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Music Distributors and Unfair Business Practices: What Entrepreneurs Need to Know ⚖

Updated: Mar 24



The entertainment industry is evolving, but some outdated practices remain unchecked. In particular, music distributors have been operating without oversight, enforcing unfair contract terms that hurt independent entrepreneurs and business owners. This needs to change.


1. The Hidden Dangers in Music Distribution Contracts


Music distributors serve as gatekeepers between creators and streaming platforms like Spotify and Amazon Music. However, their contracts often include unfair terms that limit an entrepreneur's ability to receive fair pay for their work. Some of the most problematic clauses include:


  • Unilateral Withholding of Royalties: Many contracts allow distributors to withhold an artist’s earnings indefinitely, sometimes without providing a valid reason.

  • Monopolistic Behavior: Since artists must use a distributor to get their music on major platforms, they have no alternatives if their royalties are unfairly held.

  • Interest-Bearing Accounts: Some agreements state that withheld royalties can be placed in interest-bearing accounts, with distributors keeping the interest—essentially profiting off the money they owe creators.

  • Limitation of Liability: Many contracts cap the distributor’s liability at as little as $100, making legal recourse nearly impossible.


2. Why Oversight is Necessary


Music distributors operate similarly to performance rights organizations (PROs) like ASCAP, SESAC, and BMI. However, while some PROs are subject to government regulations to prevent monopolistic behavior, distributors are not. This lack of oversight allows them to exploit contract loopholes and delay or withhold payments.


3. A Call for Change in the Music Industry


Entrepreneurs and business owners in the music industry deserve better. The common excuse that "this is industry standard" is no longer acceptable. Distributors must be held accountable for their actions and provide clear, fair, and transparent terms of service.


Key Changes Needed:


  1. Fair Royalty Withholding Policies – If royalties are withheld due to claims, there must be a structured, transparent, and timely resolution process.


  2. Standardized Dispute Resolution – Business owners should have access to a fair system for resolving payment disputes, with responsive customer support.


The entertainment industry thrives on creativity and innovation. It is time for music distributors to align their business practices with these values by ensuring fairness, transparency, and legal accountability.


If you are an independent artist or entrepreneur navigating the complexities of the music business, seeking legal protection is crucial. Understanding your rights and advocating for change can make a difference. For professional legal guidance on entertainment law and contract negotiation, reach out today!



Krystle Delgado, Esq.

CEO/Founder


 
 
 

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