Spotify Windfall

As you may have seen in the news, Spotify recently floated on the NY stock exchange.

Merlin (the rights agency which represents independent labels ) received an equity stake in Spotify at launch and have now disposed of these shares on the open market. Proceeds from this sale have been distributed to Merlin members (including Kudos) in proportion to each member’s Spotify turnover.

You can read more about this here.

We will shortly receive track-level accounting from Merlin covering nearly a decades worth of Spotify usage data. These reports will enable us to allocate these proceeds to labels, as per our Fair Digital Deals Declaration.

Hats off to Merlin for seeking and securing parity with major labels in their original licensing negotiations with Spotify and also for committing themselves to providing the data necessary for distributors and labels to equitably distribute this windfall on to artists. I am quite sure that many of the major’s revised policies on sharing equity gains with Artists have been a direct result of moves by indie labels to provide more equitable and transparent accounting.

With the likes of Spotify & Apple grabbing all of the headlines recently, we thought we should mention some of the smaller services (covering territories including pan-Asia, Australia, Africa and Russia) that we have recently rolled out integrations with.

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25 years of Kudos Records Ltd

Kudos Records is 25 years old today.

We are good at distributing, but bad at blowing our own trumpet. However, we felt 25 years was a milestone worth celebrating.
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Bandcamp Fulfilment

Direct to Consumer sales are now an essential part of any label strategy, both in terms of generating income and developing a customer base. It enables artists and labels to build direct relationships with fans in a way that is simply not possible though the traditional label -> distributor -> retailer sales model.

Bandcamp are the market leader in this area. More than 7 million music fans have purchased music through Bandcamp, with an extra 100,000 registered users being added every month. Their platform includes cutting edge marketing tools to help you reach your buyers. The main Bandcamp site also has a variety of highly curated editorial spaces to facilitate music discovery.
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The IFPI recently published their “State of the Industry” report for 2016.  We were curious to see how closely these industry-wide figures reflect the changes we’re seeing within our niche sector of the music marketplace so we’ve spent some time analysing our sales stats for comparison.

Below are a few trends we discovered which we thought you might find interesting.

Growth in Physical and Digital
We saw overall growth of our business of around 20%, marking our tenth year of uninterrupted growth (yay!). Encouragingly, while most of this growth was fed by digital revenue (+30%), we saw significant growth in physical sales as well (+8%). However, this massive growth in digital did cause an overall shift in the balance between digital and physical revenue, swinging from 50%:50% in 2015 to 55%:45% in 2016.   This is broadly in line with the industry’s split  of 57% digital v 43% physical.

Vinyl vs. CD
Vinyl / CD ratio (based on turnover) was  77:23 in favour of vinyl which represents no significant change from 2015.  However it is worth noting that this is not an accurate reflection of demand for these two formats.  Vinyl production remains problematic, with frustratingly slow turnaround times as demand continues to outstrip supply.  

Big Shifts in Digital: Streaming Becomes the No.1 Revenue Source
The growth in digital revenue was driven mainly by a dramatic 67% increase in revenue from streaming, with downloads declining by around 12.5%.   This rate of growth in streaming was (perhaps surprisingly) greater than the industry’s as a whole, where streaming was up 45.2%.   Downloads now make up 31% of Kudos’ digital sales, whereas streaming accounts for 58%.  This means streaming now represents 32% of our overall turnover.  Downloads and streaming were level-pegging in the previous year.

Video Services Significant, But No Real Growth.
In 2015 around 5% of Kudos’s digital revenue came from YouTube and other video-based services. This increased broadly in line with overall growth in 2016, so there was no significant change to the market share.

More Revenue from Overseas
One of the ways that streaming services have increased their market share has been to expand into new territories. In some cases generating revenue in territories where previously there was no digital market to speak of at all.  We see this trend reflected in our sales data which shows more growth from outside the British Isles (38%) than within it (16%) with overseas sales now making up 75% of digital revenue.

Growth across physical and digital.

  • Digital up 30%
  • Physical up 8%
  • Streaming up 67%
  • Streaming accounts for 58% of digital
  • Downloads 12.5% down
  • Video showing growth overall,  but steady in real terms
  • Digital growth coming largely from outside UK.

Kudos Records is an independent music distribution company (est 1992). We provide physical and digital distribution services to a hand-picked selection of quality, independent record labels.

Due to continued expansion, there now exists an opportunity to join our sales and label management team.. Read more »

Kudos are happy to announce a new strategic partnership with KDigital.  KDigital will sub-distribute Kudos Records’ digital catalogue to local services across South East Asia and the Middle East, including Korea, Hong Kong, Malaysia, Singapore, Phillippines,  Indonesia, Vietnam, Mynamar, Laos, Cambodia, India, Japan, UAE and Taiwan.

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Much of the focus of the ongoing streaming debate has rightly moved away from “how much do these digital services pay?”, to “how much of this money actually finds its ways back to the artists?”.

It would seem (judging from the per stream rates reported by some artists) that there are still some record companies using contracts and accounting practices that were designed for the pre-digital age, with digital sales attracting the low royalty rates you would normally associate with physical products.

There is also the issue of fair distribution of *breakage income and **equity, where rights holders (record labels/distributors) receive income not directly related to specific recordings.

The ‘Fair Digital Deal Declaration’ is an initiative by WIN which aims to encourage transparency and fairness in this area. WIN is an umbrella body, whose membership includes local independent trade organisations such as AIM (UK), A2IM (US), AIR (Australia), VUT (Germany). You can read more about WIN here.

The concept is really pretty simple; labels signing up to the declaration agree to account fairly and transparently to artists for digital income.

You can read the full declaration here.

The Declaration and Kudos
For a label to sign up to this declaration, they need to know that their distributor is equally committed to the same level of transparency and ‘fairness’. Kudos has always provided our labels with complete and transparent accounting. Distribution statements on our label portal contain, wherever possible, detail at transaction level and are completely itemised, displaying income source, genuine exchange rates, and distribution discounts. We are also fully committed to distributing any breakage or equity income we receive.

So, we have taken the liberty of revising the WIN version for our own use to make it more applicable to our distribution business model.


To sign up as a label, download the form here. Print, sign, scan and email to Signatories will be added to a directory which WIN plans to maintain, and will then be issued with a ‘Fair Digital Deal’ badge which they can display on their website.

The Fair Digital Deal Declaration makes a really positive statement. We would like to see it develop into a recognised ‘kitemark’ which could guide artists and managers to make a more informed choice when considering labels. This, in turn, should encourage the wider marketplace to adopt fairer and more transparent accounting practices, which has got to be a good thing.

*Breakage can cover a number situations, but the most common is where a mobile phone service provider pays a digital music service a fixed fee per customer. Some of these customers may never use the music service, but a share of this fee is still distributed to rights holders.

**Equity share is where a service gives rights holders shares (or options on shares) in the digital service as part of the supply agreement. When the service goes public through an IPO or is sold, the rights holder would receive their share of that disposal value.

Random Testimonial

  • ~ Aaron Schultz, Bastard Jazz

    Kudos is by far the most professional and easy-to-reach distributor I’ve ever worked with. I’d trust these guys with my children (if I had any). If that’s not enough, they really love and understand the music they’re distributing, and it shows![read more]

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