If you are truly a record company in your own right, then this is the deal for you. It gives you the most autonomy and control of your life, as well as highest profit margin. This is the deal that true independent labels make. A pressing and distribution agreement of P&D is exactly that-the company agrees to manufacture records for you, although in some situations this isn't even so; the product is manufactures elsewhere, and then to distribute them solely as a wholesaler. This means you sell the records to the distributing entity for a wholesale price less a negotiate distribution fee. The distribution fee ranges in the 20% to 25% range and less if you are a big label, with the bulk of the deals around 24% to 25%. For example, if a CD wholesales for $10, under a deal with 20% distribution fee, the independent company gets
$8.00 per unit. Out of this, the independent pays manufacturing, mechanicals, artists royalties, promotion, overhead, salaries, and everything else.
In these deals, the entire risk of manufacturing falls entirely on the independent company. Remember how records are sold on a returnable basis. This means that, if you guess wrong, the returns come back home to roost. So not only are you losing your potential profit on the sale, but you're also coming out of pocket and losing the cost of manufacturing and shipping records you can't sell. Many deals also require you to pay a distribution fee even if the record is returned, adding injury to insult. The distribution company typically offers no services whatsoever in term of marketing, promotion, accounting, etc. For example they might help you with marketing, sales, or promotion, and charge an extra 3% to 5% distribution fee.
These type of deals can be made at the highest level like A&M Records was distributed by BMG ins such an arrangement. Small indie labels make these deals with smaller independent distributors.
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Arian Collin, author of this blog is a music manager for bands and solo artists in the music industry.