Music Distribution: Upfront Revenue vs. Revenue Sharing

Once you’ve finished creating your music, its time to develop a strategy for how you want to release it. With so many digital distributors out, it picking one can be a difficult choice, something made more complicated by the decision of whether you want to pay an upfront fee, or allow the distributor to share your revenue.

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Guest post from AWAL

After pushing your newest song past the finish line, it’s time for strategic action. Unleashing your latest and greatest onto the masses takes a release partner, and selecting the right one requires research.

Right off the bat, you might notice a major difference in fee structure among digital distributors. Some require a flat, upfront fee to upload and distribute music, while others “share in revenue,” meaning they take a percentage of the income your music generates via their service.

Making the choice between the two is something artists and teams should consider carefully. Though an upfront-fee-based model seems straightforward and predictable (you know how much you’re paying and for what), a revenue share model incentivizes partnership and often provides an opportunity to unlock additional support down the line.

“At the early stage of a career,” says Matt Riley, AWAL’s VP, A&R, “The choice you make may not have huge consequences. It’s when things grow that the rev share model really takes over with artists needing more support, advances, marketing, and services.” 

The appeal of an upfront fee is no mystery: Artists typically retain all revenue once they pay a preset amount at the start. After an artist pays that fee and the distributor delivers your work to streaming services, that’s usually where that partner’s obligation ends.

If you’re solely looking for a provider to deliver your music and cover the basics, this model makes sense. Costs start to accumulate, however, once you start to require ancillary servicing—preorders, instant grats, pre-saves, Content ID, UPC and ISRC assignments, etc.

Conversely, other music companies, AWAL included, receive a percentage cut of an artist’s revenues when those creators find success. As Paul Hitchman, President of AWAL, puts it, “If our artist makes nothing, we make nothing.” The incentive structure encourages true partnership and support based on aligned interests that lead to additional services, powerful tech tools, etc.

That relationship intrinsically drives mutually beneficial growth.

“It doesn’t make any sense to take an artist on a revenue share and then not try your hardest to make sure [their music] gets streamed, downloaded, and sold as much as possible,” says Silvia Montello, AWAL’s Senior Vice President of Operations.

AWAL is built to simplify distribution and then provide additional tools, teams and services when it comes time for artists to look beyond digital content delivery. In other words, we’re here to pay attention and amplify traction wherever possible.

“We’re helping develop artists that can grow,” says Sarah Landy, AWAL’s Senior Vice President of Client Development, “Therefore, our business will flourish if the artist flourishes. It keeps us motivated to build and enhance the way we work with partners because the more opportunities we get for our artists, the more royalties they are going to be seeing. We’re not making money unless that’s happening for them.”

If you’re struggling to select one model over the other, one or two key questions might illuminate answers. Hitchman suggests the following: “Will the partner add more value than their commission rate? If so, then clearly you make more money with that partner.”

Less tangible yet crucial to consider is perception’s role in DSP support. Some streaming services pay mind to who an artist associates with when making editorial decisions. The vetted roster of a company like AWAL, with clients selected based on present quality and future potential, creates trust with the Spotifys and Apple Musics of the world.  

If, at the end of the day, the choice between fee structures is purely based on financial reasoning, consider what you’ll lose by not sharing in revenue versus what you might potentially gain from an upfront-fee deal. In many cases, the revenue you share with your distribution partner may be more than outweighed by the value of the services you’re receiving in exchange for a percentage.

“We have built our service to exceed our cut of the revenues and increase net profits for our artist clients,” says Landy. “Whether it’s the tools, the educational materials or the playlist promotion proposition, we feel that that will end up impacting revenues more than our 15 percent share of their [income].”

Ultimately, the decision comes down to finding and defining value. Doing so through the lens of short-term gains versus long-term investments helps clarify which distribution model benefits your business and your art best.