Music Industry Manufacturing and Distribution Deals

M&D Deals Can Help Small Record Labels

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If you're involved in the production of music, you've probably heard of a music industry manufacturing and distribution (M&D) deal, which refers to the agreement between a record label and the music distributor.

As music becomes more digital, M&D deals are fading in terms of relevance, but they still play a major role in the industry. These deals have a few advantages and disadvantages.

What Is an M&D Deal?

A music industry manufacturing and distribution (M&D) deal is a standard contractual arrangement between a record label and a music distributor. Under M&D deals, distributors pay for the manufacturing costs of albums from the pressing process to the final label printing process. Distributors then recoup those costs from record sales and an estimated percentage of any profit. Distribution companies that engage in these deals often offer other services such as marketing.

M&D deals are becoming less relevant in the face of increased digital distribution. However, from a record label's perspective—especially an indie label with limited resources and funds—an M&D deal can be a lifesaver, especially if the label plans to produce physical copies of albums.

How to Get a Music Distribution Deal

The following steps can assist you in obtaining an M&D deal:

  1. Register your business as a distinct legal entity.
  2. Obtain a business license.
  3. Connect with music stores nationwide to arrange deals.
  4. Contact major record labels as well as independent artists.
  5. Partner with shipping companies to arrange for shipments to specific destinations.
  6. Maintain accurate records of shipments.

The Advantages of a Music Distribution Deal

For record labels, M&D deals make sense because they can have their records pressed without incurring any upfront expenses. This translates to less disruption to the cash flow of the company, which can be significant for independent and small labels on tight budgets. Traditionally, big record labels rarely enter into M&D deals.

Additionally, record labels pay less for manufacturing under M&D deals because distributors manufacture albums in large quantities, allowing labels to cash in on their preferential rates. Because distributors have invested in the release of albums, they will be motivated to get them into the stores and start making some sales.

The Disadvantages of a Music Distribution Deal

Labels don't get any money for the release of an album until their distributors have recouped their manufacturing costs and their portion of the profits. This has the potential for turning a small cash flow problem into a large cash flow problem. If a label's release schedule is busy, it could find itself in serious debt to a distributor. That could push the label's payday even further into the future—especially if each release is not treated as a separate account. 

Record sales that come in lower than anticipated can leave labels in debt to a distributor if the sales don't cover the manufacturing costs and other feeds in the contract. Labels could also end up ceding some control over releases to their distributors. For instance, a distributor may object to the cost of printing a label's marketing booklet even though the label or artist thinks it is vital to a record's success.