Warner Music Group's ADA Takes Over Entertainment One-Owned Labels' Physical Distribution

RG-vc/Getty Images
Vinyl records in a row. 

Entertainment One has announced to its employees and labels that it will shut down its physical distribution operation, which handles about 100 music and video labels, and will only be a digital distributor going forward. As part of that, Entertainment One signed a deal with Warner Music Group’s Alternative Distribution Alliance to handle physical distribute for its owned labels, but will handle its own digital distribution.

As for its non-owned distributed labels, Entertainment One will try to retain labels for its digital distribution business, but that may run into a few problems because it has told its labels that they have to find their own solutions for their physical product.

Nowadays some distribution companies, like RED, insist on handling both physical and digital distribution and won’t take on labels that want to keep their own digital distribution. However some sources wonder, if by ending its physical distribution, is Entertainment One breaching their distribution contract agreements, which could allow their labels to walk away completely, should they so choose.

Entertainment One currently distributes such labels as Red House, Putumayo, Shanachie Entertainment, Real World, SPV, Silva Screen America, Tuff Gong, Pandisc, Sunnyside and Righteous Babe Records.

So far, the company hasn’t announced the timing for how things will unfold, like when the layoffs will begin or how long do its distributed labels have to find a physical distribution solution, according to sources. But some suggest that the transition to ADA for its owned labels, including eOne Music, Last Gang and Light Records, will occur incrementally during the first six months of 2017. 

According to the financial statement of its parent -- the giant film company Entertainment One -- eOne’s music revenue in the fiscal year ended March 31, 2016, was $60.7 million while its earnings before interest, taxes, depreciation and amortization was $2.9 million.

Meanwhile, Entertainment One Distribution currently has 1.45 percent in album plus TEA (track equivalent albums) market share, according to Nielsen Music. Its overall market share, including on-demand audio streaming is lower at 1.15 percent. That's because its 0.61 percent on-demand audio streaming market share is less than half the size of its 1.45 percent in sales-oriented market share. Of the 0.61 percent in on-demand audio streaming share, its own label eOne Music has 0.48 percent, which if that is correct, means that  the rest of the 80 or so labels it distributes collectively only have 0.13 percent market share in the streaming channel.

In an e-mail to employees, Entertainment One Music president Chris Taylor said “in order to build a stronger better future as well as continue to build our core music business, we will be doubling down on our digital marketing capabilities, such as editorial and cross genre playlisting, featured track slider placements, digital features and other initiatives.”

In that same e-mail, he also said that it had signed a multi-year deal with ADA for physical distribution covering North America. ADA already distributes DualTone Music, which eOne Music recently acquired.

In doing the deal, ADA will be taking on about 1,000 titles, which means that 19,000 of Entertainment One Distribution’s overall catalog will be looking for a physical home and maybe a digital home too. Sources say when Entertainment One first started to look for a home for its physical distribution, it was initially looking for all of its distributed labels, too.

About half of Entertainment One Distribution revenue comes from its owned labels, sources say, even though Nielsen Music lists their market share at .26 percent, or less than a quarter of the company’s distribution share.

If the sources are correct, then its owned labels account for $30 million and if one third of that is physical, that means ADA is picking up $10 million in business. In terms of market share, that could make ADA as large as RED, which currently has a market share 4.07 percent for album plus TEA plus SEA (stream equivalent albums) when all of its pieces are added up in Nielsen Music Connect 2.0 database; and 4.2 percent in album plus TEA, when all of its pieces in Nielsen’s Music SoundScan database are added together.

Nielsen Music’s Connect 2.0 system doesn’t show ADA’s album plus TEA plus SEA market share, but its album plus TEA market share is currently 3.87. But with physical sales dwindling, how long it retains the eOne Music market share remains to be seen.

Nevertheless this marks the second big deal ADA has done this year. In April, it landed the BMG labels. 

ADA president Eliah Seton issued a statement to Billboard.

“ADA has enjoyed a long relationship with Dualtone Records and we are thrilled to take this next step in expanding our partnership with eOne’s wholly owned labels including Last Gang,” Seton said. “ADA’s suite of global services is perfectly suited to support eOne’s exceptional roster of artists and labels. eOne is a well-known powerhouse in media and entertainment and we are honored that they chose ADA as a long term partner as they evolve their music business.”

eOne Music's Taylor also issued a statement to Billboard.

“We are excited to join forces with the team at ADA in North America," he said. "It’s going to allow us to re-focus on our efforts on the recorded music side of our business while also freeing up room to expand our artist management and music publishing operations on a global level.”


THE BILLBOARD BIZ
SUBSCRIBER EXPERIENCE

The Biz premium subscriber content has moved to Billboard.com/business.


To simplify subscriber access, we have temporarily disabled the password requirement.