Traditionally, distribution companies sign deals with record labels, which gives them the right to sell that label's products. The distributor takes a cut of income from each unit sold and then pays the label the remaining balance.

Most distributors expect record labels to provide them with finished, ready-to-market products, but sometimes distributors offer manufacturing and distribution (M&D) deals. With this setup, the distributor pays the manufacturing costs of an album upfront and keeps all the income from album sales until that initial investment is paid off.​

Throughout much of the 20th century, distribution companies were the links between record labels and retail outlets, which included music-only stores, big-box retailers such as Walmart and Best Buy, and bookstores.

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Record labels signed (and still sign) contracts with music artists. They oversaw music recording, marketing, and promotion. Consumers bought their favorite music on vinyl records, cassette tapes, and CDs. In most cases, it was the record labels that paid to have these products manufactured. To get album copies in the hands of fans, record labels signed deals with distribution companies that, in turn, signed deals with retail stores to sell the albums.

Some distributors bought albums from record labels outright, while others distributed albums on consignment. Retailers did the same thing—some bought albums outright, and others agreed to put the products on their shelves on consignment.

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