‘A Fundamental Change’: How Major Labels Learned to Stop Worrying and Love Distro Deals

Major labels and distribution companies were once distinct entities with different ways of doing business. In today’s music industry, however, “distributors are starting to look like labels, and labels are starting to look like distributors,” says entertainment attorney David Fritz. 

Each of the major label groups has its own distribution arm: Sony relies on The Orchard, Universal leans on Virgin, Warner has ADA. Confusingly, at varying points in the last five years, many of the frontline labels have launched distribution offerings too, whether that’s Republic (Imperial), 300 (Sparta), Alamo (which is affiliated with both Santa Anna and another distribution company, Foundation), or Interscope. Sony also has AWAL, which focuses more on nurturing individual artists, whereas The Orchard usually looks to sign and support labels. These companies are all in competition with each other — and often with the various frontline labels as well. 

For Kirk Harding, a veteran artist manager and co-owner of the Bad Habit label, the meaning of all this activity is clear. “Everyone knows what the future is,” he says. “The major labels are going to be distribution companies with really big catalogs.”

This would have been hard to fathom just five years ago. “It’s a fundamental change in how we’re operating,” acknowledges one major label A&R executive. 

Frontline major label deals typically come with budgets — for recording, marketing and more — along with access to teams of people who can theoretically help artists find new songwriting partners, polish their TikTok clips and find money to support a tour. Since the label invests resources and services in the artists, it takes a significant chunk of the money that they earn, as well as rights to the songs they make. 

Distribution deals are often the polar opposite. They typically come with far less money up front, few, if any, services, and significantly shorter terms. Since the company offering the deal doesn’t commit much, it doesn’t take much. 

The frontline major labels were historically opposed to offering distribution agreements precisely because they tend to be short-term deals where the majority of the money made goes to the artist. That severely limits the upside for the record companies, which built their multi-billion-dollar valuations over decades via long-term agreements — often five albums or more — in which they obtained artists’ recordings in perpetuity. Each major label group maintained a distribution arm for acts that insisted on a different arrangement, or for independent labels that needed help to get to market, but the frontline labels almost always signed the stars, and were thus seen as the real engines of growth. 

Now, thanks to streaming, social media and advances in music production technology, artists can record songs, distribute them and amass fans on their own, meaning they have the luxury of turning down unappealing deals. And it turns out that, given the choice, many artists want to maintain flexibility — and make the majority of the money from their art. “Every artist we talk to is asking for a distro situation,” the A&R says. 

This puts major labels in a bind. The long duration of traditional recording agreements allowed them to build up massive catalogs. This in turn ensured they had leverage in negotiations with streaming platforms — and protected them as catalog listening grew in the streaming era. The rise of short-term distribution deals, then, seems likely to erode the size of their catalogs over time even quicker than 35-year termination rights, meaning major labels are effectively mortgaging their future for short-term gains.

But like politicians looking to win re-election, they may feel they have no other choice. Even executives who believe distribution deals don’t make sense for them say they’re now feeling pressured to offer them anyway. “Majors have had to adapt and start offering different types of agreements just to even be in the ring on some of these potential signings,” says Gandhar Savur, a music lawyer. 

Not only that — the major labels have been losing market share to an array of new digital distributors that undercut them by allowing artists to upload songs to streaming platforms for a negligible fee or small percentage of royalties. This forces the majors to play defense. “They see some indie artists that come out of distribution systems and think, ‘I want that too,'” says Joie Manda, a former major label executive who launched Encore Recordings in 2021. 

Offering distribution deals isn’t just about playing defense, though. They can help the majors limit risk by signing artists earlier, when they have smaller fan bases, which makes deals cheaper. Artists who do well and need additional support can later be “upstreamed” to a more traditional frontline arrangement. (And if the majors want to sign a viral act that lucked into one big song but has little other music of promise, a distribution deal may be the best way to do that.) 

For artists, all the major label forays into distribution mean they potentially have a lot of different options at their disposal. “Artists want choices; they want the option for high service or low service, long term or short term,” says Mike Caren, founder of Artist Partner Group. “The choices are out there, and some companies want to provide all the choices under a single banner.” 

Making the right choice remains a challenge, however. 

A distribution deal “is not a label deal,” Harding emphasizes — even if it’s with a label. “All you can expect them to do is distribute. If you want them to do more, you have to pay more.”

Young artists in particular may not understand these distinctions, or know which option is better for them. Caren cautions that distribution agreements “can become traps where confusing pitches lead to false promises of short term with high service,” he says, adding, “This can be an unsustainable and dangerous territory that may lead to a lot of frustrated artists.” 

Distribution offers will often come with one advance to cover all of an artist’s needs, according to Matt Buser, a music lawyer. “It forces artists to budget out all these different buckets of money,” he explains. “It gives them a lot of autonomy. But if you don’t know what you’re doing, and you blow all the money, and you have to ask for more, the record company gets more rights, or a longer deal, or something in exchange.”

It’s not uncommon for artists to be messaged distribution agreements via Instagram the moment they start to show growth — some companies don’t even pretend to want to meet the acts they sign. There are distributors who “play moneyball where they send very low-risk, low-effort offers to kids at scale,” says Eric Parker, who manages the rising U.K. act Myles Smith, among others. “I’ve seen one distributor send the exact same agreement to over 10 different kids.” 

Parker calls this approach “race to the bottom A&R-ing in the age of data analytics.” It’s like using artists as lottery tickets — buy as many as possible as cheaply as possible, and pray one gets lucky. 

Manda also believes some artists “are not getting the right guidance” when they’re evaluating different offers from labels and distributors. “Artists need to spend time with, and talk with, the people they might partner with,” he says. 

He has a dim view of the major labels’ decision to throw themselves headlong into distribution. The majors “need to lean more into their superpower, which is signing, developing and breaking superstars over the long term,” Manda says. It’s notable that, even as the majors expand their distribution webs, most of the recent breakout artists this year — Sabrina Carpenter, Chappell Roan, Benson Boone, Teddy Swims — have come via traditional label deals. 

Despite this, the major label scramble to get artists into distribution deals continues. “Everyone is competing now in the space of, ‘It’s no longer wait and see what this becomes — stick it into distribution,'” says one senior executive. “Every artist has two or three distro offers after one video.”