{"id":107877,"date":"2024-10-25T09:08:28","date_gmt":"2024-10-25T13:08:28","guid":{"rendered":"https:\/\/www.cyberlego.com\/web\/2024\/10\/25\/distribution-deal-prices-are-soaring-as-competition-for-artists-heats-up-2\/"},"modified":"2024-10-25T09:08:28","modified_gmt":"2024-10-25T13:08:28","slug":"distribution-deal-prices-are-soaring-as-competition-for-artists-heats-up-2","status":"publish","type":"post","link":"https:\/\/www.cyberlego.com\/web\/2024\/10\/25\/distribution-deal-prices-are-soaring-as-competition-for-artists-heats-up-2\/","title":{"rendered":"Distribution Deal Prices Are Soaring as Competition for Artists Heats\u00a0Up"},"content":{"rendered":"

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\n\tThe pop duo LANY<\/a> 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. \u201cAutonomy is the future,\u201d manager Rupert Lincoln<\/strong> told Billboard<\/em><\/a>. LANY ultimately chose to work with Stem<\/a>, a distribution company.\u00a0<\/p>\n

\n\tFor decades, major labels demanded long-term contracts, obtaining multiple albums from the acts they signed, and made most of the money from those acts\u2019 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 \u2014 short-term agreements where they retain ownership of their work and keep the majority of the income their music generates.\u00a0<\/p>\n

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\t\t\t\t\t\t\"Market,<\/p><\/div>\n<\/p><\/div>\n<\/p><\/div>\n

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\t\t\t\t\tOn the Money: Why DIY Music Distributors Are the Hot New Target for\u00a0Investors\t\t<\/p>\n<\/h3><\/div>\n

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\n\tAs 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<\/em>. Stem \u201chas lost numerous deals historically as it wasn\u2019t able to be competitive with advances,\u201d the deck states.\u00a0<\/p>\n

\n\tOther companies have also seen prices rise. \u201cIt is a much more competitive market\u201d than it used to be, says Jorge Brea<\/strong>, founder and CEO of the distributor Symphonic. \u201cAll distros have to be well-funded to ensure they can put up money for deals.\u201d<\/p>\n

\n\tHistorically, digital distributors didn\u2019t 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.<\/p>\n

\n\tBut ironically, as the distribution landscape has become sexier \u2014 \u201cThere have been more entrants,\u201d Brea notes \u2014 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.\u00a0<\/p>\n

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\t\t\t\t\t\t\"Band\"<\/p><\/div>\n<\/p><\/div>\n<\/p><\/div>\n

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\t\t\t\t\tWhat Happens When an Artist Gets Dropped From Their Record Label? It\u2019s\u00a0Complicated.\t\t<\/p>\n<\/h3><\/div>\n

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\n\tConcerns about up-front payments and services feature prominently in Stem\u2019s 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\u2019t meet an artist\u2019s ideal \u201ccheck size,\u201d and $26.4 million in situations where it couldn\u2019t compete on \u201ccheck size + other services (Intn\u2019l, radio).\u201d\u00a0<\/p>\n

\n\tBy Stem\u2019s 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.) \u201cWe\u2019re tracking all the lost deals that we were actually in the conversation on,\u201d says Kristin Graziani<\/strong>, Stem\u2019s president.<\/p>\n

\n\tThe 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\u2019t accurate.)\u00a0In both these cases, Stem couldn\u2019t match the final check, though the presentation doesn\u2019t say whether those artists also wanted services that the company couldn\u2019t provide \u2014 or picked a rival distribution outfit for another reason altogether. <\/p>\n

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\t\t\t\t\t\t\"Taylor<\/p><\/div>\n<\/p><\/div>\n<\/p><\/div>\n

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\t\t\t\t\tMore Hits Debut in the Hot 100\u2019s Top 10, But They Also Burn Out More\u00a0Quickly\t\t<\/p>\n<\/h3><\/div>\n

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\n\tIn July 2023, Stem announced<\/a> that it had set up a $250 million credit facility from Victory Park Capital to provide artists with advances. But \u201csome 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,\u201d says Stem CEO Milana Rabkin-Lewis<\/strong>. \u201cThere are many other types of capital out there that have less restrictions,\u201d she continues, \u201cand those are the conversations we\u2019re having\u201d now.<\/p>\n

\n\tOther companies are doing the same \u2014 Billboard <\/em>reported<\/a> 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<\/strong>, clinical assistant professor at the University of Michigan Ross School of Business.\u00a0<\/p>\n

\n\tStem\u2019s adjusted EBITDA \u2014 earnings before interest, taxes, depreciation, and amortization \u2014 was -$5.2 million in 2022 and -$4 million in 2023, according to the company\u2019s presentation; it\u2019s projected to be -$3.8 million in 2024. In Gordon\u2019s view, \u201cinvestors are likely to take three consecutive years of EBITDA that is negative, even after management adjusts it, as a sign of problems.\u201d<\/p>\n

\n\tRabkin-Lewis says that, although \u201cthe distribution business is profitable, the overall Stem company is not because we\u2019ve invested a lot into Tone<\/a>, which is a newer product.\u201d (The adjusted EBITDA for the distribution part of Stem\u2019s business was -$1.3 million in 2022 and $400,000 in 2023, according to the deck.) \u201cWe\u2019ve been prioritizing gross revenue growth,\u201d 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.\u00a0<\/p>\n

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\t\t\t\t\t\t\"Travis<\/p><\/div>\n<\/p><\/div>\n<\/p><\/div>\n

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\t\t\t\t\tHow Digital Album Sales Are Affecting the Race for No. 1 on the\u00a0Charts\t\t<\/p>\n<\/h3><\/div>\n

\t\t<\/a><\/p>\n<\/div><\/div>\n

\n\tMeanwhile, distribution deals for proven artists continue to get more expensive. \u201cA lot of companies are throwing out cash-heavy distro deals that we have never seen before,\u201d says Karl Fowlkes<\/strong>, an entertainment attorney. At Symphonic, Brea has watched some of his competitors enter into agreements he believes are \u201cridiculous.\u201d \u201cWe\u2019re aggressive when going after deals,\u201d he adds, \u201cbut not to the point where it\u2019s not going to make [economic] sense.\u201d<\/p>\n

\n\tDistributors 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.\u00a0<\/p>\n

\n\tOn 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. \u201cWe feel like we\u2019re finally at a point, from a services perspective, where we can demand longer licenses,\u201d 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.\u00a0<\/p>\n

\n\tThis points to another lane for competition \u2014 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.\u00a0<\/p>\n

\n\t\u201cThe supply of distribution is now almost infinite \u2014 you can get it anywhere,\u201d says Emmanuel Zunz<\/strong>, founder of the independent label OneRPM. \u201cIn order to make money in distribution, you have to create value elsewhere. If you\u2019re unable to create additional value, you get stuck.\u201d<\/p>\n<\/div>\n<\/div>\n

Aller \u00e0 la source<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

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. \u201cAutonomy is the future,\u201d manager Rupert Lincoln told Billboard. LANY ultimately chose to work with […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","footnotes":""},"categories":[17],"tags":[],"class_list":["post-107877","post","type-post","status-publish","format-standard","hentry","category-musique","et-doesnt-have-format-content","et_post_format-et-post-format-standard"],"_links":{"self":[{"href":"https:\/\/www.cyberlego.com\/web\/wp-json\/wp\/v2\/posts\/107877","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.cyberlego.com\/web\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.cyberlego.com\/web\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.cyberlego.com\/web\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.cyberlego.com\/web\/wp-json\/wp\/v2\/comments?post=107877"}],"version-history":[{"count":0,"href":"https:\/\/www.cyberlego.com\/web\/wp-json\/wp\/v2\/posts\/107877\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.cyberlego.com\/web\/wp-json\/wp\/v2\/media?parent=107877"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.cyberlego.com\/web\/wp-json\/wp\/v2\/categories?post=107877"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.cyberlego.com\/web\/wp-json\/wp\/v2\/tags?post=107877"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}