Turmoil In Digital Music Distribution
PART 1 IN A SERIES: DIGITAL MUSIC IN TRANSITION
Read Part 2: Orchard Voices MySpace Music Concerns here.
A TALE OF RISING COMPETITION & SHRINKING MARGINS
As digital revenues have grown and other income streams slowed to a trickle, record labels and artists have begun to question paying digital distributors 10-30% for delivery of music to download stores. Services like TuneCore have fueled the fires of discontent offering low cost flat fee delivery 
and
RoyaltyShare recently added 5% digital delivery to its suite of label services. This has all led to downward price pressure on digital music distributors already struggling with thin margins and a multitude of competitors.
Last week news came that losses at publicly traded distributor The Orchard widened from $1.4 million in the last quarter to $2.4 million even as revenue almost doubled. Also last week, INgrooves received a large
cash infusion 
from Universal who apparently found value in the company’s technological platform more than its catalog or revenue.
Friday was the last day at EMI’s Caroline indie distribution arm for SVP Bill Hein although he denies it’s part of any
shakeup at EMI or in the distribution sector. In an email to colleagues, industry veteran Hein wrote "My
exit is not related to Terra Firma’s recent acquisition of EMI. I have
a career opportunity which I wanted to take and EMI have graciously
allowed me an early exit from my responsibilities here." Hein is headed to Live Nation’s new recorded music division which he will helm.
Earlier this year there were rumors of offers from at least two major label groups for 
one of the larger players IODA; and WMG bought niche German distributor Zebralution who was struggling to gain a foothold in the key US market.
Now comes unofficial word that niche distributor IRIS just laid off 5 of its 11 staffers and rumors are growing that The Orchard and World’s Fairs will also lay-off staff.
COMMENTARY: More cuts and consolidations in digital distribution are sure to follow, and the future appears dim.
Download stores may someday offer direct delivery platforms for labels and artists as Amazon already does from some other products. Fewer middlemen could mean both lower prices for consumers and higher margins for labels. Or will distributors learn to compete by using technology to trim costs and fees and by offering new value-added services?
Share your opinions and experiences on the state of digital music distribution.
Whoever can provide the best usability, widest syndication, widest interoperability, and most open accessibility wins. Pricing is a race to the bottom…marginal cost=marginal price, blah blah 😉
I never understood why IODA or The Orchard required some kind of “application” procedure to be a client…they’re just walling themselves off to the majority of the total market.
Until the digital retailers adopt some standards for how they receive content (music formats, bit rates, meta data, images, ISRC codes)there will continue to be a need for digital distributors. Trying to maintain this unique set of data for each digital retailer and mobile provider out there doesn’t add any value at the label level and is simply unmanageable for almost all independent artists.
It’s doubtful the digital retailers and mobile providers would be very excited about executing individual agreements and providing direct support for each label and artist selling through their service.
Agreed a shakeout is coming in this sector. There are currently too many providers offering essentially the same distribution service to the same set of retailers.
I agree with the Post by David Rose. Everybody is trying to do digital distribution to only the Major online download stores. They are promising indie artist and labels they can get you in the key stores, but what about product placement. These Digital Distributors seem to forget that these artist or labels they charge a fee to, have to sell music too. If they are taking on thousands, upon thousands of music how the heck will a consumer find them.
These retailers first concern is place the Major Artist/Label Music upfront, and bury the indie.
http://www.watunes.com has the awnser! Indie Artists can upload their content(unlimited actually) to major online stores such as Itunes,Rhapsody, & Emusic.
Revolutionizing Digital Content Management & Social Media
WaTunes is a social media distribution service that enables music artists and record labels to sell their music to over 100 music store services including iTunes, Napster, and eMusic. WaTunes also provides a whole new social music experience that enables the fans to connect and stream unlimited music freely, rate/comment their favorite albums, meet new friends, and buy music directly from iTunes.
What We Do
Fans/Listeners: Whether you’re a music lover or enthusiast, we make our wide-range of music available for you to enjoy with your family and friends. Get the latest buzz on your favorite artist, comment and review your favorite album, and download your favorite songs.
Artists/Labels: Looking for a chance to channel your music to a wide-range of fans can be very difficult. With WaTunes, we draw in our fan-base to visit our profile page to listen, review, and download your music. By providing digital content management services, we can place your music to over 100 music store services including iTunes, Napster, and eMusic.
I forgot to mention, all for only 10$ a month! Thats it, no strings attatched.
For £25 http://www.dittomusic.com provide you with over 50 sites, and not just the US based ones.
Also online accounting, a fixed release date, 4 week turnaround and you can become eligible for the UK charts.
They cover a total of 700 worldwide stores and take 0% commission on sales.
They have had 7 UK top 40 singles, all with unsigned artists.
A better service for worldwide artists.
They currently distribute thousands of signed and unsigned artists including Lil Wayne, The Streets, My Vitriol, Finch and loads more, definitely one to check out!!