Getting records into shops is a separate business from making them, and it takes a cut at every step.
A label that presses a record has solved half the problem. Getting it into shops is a different business with its own economics, and it is where most of the margin goes.
You can listen to our full playlist which contains the artist’s music, and know more about the artist’s work by scrolling down the page.
PLAYLIST
Making Records and Selling Them Are Different Businesses
A label that has pressed a record owns a quantity of physical objects in a warehouse. Converting those into records on shop shelves across multiple countries is a separate operation with its own infrastructure and its own economics.
Distributors exist to bridge that gap. They hold stock, maintain relationships with retailers, handle ordering and returns, and take a percentage for doing so. Very few small labels can replicate any of this.
The percentage is the point of tension. Every party between the pressing plant and the buyer takes a share, and by the time a record reaches a shop the label’s portion of the retail price is considerably smaller than most people assume.
The Chain Takes a Cut at Every Step
The structure is straightforward even if the specific numbers vary by territory and deal. The shop buys at a wholesale price and sells at retail, keeping the difference. The distributor buys from the label at a lower price and sells to the shop, keeping that margin.
Where a label uses an exclusive distributor who then works through sub-distributors in other countries, another layer is added, each with its own margin.
The consequence is that the label’s revenue per record is a fraction of the shelf price, and out of that fraction it has to cover manufacturing, recording, artwork and the artist’s royalty. This is why physical sales alone rarely fund a small label.
Distributor terms also determine cash-flow timing, which matters more to a small label than the percentage. Payment ninety days after sale, against manufacturing paid up front, means a label finances its own distribution for a quarter.
Sale or Return Shifts the Risk Backwards
The arrangement that causes the most damage to small labels is sale or return, under which retailers can send back unsold stock for credit rather than buying it outright.
From the shop’s perspective this is entirely reasonable: it allows them to stock unfamiliar records without carrying the risk. From the label’s perspective it means a sale is not final until the record has actually left the shop.
Labels therefore cannot treat shipped stock as revenue. Money received against records that may come back months later is a liability disguised as income, and misreading that is a common route to a cash-flow failure.
Getting Distributed Is Itself Competitive
Distributors are selective, because carrying a label costs them warehouse space and sales attention regardless of how it performs. A label with no track record offers uncertain return on that effort.
This produces a familiar circularity. Distribution improves sales, and demonstrated sales are what persuades a distributor to take you on. New labels frequently have to prove themselves through direct sales before the door opens.
Some distributors also require exclusivity, which removes the label’s ability to sell directly into shops it already has relationships with, and that can be a worse deal than it appears at signing.
Returns can arrive long after a record has stopped selling, which makes them a liability that sits open for months. Labels that treat shipped stock as revenue discover this at exactly the wrong moment.
Direct Sales Changed the Balance
Selling directly to listeners removes every intermediate margin, and the difference per record is large enough to change which releases are viable.
That is why direct platforms and label webstores became central to independent economics rather than a supplementary channel. A few hundred direct sales can generate more revenue than several times that number through distribution.
The limitation is reach. Direct selling only accesses people who already know the label exists, which is precisely the audience a small label struggles to grow. Distribution reaches strangers, and strangers are how catalogues expand.
Most Labels Run Both
The practical resolution for most independent labels is to operate in both channels simultaneously, with different expectations of each.
Direct sales carry the margin and fund operations, typically with the limited pressings, coloured variants and bundles that reward buying from the source. Distribution handles reach, accepting a much thinner return in exchange for presence in shops and access to people who will never visit the label’s website.
Understanding which channel is doing which job is the difference between a label that grows and one that mistakes turnover for profit. The distributed copies build the audience; the direct copies pay for the next record.
Export and territory splits add another layer. A label distributed in several countries deals with different terms, currencies and return policies in each, and the administrative load rises faster than the sales do.
About The Author
