Ayesha Erotica. “She had a lot of infringement” around her catalog, according to Goldglit — imposters were ripping her songs, uploading them and pocketing royalties from the plays they earned.
Too Lost worked to take down the pirated versions of Erotica’s songs and ensure her royalty income flowed properly to her artist account without even asking for up-front payment. “I’ve never seen it in the music business — someone said, ‘Let me just do this thing for you, and then we’ll take it from there,’” Morabia says. “Usually it’s, ‘Sign your life away here, and then we’ll underdeliver on our promise.’”
Erotica is now earning more than 9 million streams a week on Spotify alone. “She’d never seen a check off her music,” Goldglit says. “Now she’s seeing a lot of money.” She has since signed an official deal with Too Lost, and her team liked the company enough that they recommended it to another act who is now close to signing a deal.
As artists like Ayesha Erotica get bigger, Too Lost’s ability to hold on to them will be a test. But Hirschhorn is confident that, as long as his platform remains versatile, current and easy to use, even artists that choose to go elsewhere will eventually return to the fold.
“You might not always bank with Chase, but you’re not going to get rid of your Chase account,” he reasons. “They might leave to do a project with a major, but they’re going to come back, or they’ll keep their back catalog with us.”
***
Too Lost has been able to win some deals by undercutting competitors, not only on pricing, but on distribution rates — offering to take a 5% cut, for example, when competitors are asking for twice as much. Several executives at rival companies, speaking on the condition of anonymity, believe that this strategy is not sustainable in the long run. And these executives did not understand how Too Lost could be making money.
Feshbach offers a blunt rebuttal. “The people that say there’s no way Too Lost is making any money are just stupid,” he says. “Does [Too Lost] do some deals that I wouldn’t do in order to get people on platform? Sure. But in the long run, they’re weighing these decisions against all of their different revenue streams.”
Too Lost makes money from subscriptions, royalties from distribution deals with bigger clients, and data deals with consumer research companies, according to Hirschhorn. The average customer spends $8 a month between a subscription and other add-on services like cover song licensing, copyright registration and usage discovery, which shows where tracks are being played on various social media services. The company’s adjusted EBITDA for 2024 was $6.5 million.
beatBread, an artist funding platform, has pumped “tens of millions” into Too Lost artists. “I’d like to think that that has at least something to do with their growth,” says Peter Sinclair, the company’s founder, who spent five years at Universal Music Group before founding beatBread. “A lot of guys win deals by promising dream fulfillment,” he continues. “That is expensive. You need fancy offices, a big A&R force. To really focus on the digital nuts and bolts of something [like Too Lost does] can be cheaper. And I think that word is what drives some resentment.”
Too Lost is now in the process of raising $20 million to $40 million, capitalizing on a moment when both investors and major music companies are looking to snap up pieces of the independent distribution market. “I have been working off our balance sheet historically [to do deals], which has a ceiling,” Hirschhorn says. “I’ve had to turn down a lot of amazing opportunities just due to a lack of available capital.” He hopes that raising money will provide extra ammunition to win competitive deals.
Separately, Too Lost might also indirectly benefit from Virgin Music Group’s recent acquisition of Downtown Music Holdings, FUGA’s parent company. Some artists and labels still want to build their businesses outside of the major label systems. If they no longer see FUGA as an option because Virgin is part of Universal Music Group, they will search for other independent distribution companies to partner with, including Too Lost.
The majors “convince artists they’re going to become stars,” Hirschhorn says. But “when they don’t become stars, they still have a catalog making a lot of money every year.”
At that point, he’s making a bet: “Artists are gonna think, I’d rather manage my catalog with those guys over at Too Lost than with the guy who said he’s going to put me on Jimmy Kimmel.”
Reggaetón star Nicky Jam has signed a new global agreement with Virgin Music Group after spending more than a decade with Sony Music Latin.
Under the new agreement, Nicky Jam’s new music will be distributed by Virgin Music Group, which will also administer and supervise Nicky Jam’s catalog for YouTube and will work some material in digital platforms in different territories.
Nicky Jam (born Nick Rivera Camerino) disclosed the terms and impetus behind the deal during an exclusive interview with Billboard in Miami.
“I went with my gut,” he tells Billboard, noting that his contract with Sony had been up and he had met with several labels. “I thought it was the best thing to do. I have too much respect for Afo [Verde, chairman of Sony Music Latin Iberia] and my Sony family. I owe a lot to them and I love them very much. It’s just that sometimes you feel you have to move. I’m very spontaneous and that’s just the way I am. I could say I’m a bohemian. I take my luggage and I go wherever I have to go.”
In this case, Nicky Jam decided to go with a company that is giving him broad latitude. He’ll get to retain ownership of his masters, and will also have wide latitude in determining when he releases his music.
“It’s a distribution contract, but under that contract I can come out with music whenever I want. They are not going to mess with my creative part and that’s beautiful,” says Jam.
Nicky Jam’s new label deal coincides with a series of major changes in both his personal and professional life. Last year, he got married (to 22-yer-old model Juana Valentina Varón], split with his longtime manager Juan Diego Medina and spoke openly about his problems with alcohol and quitting drinking.
From left: Larry Gonzalez, David Daza, Michael Cantor (VMG SVP, Business Affairs and Development), Chi Orjiakor (VMG VP, Strategy), Victor Gonzalez (VMG, President of Latin America and Iberia), Nicky Jam (Artist), and Armando Rodriguez (VMG SVP/General Manager of Latin U.S.).
Courtesy of Nicky Jam
Now, a fit and trim Nicky Jam is readying to release new music that he says reflects his current, positive state of mind. “If you listen to my last album, it was called Insomnio. It was mostly what I was going through: Drinking, partying, it was all dark,” says the singer. “This is the new Nicky Jam,” he adds.
“Nicky has been a true pioneer in Latin music,” says Victor González, president of Virgin Music Group for Latin America and the Iberian Peninsula. “Having him choose Virgin Music Group for this new chapter of his career is incredibly rewarding for me and our entire team.”
Armando Rodríguez, general manager of Virgin Music Group for the U.S. Latin market adds: “Nicky is creating incredible music, and we are excited to work alongside him—not only on his upcoming releases but also in developing a strategic approach for his entire catalog.”
In the past couple of years, Virgin has notably expanded its Latin footprint, signing major names in Mexican music like Carín León, Pepe Aguilar, Angela Aguilar and Espinoza Paz. In the urban realm, Nicky Jam is their biggest get. The Puerto Rican star brings a legacy of hits, including the “El Perdón,” the 2015 smash alongside Enrique Iglesias that spent 30 weeks at No. 1 on Billboard’s Hot Latin Songs chart. All told, Nicky has charted nine songs on the Billboard Hot 100 and 58 on Billboard’s Hot Latin Songs chart, including five Number 1s. This week, he ranked at Nol 162 in streams globally on Spotify, a testament to his lasting appeal.
“This agreement with Virgin Music Group marks a new chapter in my artistic journey. I have always believed in the importance of evolution and adaptation, and I am confident that, together with Virgin Music Group, we will achieve incredible things,” says Nicky Jam.
CD Baby, one of the biggest do-it-yourself distribution services in the industry, laid off members of its creator services team last week, a source close to the matter tells Billboard. Responsible for providing customer support, this team is now being “consolidat[ed]” in an effort to “re-allocat[e] resources” within the company, says a spokesperson for CD Baby.
News of CD Baby’s employment cuts echo the recent news that Distrokid was placing 37 union employees responsible for quality control and customer service on “administrative leave.” These roles were to be outsourced to contractors, located internationally. Its other competitor, TuneCore, was recently sued by UMG in a landmark $500 million lawsuit for allegedly allowing its users to distribute songs that clearly infringed on UMG’s copyrights to streaming services.
Over the last year or so, a number of music businesses, even beyond the realm of DIY distribution, have restructured their companies, leaving hundreds, if not thousands, of music professionals on the search for new jobs. This year alone, UMG completely restructured its recorded music division, laying off hundreds of employees. WMG followed suit with similar restructuring of Atlantic Music Group and layoffs. WMG also shut down LEVEL, one of its distributors. In late 2023, BMG laid off “dozens” in its film/tv, theatrical and international marketing departments.
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A spokesperson for CD Baby replied to Billboard’s request for comment, saying: “In an effort to support the changing needs of artists and the industry, we are consolidating certain CD Baby functions within Downtown and re-allocating resources towards long-term growth opportunities. Unfortunately, this has resulted in the elimination of certain roles and positions at CD Baby. We want to recognize the achievements of these staff members during their tenure with CD Baby. Their dedication to innovation helped CD Baby to become a globally recognized leader in the distribution space. Going forward, we will stay committed to this music-first and pioneering approach, building the services that benefit artists today and in the future.”
CD Baby has helped independent musicians get their music out since its founding in 1998. In the intervening years, it has become one of the pioneers and leaders of the DIY distributor market, democratizing the music business and opening it up to musicians of all backgrounds. CD Baby, and the other services owned by its parent company AVL Digital Group, sold to Downtown Music Holdings in 2021 for a reported $200 million dollars. At the time, CD Baby’s then-CEO Tracy Maddux said of the deal: “This transaction will allow us to take the services we offer the independent music community to the next level.”
Attorneys in the music industry are a competitive bunch. They vie for high-performing clients and duel with each other over deal points; battle is in their blood.
Perhaps unexpectedly, a number of these attorneys have joined forces recently, unified by a common goal: Getting their producer clients paid for their contributions to Vultures 1, the first of two 2024 albums from Ye (formerly known as Kanye West) and Ty Dolla $ign.
Since its February release, Vultures 1 has earned more than 817,000 album equivalent units in the U.S., according to Luminate — including over 1 billion on-demand streams — and a Grammy nomination for the hit “Carnival.” But more than 10 producers on the album do not have signed agreements in place with Ye, meaning they are unable to collect fees, as well as potential producer royalties and publishing income, for their work. And several of the producers who worked on Vultures 2, which came out in August, share the same unpaid fate as their colleagues who worked on the first installment.
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“We have clients who’ve produced music on the Vultures album(s) and have still not been paid for their services even though both albums have been released,” Bob Celestin, a music attorney, told Billboard via email. “Presently, we have no idea when payment will be made, which is so unfortunate and unfair. You would think Ye would be more sensitive to this issue because he is a producer.”
“We’ve had trouble receiving a producer agreement from Ye,” adds Brittney Trigg, another lawyer who represents a producer on Vultures 1. A representative for the star did not respond to a request for comment.
This problem continues to plague the music industry at its highest levels. Jason Berger, a partner at Lewis Brisbois, estimates that in “nine out of 10 deals, the producer has not been paid the day the music comes out.” And due to the volume of new releases, the high number of collaborators on some albums, shrinking major-label staffs, and the mercurial nature of superstars — who have to sign off on producer agreements even if they are running around the world on tour — Celestin says that producers often don’t get paid for a year or more after albums come out.
“The more convoluted the system gets, the less money comes down to the people that are actually making the product,” says Nima Nasseri, who manages the producer Hit-Boy. (Hit-Boy was not involved with Vultures 1.) “Why do people have to fight to get paid?” Nasseri asks.
In Ye’s case, five lawyers with clients on Vultures 1 say that getting them compensated for their work has been even more challenging than usual.
The superstar has cycled through at least two attorneys to help with clearances and is now relying on a third, the lawyers says. Longtime Ye associate 88-Keys was initially involved in negotiations with producers; more recently, Matt Geffen from the Revels Group has taken on a prominent role. (Geffen did not respond to a request for comment.) On top of that, Ye also changed distributors, leaving Label Engine, which is owned by Create Music Group, in favor of Too Lost. (Vultures 1 and 2 were released independently.)
In a typical distribution deal, artists are responsible for clearing songs and disbursing royalties to collaborators. Distribution companies are usually shielded from legal liability, though many offer tools to help streamline the royalty splitting process once clearances are completed.
Still, earlier this year, attorneys for a number of producers on Vultures 1 banded together, coordinating their efforts via a group chat, to draft threatening legal letters to send to Create, since no royalties were flowing to their clients. They hoped that, in a relatively small industry that places a premium on maintaining good relationships, their collective weight might convince Create to try to help them. (A representative for Create declined to comment.) Before the messages could be sent, however, Ye switched distributors.
The producers on Vultures 1 may find cold comfort in the fact that even Atlantic Records — the label to which Ty Dolla $ign is signed — is having a tough time getting paid, according to a source close to the situation. (West alluded to this in an Instagram post in September.) The source says Too Lost is now holding money for Atlantic and other rights holders and working with Ye’s team to clear the records accordingly. Representatives for both Atlantic and Too Lost declined to comment.
The challenges that producers face in getting paid in a timely manner seem all but certain to persist. “The industry’s ‘back of house’ infrastructure really isn’t designed to handle dozens of producers and other collaborators on a single project,” says Tim Kappel, an entertainment attorney. “There are inevitably going to be delays even when everyone is operating in good faith. Throw in a few bad actors here and there, and it’s easy to understand why producers are feeling aggrieved.”
The sad truth is that producers can’t do much to redress those grievances. They have very little leverage once they have turned over the files containing the music that will appear on an artist’s album.
At this point, “we have no recourse besides to try to sue [Ye],” says one attorney with a client on Vultures 1. “But that’s costly.” And, as another music lawyer points out, “Legal claims against Ye don’t really seem to go anywhere.”
In situations where producers are frustrated because they haven’t been paid for their work, their representatives often “threaten to file a takedown notice on the recording,” according to Kappel. “But this is inappropriate since the DMCA takedown process can only be used to report copyright infringements,” he continues. “There is simply no cause of action for infringement among co-authors.” There have been several attempts to take down tracks on Vultures 1, all unsuccessful, according to multiple lawyers with knowledge of the back-and-forth behind the scenes.
Some producers who contributed to the album did receive deal offers from Ye’s team this fall. However, those offers were buyouts, according to multiple attorneys, meaning the producer would accept a flat fee and not receive any royalties if the album recouped its costs. Recoupment may be out of reach — as Ty Dolla $ign told Billboard in June, Vultures 1 is “a very expensive album” recorded between Las Vegas, Miami, Los Angeles, Japan, Italy, Saudi Arabia and Dubai. Still, buying out producers in this fashion is atypical, and multiple lawyers for Vultures 1 producers rejected the offers.
Sources close to Ye now believe he is planning to release another album soon, meaning that the star could put out three uncleared projects in a single year. “It’s a mess,” says one attorney involved with Vultures 1 clearances. “I just keep going back to that word.”
Universal Music Group’s Virgin Music Group struck a global distribution and marketing partnership with Brooklyn-born independent label Partisan Records, which is home to IDLES, PJ Harvey, Blondshell, Cigarettes After Sex, Laura Marling, Ezra Collective and more. Partisan also includes the imprints Desert Daze Sound and section1. The deal follows Universal’s acquisition of Partisan’s longtime partners [PIAS] and [Integral] last month. “The combination of the Virgin and [Integral] teams allows for Partisan to marry the best of the [PIAS] and [Integral] teams that helped get us here with the extra resources of Virgin required to meet our ambition to be the most trusted music company for artists of all genres, worldwide, said Partisan COO Zena White in a statement.
SoundExchange and the South African Music Performance Rights Association (SAMPRA) reached a reciprocal agreement that will see U.S. and South African performers paid royalties for the use of their recordings in the U.S. and South Africa, respectively. This will be the first time U.S. performers are paid neighboring rights when their music is used in South Africa. “This agreement is a result of SoundExchange’s efforts to ensure American creators are treated the same as their South African counterparts in the country,” states a press release on the deal. The multi-lateral agreement, which also includes the AFM & SAG-AFTRA Intellectual Property Rights Distribution Fund, is retroactive to the 2022 distribution period and will also benefit non-featured artists including studio musicians and backup singers. Those non-featured artists will also see South African royalties deposited into the fund, which is administered by the American Federation of Musicians (AFM) and SAG-AFTRA. “This is similar to how, in its U.S. collections, SoundExchange distributes 5% of collected royalties to non-featured artists through the Intellectual Property Rights Distribution Fund, 45% to featured artists, and 50% to rights owners,” the release adds.
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Live Nation acquired a majority stake in Lisbon, Portugal’s 20,000-capacity MEO Arena, marking a major investment for the touring giant in the country. First opened in 1998, MEO Arena will soon be renovated to upgrade premium seating, skyboxes, dressing rooms and concessions. Live Nation also plans to build on the arena’s sustainability efforts to focus on reducing its environmental impact. Daily operations at MEO Arena will remain under its current leadership team. The acquisition follows formal approval by the Portuguese competition authority and is subject to closing conditions. The agreement is expected to be finalized late this year or early next.
Warner Music Group’s merchandise and fan experience division WMX has signed on as the official merch partner for Oasis‘ upcoming comeback tour, Oasis Live 25. The merch offering for the show will include pop-up stores, fan experiences, exclusive brand collaborations and event merchandise. The band is slated to hit stadiums in the U.K., Ireland, North Americ, South America and Australia next year.
Create Music Group acquired Manchester, England-based record label and music publisher Ostereo, which has worked with artists including Joel Corry, J.Fla and Shania Yan. As part of the agreement, Ostereo founder Howard Murphy will exit the company to focus on a new venture, leaving his longtime partners, Ramin Bostan and Nick Kirby, to oversee day-to-day operations.
Dallas-based Regional Mexican label Elegante Records signed a global distribution pact with Warner Music Group’s ADA. The Elegante roster includes Conjunto Rienda Real, La Pócima Norteña and Distinto Norte.
The American Association of Independent Music (A2IM) partnered with artist, songwriter, indie label and distributor funding platform beatBread, effectively providing A2IM members with beatBread’s data-driven funding solutions that enable artist or catalog acquisitions, new release funding and support for general operations and growth. Other benefits include free distribution via Too Lost, free OpenPlay subscriptions and discretionary A&R funds on top of any advances taken (up to 20% of the advanced amount).
Downtown-owned business-to-business distributor FUGA signed a partnership with L.A.-based independent label Mind of a Genius Records (MOAG). FUGA will provide MOAG with its suite of comprehensive services, including digital and physical distribution, synch and licensing opportunities and advanced data analytics. MOAG’s roster includes Mindchatter, Kwaye, Karnaval Blues, Peter $un, and Jordan Astra alongside its frontline releases.
Independent distributor IDOL struck a global partnership with London-based label Full Time Hobby and its alt-rock imprint Hassle Records. IDOL will handle global distribution, marketing and audience development for both labels’ frontline and catalog releases, excluding Germany, Austria and Switzerland. Over 21 years, Full Time Hobby has developed artists including GHOSTWOMAN, Michael Nau, Squirrel Flower, The Saxophones and Casey. Under the deal, IDOL will service new Full Time Hobby releases from artists including Bananagun, Canty and Tunng and new Hassle Records releases from BRUTUS, Dead Pioneers and Jools.
“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.”