Introduction

Historically, music distributors have been a vital conduit in getting physical and digital music product from record labels’ creative hands into the brick-and-mortar and virtual retail environment. As the marketplace shifts to a digital environment, distribution companies are re-evaluating their value in the food chain and developing sales models and adding services that reflect direct sales opportunities to music consumers. By the end of 2014, more than half of all albums purchased in the U.S. were either a digital transaction or were purchased at “non-traditional” outlets, which includes digital services, Internet retailers, mail order, at “non-traditional stores” or at a concert (Nielsen SoundScan, 2008). Vinyl record sales were up 52% to 9.2 million but digital song sales fell by 250 million most likely due to the 54% increase in song streams (Smith, 2015). Whatever the sales channel, distribution companies think of themselves as extensions of the record labels that they represent.

Prior to the current business model, most individual records labels hired their own sales and distribution teams, with sales representatives calling on individual stores to sell music. It took many reps to cover retail, as Figure 15.1 shows. This model shows nine points of contact, where each label meets with each retailer. As retailers became chains, and as economics of the business evolved, record labels combined sales and distribution forces to take advantage of economies of scale, which eventually evolved into the current business model.

Figure 15.1 Direct Contact Concept

Figure 15.2 includes the distribution function and shows the points of contact reduced to six. In today’s business model, record label sales executives communicate with distribution as their primary conduit to the marketplace, but labels also have ongoing relationships with retailers. Depending on the importance of the retailer, the label rep will often visit the retailer with their distribution partner so that significant releases and marketing plans can be communicated directly from the label to the retailer. And as deals are struck, both orders and marketing plans can then be implemented by the distributor.

Figure 15.2

The Big 3 and More

Within the last 15 years, the Big 6 have consolidated into the Big 3, reducing their number of employees to reflect the ever-decreasing size of the music sales pie. But the mergers began prior to the explosion of file sharing with the combination of Universal with Polygram in 1999, the same year as the emergence of Napster^TM. This merger created Universal Music & Video Distribution (UMVD), now Universal Music Group Distribution (UMGD) who has maintained their market share position at #1 since inception. In 2013, most of EMI’s stable of labels and artist were added to the Universal fold, increasing the strength of this company’s musical power in the marketplace.

Another recent combination of conglomerates include the blending of Sony and BMG in 2004, who consolidated their various profit centers as well as their distribution workforces but maintained much of the integrity of their imprints. They, too, gained market share, garnering the #2 position simply by merging. In 2008, Sony purchased the remaining 50% stake held by BMG in the Sony/BMG merger. The merged companies, now wholly owned by Sony, were renamed Sony Music Entertainment Inc. (SMEI), and includes all the labels that were Sony, as well as BMG.

WEA maintains a separate distribution function as part of Warner Music Group. This company is positioned as #3 of the major music conglomerates.

As noted in the market share data, independent labels continue to be a force within the music business and in 2014, independents held an approximate 17.5% market share. With the burgeoning digital storefronts, any label can now have an instant “sales” point in which to connect with customers directly, but to fulfill physical product, independent labels need to reach the brick-and-mortar outlets using traditional methods. All three of the major distributors have created an “independent” arm within their distribution division. By contracting this function of distribution to independent labels, these “independent distributors” can assist the independent label in placing their music in the mainstream marketplace. But there are many true independent distributors that are not tied to the Big 3 that function similarly.

Vertical Integration

The Big 3 music companies share profit centers that are vertically integrated (combine two or more stages of production), creating efficiencies in producing product for the marketplace. To take full advantage of being vertically integrated, labels looking for songs would tap their “owned” publishing company. (Each of the major entertainment conglomerates has a publishing company. If they only recorded songs that were published by their sister company, more of the money would stay “in the family.”) Once recorded, the records would be manufactured at an out-sourced pressing plant (Sony is the only conglomerate that still owns CD manufacturing plants). In-turn, the pressed CDs would then be sold and distributed into retail, using the conduit of the distribution function located within the family. (Figures 15.3 and 15.4).

Figure 15.3 Vertical Integration of Music Companies.

Figure 15.4 Distribution Pathways

In addition to the Big 3 companies, there are many independent music distributors that are contracted by independent labels to do the same job. Many of these independent distributors have developed a niche in marketing unique and diverse products. Ideally, the distribution function is not only to place music into retailers, but also to assist in the sell-through of the product throughout its lifecycle.

Music Supply to Retailers

Once in the distributor’s hands, music is then marketed and sold into retail. Varying retailers acquire their music from different sources. Most mass merchants like Walmart are serviced by rack jobbers, who maintain the store’s music department including inventory management, as well as marketing of music to consumers. Retail chain stores like FYE are usually their own buying entities, with company-managed purchasing offices and distribution centers (DCs). Many independent music stores like Waterloo Records may not be large enough to open an account directly with the many distributors, but instead work from a one-stop’s inventory as if it were their own. (One-stops are wholesalers who carry releases by a variety of labels for smaller retailers who, for one reason or another, do not deal directly with the major distributors). Retail chain stores and mass merchants will, on occasion, use one-stops to do “fill-in” business, which is when a store runs out of a specific title and the one-stop supplies that inventory. (Retail is discussed in detail later in this chapter.)

Role of Distribution

Most distribution companies have three primary roles: the sale of the music, the physical distribution of the music, and the marketing of the music, although these roles have been dramatically modified as the shift from physical to digital has advanced. The national staff of distribution companies now focus as brand extensions of the individual labels with an executive staff that acts as a wheelhouse that manages the functions of product information dissemination such as street date and sales information, manufacturing and product management, and implementation of national and regional marketing efforts to be executed at various levels. Sales information consists of setting sales goals, determining and setting deal information such as discount off of wholesale and dating of product, and soliciting and taking orders of the product from retail. Additionally, the sales administration department should provide and analyze sales data and trends, and readily share this information with the labels that they distribute.

The marketing division assists labels in the implementation of artists’ marketing plans along with adding synergistic components that will enhance sales. For instance, the marketing plan for a holiday release may include a contest at the store level. Distribution marketing personnel would be charged with implementing this sort of activity. But the distribution company may be selling holiday releases from other labels that they represent. The distribution company may create a holiday product display that would feature all the records that fit the theme, adding to the exposure of the individual title.

The physical warehousing of a music product is a big job. The conglomerates have consolidated the warehousing of music with positioning of their distribution centers centrally in the United States. For instance, Sony Music’s central warehouse is located in Franklin, Indiana—just outside Indianapolis. Incorporating sophisticated inventory management systems where music and its related products are stored, retailers can place an order, and it is the distributor’s job to pick, pack, and ship this product to its designated location. These sophisticated systems are automated so that manual picking of product is reduced, and that accuracy of the order placed is enhanced. Shipping is usually managed through third-party transportation companies.

Because physical music sales have been reduced and many stores have either closed or minimized store floor space dedicated to music sales, music companies and their distributors have out-sourced the inventory management, fulfillment and rack-jobbing to a known-entity within the industry. Anderson Merchandisers has stepped up its role as “sales rep” for both Walmart and Best Buy, managing the inventory, as well as taking care of the in-store floor space in place of the distributors who would normally assist these accounts with sales and marketing efforts.

As retailers manage their inventories, they can return music product for a credit. This process is tedious, not only making sure that the retailer receives accurate credit for product returned, but the music itself has to be retrofitted by removing stickers and price tags of the retailer, re-shrink wrapping, and then returning into inventory.

One Sheet: The Solicitation Page

On the website, MusicDish Industry e-journal, Christopher Knab of Fore-Front Media and Music describes a one sheet as:

A Distributor One Sheet is a marketing document created by a record label to summarize, in marketing terms, the credentials of an artist or band. The One Sheet also summarizes the promotion and marketing plans and sales tactics that the label has developed to sell the record. It includes interesting facts about an act’s fan base and target audience. The label uses it to help convince a retailer to carry and promote a new release.

(Knab, 2001)

The one sheet typically includes the album logo and artwork, a description of the market, street date, contact info, track listings, accomplishments, and marketing points. The one sheet is designed to pitch to buyers at retail and distribution. The product bar code is also included to assist in the buy-plugging the actual release into the inventory bar code system.

Figure 15.5 One Sheet for Jason Isbell. (Source: Thirty Tigers).

Consolidation and Market Share

As consolidation continues, the Big 3, once the Big 6, just keep getting bigger, although the Indies have been a force to be reckoned with. Looking at market share date generated by over-the-counter sales of SoundScan, one can view how large these entities have become over time. Note that the piece of the Big 3 pie fluctuates, with Independents representing the remaining market share. Over the past 15 years, the mergers with Universal have maintained their strong market leader position, while the Sony transaction has shown signs of the turbulent times as Polygram, BMG and EMD disappearing altogether. Remember that during this time, these pieces of the pie have been shrinking, with music sales down by over 50% since its all-time high in 2000.

Figure 15.6

Included here is a breakout of 2014 mid-year sales showing the power of independent labels. All of the major’s independent distribution arms,

Figure 15.7

Warner’s ADA Distribution, Sony’s Red Distribution, and Universal’s Caroline Distributors, distribute and market independent releases from independent labels and the conglomerates often claim that market share. If broken out independently, the independent labels would have a much larger share of the music market sales—as noted in the adjusted 2014 data below.

Digital Distribution

According to SoundScan, year-end 2014 data reveals that digital music accounts for 68% of all music consumed which includes streaming outlets. As for digital consumption alone, on-demand streaming increased 54.5% but this did not make up for loss of sales, which showed a decrease of -2% overall year-over-year. There was also a 10% increase in overall music purchases exceeding 1.5 billion units. A glimmer of good news is that Vinyl LP sales increased 52% and now comprise over 6% of physical album sales, but only hold 2% of entire sales pie.

Sales data from 2014 confirms that consumers are moving to digital consumption. As stated by the Nielsen Company 2014 Year-End Music Industry Report:

• On-Demand Streaming grew 54.5% over 2013, with Audio On-Demand (+60.5%) and Video On-Demand Streaming (+49.3%) both experiencing significant increases.
• The soundtrack to the movie Frozen ranked #1 for overall consumption this year (Album Sales + Track Equivalent Albums + Streaming Equivalent Albums) with over 4.47 million album equivalent units. Taylor Swift/1989 ranked second with 4.40 million units.
• Taylor Swift had the best-selling album of the year with 3.66 million sales for her album 1989. The album also had the best debut week of the year and the biggest opening week for an album since 2002 with nearly 1.3 million albums sold in the first week.
• 1989 also had the second biggest digital album sales week in history. In its debut week, 1989 comprised a full 22% of all album sales for the week.
• 2014 had two albums that sold over 3.5 million units during the calendar year (Taylor Swift’s 1989 and the Frozen soundtrack)—this is the first time since 2005 that two albums have sold over 3.5 million albums in a calendar year. While the top two albums this year performed significantly better than last year’s top two albums, 2014 saw just four albums surpass 1 million units, compared to 13 last year.
• The top 10 albums in 2014 were virtually flat versus 2013, thanks to the strength of Taylor Swift and Frozen.
• Vinyl LPs had another record-breaking year, with 9.2 million sales, surpassing last year’s record of 6.1 million units. This is the ninth consecutive year of growth for vinyl sales. Vinyl now comprises over 6% of physical album sales.
  • 27 vinyl LPs sold over 20,000 units in 2014, up from the 11 vinyl LPs to reach that level in 2013.
  • 94 vinyl LPs sold over 10,000 units in 2014, up from the 46 vinyl LPs to reach that level in 2013.
  • Rock is still the dominant genre for vinyl LPs, with 71% of vinyl LPs being classified as rock.

• The independent store strata outperformed other brick-and-mortar retailers, with album sales virtually flat against last year. The strength was led by vinyl LPs, which were up 35% at Independent stores.
  • The independent store strata had a record setting year with vinyl LP sales, with 5.2M vinyl LPs sold, making up 57 percent of all Vinyl sales.

• Genres performed differently across the different types of consumption, showing how different music fans prefer to access their favorite music.
  • Rock is the dominant genre for album sales (over 33% of albums) and of total consumption (29%). However, on a track sales basis, pop (21.1%) is nearly as big as rock (21.3%). R&B/HipHop is the dominant genre for streaming (28.5%) followed by rock (24.7%) and pop (21.1%).

• Country consumers still prefer albums (11.8%) and track downloads (12.0%) over streams (6.4%). Pop music consumers are buying individual hit songs much more than albums. While 21% of digital track sales are in the pop genre, only 10.8% of album sales are pop.
• Some genres, particularly R&B/Hip-Hop, EDM and Latin perform particularly well in streaming.
  • While R&B/Hip-Hop only comprises 13.9% of2 album sales, it makes up 28.5% of streaming. Electronic/dance (EDM) only makes up 2% of album sales, but makes up nearly 7% of streaming, making the genre a bigger share of streaming than country.
  • Latin music also performs particularly well at streaming, with 5% of streaming coming from Latin music, while just 2.4% of album sales are Latin.

Digital Revenues

Figure 15.8

Figure 15.9

Figure 15.10

Figure 15.11

At the Future Music Forum in Barcelona in the summer of 2014, keynote speaker and Jupiter Researcher, Mark Mulligan presented several interesting ideas regarding the digital landscape for music consumption and how consumers may and may not be satiated in the coming marketplace. As streaming becomes the “experience” of choice and sales continue to dwindle, Mulligan recognizes that the Internet has created an environment that he calls the “Tyranny of Choice.” With over 30 million tracks for listeners to choose from, the fractionalized consumer doesn’t have a prayer in deciding what to listen to—so we enter into a new and fourth phase of digital music: The rise of curated and “Listen” Services.

According to MIDIA, the industry is attending to the aficionado music-phile by creating more curated outlets such as Spotify, Apple’s Beats, and radio, while moving away from a traditional buyer who is not making the transition to a streaming model and is labeled the “forgotten fan.” If that consumer does not make the jump, the revenue trend of negative sales will continue although the potential of conversion is there. And what will also be realized is the continued sales decline of not only CDs, but downloads as well.

MIDIA believes that the future to the music industry rests in three key factors:

1. The continued evolution of consumer behavior
2. Technology company strategy
3. Income distribution

Consumer behavior will be based on continual relationship building between Aficionados and content creators while working to convert and bridge the gap of the Forgotten Fan. But MIDIA stresses the fact that an entire generation is emerging that is known as Digital Natives who have experienced “free” all their lives. As they move forward, the more “free”—the better, which will be their comfort zone. As stressed by Mulligan, “For a generation weaned on free, the more free you give them, the more they will crave it. Whatever course is plotted, success will depend upon deeply understanding the needs of Digital Natives and not simply trying to shoe horn them into the products we have now that are built for the older transition generation.”

So what’s in it for the tech companies? They all have their own agendas, but it drills down to the bottom line. In 2014, Apple purchased Dr. Dre’s Beats Electronics LLC for $3 billion. Beats has long been a brand leader in high-end headphones and electronics and recently launched a music streaming site. In a rare move, Apple will keep the Beats brand, coupling it with its technology to ward off the revenue encroachment that streaming threatens to the company.

Google is in the data business and uses their myriad of portals to capture information about users to sell as valuable marketing facts that will help the next brand make an impression. Anything from YouTube, Google gmail, Google Hangouts, Google Maps, Search Engines—Google is the “go to” portal for many Internet launches on computers around the world.

Amazon boasts as one of the world’s largest retailers, leveraging the Internet as a “front door” to hundreds of thousands of outlets and products. Not only the largest “bookseller” in the world, the retailer sells anything from car parts, to lipstick, to computer technology, to the latest trends in fashion, and more. With the introduction of the Kindle, books, music, movies including exclusive “made for Amazon” content as well as the Internet, can be accessed.

Each of these entities uses music as bait to entice consumers to their site. Even though the sale of music through these portals generates revenue and royalties, music is not their end game. They each have another agenda that uses music as a pawn in the chess match. Their concern is not whether the label, artist or songwriter receives their portion of the $.99, but if the “experience” of the site user lingered longer on the site to perhaps purchase a phone or watch an advertisement. Music is merely a “carrot” to draw to consumer in.

The industry is witnessing download dollars being replaced by streaming pennies, and everyone is in the value-chain is suffering. The message that MIDIA recommends is that record labels become agencies or label services companies that transforms the old business model into a multi-faceted agency. This new music company would work with artists as a label and a publisher and a creative agency, as well as a product developer to dimensionalize the act in a multitude of fronts to help realize revenue from the various income opportunities that must be mined to be successful in a business of challenging opportunities.

Future Trends

The Music Retail Environment

Music Business Association

To assist music retailers in determining business strategies, companies look for current sales trends as well as educational and support networks. Founded in 1958, NARM—The National Association of Recording Merchandisers—was conceived to be a central communicator of core business issues for the music retailing industry. This trade organization has had to evolve to represent a new day of music retailing. Rebranded as the Music Business Association, this organization looks to be a central resource for all things music commerce via the various delivery models: physical, digital, mobile, streaming, and more. Creating a digital initiative known as digitalmusic.org, this site, its resources and partners are attempting to build a future of music commerce—together. For more information regarding the Music Business Association and its activities, visit www.musicbiz.org.

Figure 15.12

Top 10 Accounts and Forecasting

The following grid is a sample forecasting and P&P planning tool used to predict initial orders and initial marketing campaign activities within a retailer’s environment.

iTunes dominates the account list namely because of the volume of single downloads. As an account, they are a key player in understanding the components of the marketing plan but singles sales can be a wild card in the financial equation and are difficult to forecast.

SoundExchange is a new entry for 2014 as streaming revenue becomes more significant to the bottom line of labels and distributors. Watch this “account” continue to grow as the shift from ownership to curated “streaming” gains momentum.

Anderson now racks jobs for both Walmart and Best Buy with its “Direct Shot” entertainment merchandising arm. Anderson continues to grow is rack jobbing business beyond that of music and includes P&G, Post Foods, electronic kings Apple, Belin, Dell and Microsoft, toy icons Hasbro, Lego and Mattel, along with countless other product lines—insuring its future in the supply-chain to American’s largest retailer, Walmart.

Digital and Digital Aggregators

Amazon, Spotify, VEVO, YouTube, and Google all represent the power of digital music sales and streaming and where the market is going. You should begin to wonder what the physical music landscape will look like in the near future.

Figure 15.13

To explain the existence of these players, you need to remember the power of the independents. Those artists and labels who look to enter the marketplace and sell through mainstream channels use digital aggregators to ease their way onto the main stage of the retail environment. Using the selling portals of a CD Baby or ReverbNation allows an artist to sell on iTunes or Amazon, which registers their sale within the Top 10 account list below.

Partial approved aggregator listing:

• iTunes: Catapult, CDBaby, Ingrooves, Tunecore, The Orchard
• Spotify: CDBaby, Ditto Music, Tunecore, IndigoBoom, Song Last, ReverbNation

Pricing

Although record labels set the suggested retail list price (SRLP) for a release, this is not what retailers are required to sell the product for. Most often, the SRLP sets the wholesale price or the cost to the retailer. In negotiating the order, the retailer may ask for a discount off the wholesale price. The retailer may also ask for additional dating, meaning that the retailer is asking for an extension on the payment due date. Each distributor has parameters in which this transaction may occur.

Generally, music product comes in box lots of 30 units. A retailer will receive a better price on product if it purchases in box lots. For example, a retailer wants to purchase 1,200 units of a new release with a 10% discount and 30 days dating. See Table 15.3.

Table 15.3 Discount Value

Money due for any purchase would normally be received at the end of the following month that the record was released. However, with an extra 30 days dating, the due date is extended, giving the retailer a longer time-frame in which to sell all the product. Adding extra dating is often a tactic of record labels that want retailers to take a chance on a new artist that may be slower to develop in the marketplace.

The price of product reflects the store’s marketing strategy. The major electronic superstores look to music product as the magnet to get customers through their doors, which is why music prices in these environments are often lower than anywhere else. Often, these stores will sell music for less than they purchased it, called loss-leader pricing. But these stores will also raise the price after a short period of time, usually within first two weeks after the street date.

Actual Pricing of Product

Margin and Markup

Margin and markup are both calculated using the wholesale purchase price of the product. Percent margin uses the selling price as the denominator, whereas percent markup uses the purchasing (wholesale) price as the denominator for calculating.

Margin percentage on product is determined with the following calculation:

If an SRLP CD of $11.98 is purchased wholesale for $7.50 and the store wants to sell it for $9.99, the margin percentage is $9.99 −$7.50/$9.99 =24.9%

Although there are variable ways to calculate margin, most stores use this retail markup calculation since it takes into consideration differing price lines, product extensions and customer demands in retail value.

Markup uses a similar calculation, but divides the dollar markup by the wholesale cost.

If an SRLP CD of $11.98 is purchased wholesale for $7.50 and the store wants to sell it for $9.99, the markup percentage is $9.99 −$7.50/$7.50 = 33.2%

There is always an arithmetical relationship between gross margin and markup.

A gross margin of 40% requires a markup of 66.67% calculated as 40 ÷ (100–40).

A gross margin of 60% requires a markup of 150% calculated as 60 ÷ (100–60).

To achieve a target gross margin of 24.9% on the previous example, based on the purchase cost, the calculations are as follows:

A gross margin of 24.9% requires a markup of 33.2% calculated as24.9 ÷ (100–24.9) = 33.2%

Wholesale CD cost	$ 7.50
Margin 24.9%	× .332 = 2.49
Total	9.99

When setting prices, retailers think about markup since they start with costs and work upwards. When thinking about profitability, retailers think about margin, since these are the funds leftover to cover expenses as well as account for profit. Importantly, negotiating for the best discount off the wholesale price improves both markup and margin.

Where the Money Goes

When the consumer plunks down their money at the cash register to purchase a CD, Figure 15.14 shows how that money is divided between all the invested parties.

Figure 15.14 Where the Money Goes Pie Chart

Table 15.5 Sample Distribution Pricing Schedule

Store Target Market

A music store’s target market or consumer generally dictates what kind of retailer it will be. To attract consumers interested in independent music, or to attract folks who are always looking for a bargain, determines the parameters in which a store operates. Music retailers have traditionally been segmented into the following profiles:

Independent music retailers cater to a consumer looking for a specific genre or lifestyle of music. Generally, these types of stores get their music from one-stops. Independent stores are locally or regionally owned and operated, with one or just a few stores under one ownership.

The Mom & Pop retailer is usually a one-store operation that is owned and operated by the same person. This owner is involved with every aspect of running the business and tends to be very passionate about the particular style of music that the store sells. This passion can be interpreted as being an expert in the knowledge of the genre and can be a unique resource for the consumer looking for the obscure release. Mom & pop storeowners tend to have a personal relationship with their customer base, knowing musical preferences and keeping the customers informed about upcoming releases and events.

Alternative music stores profile very similarly to mom & pop stores, but with the exception that they tend to be lifestyle-oriented. An electronic music retailer may have many hard-to-find releases along with hardware offerings such as turntable and mixing boards.

Chain stores tend to attract music purchasers who are looking for deep selection of releases along with assistance from employees who have strong product knowledge. These stores can be found in malls and cater to a broad spectrum of purchasers. These stores have been studied and replicated so that entering any store with the same name in any location feels very similar. Often, they have the new major releases upfront with many related items for sale, such as blank media and entertainment magazines. Chain stores traditionally buy their music inventory directly from music distributors, with warehousing and price stickering occurring in a central location.

Electronic superstores do not make the bulk of their profits from the sale of music. But rather, use music as an attraction to bring consumers into their store environments. By using loss leader pricing strategies, these stores often sell new releases for less than they purchased it, but for a limited time. Meanwhile, they have created traffic to the store in order to make money from the sale of all the other items offered such as electronics, computers, televisions, and so forth. Best Buy sources its music from Anderson’s Direct Shot rack jobbing supplier.

Mass merchants use the sale of music as event marketing for their stores. Each week, a new release brings customers back to their aisles with the notion that they will purchase something else while there. There is little profit in the sale of music for the mass merchant, but the offering of music is looked at as a service to customers. Often, mass merchants use rack jobbers to supply and maintain music for their stores. It is the rack jobber who initially purchases the music for the mass merchant environment. Some examples of mass merchants are Wal-Mart and Meijers.

Internet Marketing and Sales

Until recently, it was the retailers who had the brand identities that were winning the Internet sales wars. Consumers went to their favorite retail store websites to browse and purchase music, meaning the actual CD that was to be delivered to the consumer’s door. These well-known retailer sites left many start-up websites with unknown names with little traffic. As noted in the sales overview, downloading and file-sharing has become big “business,” but not perceived as a potentially profitable business … until now. Downloading activities have hurt not only the labels and their distributors, but the retailers as well. With the aggressive prosecution and education campaigns to alert downloaders as to their illegal practices, consumers are beginning to use legal downloading sites to purchase music and streaming services as go-to sources for listening. Sites such as iTunes, Rhapsody, and yes, Wal-Mart are all experiencing a high volume of downloads, with more sites coming online everyday. Well-known online sites such as Amazon have also had an impact on retailing. Interesting to follow and more interesting to quantify is the impact of streaming on the bottom line of record labels.

As noted earlier, the revenue generated by SoundExchange has amounted to over 15% of the overall monies earned in 2014 and with some labels and distributors, accounts for more than that. Other streaming revenue sources such as VEVO, YouTube, and Google have caused labels to rethink their marketing efforts, with the single driving a huge portion of the bottom line. The single selection is critical and the marketing choices surrounding it and subsequent singles after it are essential to the artist’s and project’s success.

Figure 15.15

Sources: of Music

Figure 15.15 shows the basic flow of music as it reaches the consumer level. Recognize that one-stops’ primary business is servicing independent records stores, but that they also do what is called fill-in business for all music retailers.