Music Industry Manufacturing and Distribution Deals

Music Industry Manufacturing and Distribution Deals Music Industry Manufacturing and Distribution Deals In the music industry, a manufacturing and distribution  deal (commonly known as an MD deal) refers to a standard contractual arrangement between a record label and a  music distributor. Under an MD deal, the distributor pays for the manufacturing costs of an album beginning with the pressing process, all the way through to the printing of the labels. The distributor then recoups those costs from record sales â€" as well as a pre-determined percentage profit. Distribution companies that offer these kinds of deals often offer other services such  as marketing. These kinds of deals are becoming less and less relevant  in the face of falling music sales and increased digital distribution. However, from a record labels perspective, especially an indie label  with limited  resources and funds, an MD deal can be a lifesaver â€" especially if they plan to produce physical copies of albums. Why MD Deals Are Good for Record Labels For record labels, MD 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 MD deals. Additionally, record labels pay less for manufacturing under an MD deal, because the distributor manufactures albums in large quantities, allowing the label to cash in on their preferential rates. And, because the distributor has invested in the release of an album, they will be motivated to get it into the stores and start making some sales. The Disadvantages of MD Deals Of course, wherever there are pros, there are bound to be cons â€" and the music industry is no exception. There are a few things that labels need to keep in mind about MD deals. First, the label doesnt get any money whatsoever  for the release of an album until the distributor has recouped their manufacturing costs as well as their portion of the profit. This has the potential for turning a small cash flow problem into a very large cash flow problem.  If a labels release schedule is fairly busy, it could find itself in serious debt to the distributor. That could push the labels payday even further away â€" especially if each release is not treated as a separate account.   There is also another scenario that could result in debt. If record sales are poor (or less than estimated) the label may also end up in debt to the distributor. Labels could also end up ceding some control over releases to their distributors. For instance, the distributor may object to the cost of printing the labels marketing booklet â€" even though the label or artist thinks its vital to the records success. The MD Deal Bottom Line Despite the challenges of using MD, due to the advent of streaming music and decline in physical album sales, for independent record labels, MD can be a vital way to keep cash flow healthy.?