Digital Distributors

A developing channel structure in the music and gaming industries may provide lessons and the future for cloud computing and other markets. Digital Distributors (see chart and legend by Moses Avalon) charge a percentage (usually 15%) of downloads and performance royalties to represent artists (app developers?) to Digital Retailers such as iTunes, eMusic and Napster. Distributors submit music and “metadata” (artist, album, track name details, etc.) in a structured format and help the retailers upload the information in bulk.

From a margin standpoint, on a 99-cent iTunes download, about 29 cents goes to Apple, leaving about 70 cents for the Digital Distributor. The distributor takes 15% or 10.5 cents and then passes the remaining 59.5 cents along to the artist. Before the artist earns a dime, their payouts need to pass a minimum threshold which ranges from $10 to $500 depending on the distributor.

Interesting model to keep our eyes on as we hurtle forward in the digital age…