Starting a Record Label

I. Today’s Record Label

On November 12, 2011, EMI Music was divided into two distinct factions so the company could be sold. The former major label’s recorded music operations division was sold to Universal Music Group, and EMI’s music publishing was purchased by Sony. This sale reduces the number of active major record labels throughout the world to just three, two of which are Universal and Sony. The move marks the first time since 1931 that there have been only three majors operating concurrently.

While these facts may merely seem like a dismal report on the state today’s music industry that only serve to act as a warning for anyone attempting to break into the industry in any capacity—particularly if they are looking to start a record label—this is not the case. Or, at least not if you do not work for one of the three major labels that are left. As a primer on today’s music industry, here is some recent background on the current state of major labels… (Read More)

II. Reasons for Starting a Record Label Now

Part of the advantage stems from the aforementioned troubled times for the music industry in general. These times encourage new and emerging artists to release records on smaller labels rather than to try and go the major label route. Some of it comes from the new business opportunities that exist today that didn’t exist twenty or even ten years ago.

Additionally, a bigger advantage comes from a combination of those two things. Artists don’t need as much money to make and distribute records today—they don’t necessarily require the huge advance major labels can offer (which is one of the only advantages of signing to a major). But artists do still need record labels. While it is easy to post songs to the internet, it is not easy to get people to listen to those songs, which is where the record label comes in to promote the songs, as well as have them distributed on a wider scope and in different forms. We will discuss all of this further as we move on, but the point is that today is actually one of the best times, and most convenient times to start a label… (Read More)

III. A Brief History of Labels

In hindsight, it seems so simple. Years ago, there was a simple formula: an artist writes songs, learns how to perform them, builds up a fan base with touring and other forms of marketing and then a major label swoops in. The label funds a recording studio and larger tours and soon around everyone involved is rich beyond imagination.

But it was never so simple, obviously. In addition to the fact that it has never been easy to obtain a label contract, even those artists that did rarely took the same course to be discovered, nor had a precedent for the path they would take after they were signed.

And while there have always been only a handful of major labels, independents have been popping up and marking their territory in the music industry for decades now. Some have been fly-by-night operations, some have been swallowed up by majors, and others have gone on to become large and influential forces in the music industry. In the United States, the first prominent indies that we can now look back on as music industry game-changers were labels like Sun Records, Motown and Stax, among many others. And these also include the numerous tiny labels that were releasing small runs of blues, jazz and folk recordings. (Read More)

IV. The Everlasting Question: Major or Indie

So there are a seemingly infinite number of reasons to start a record label. There are also numerous reasons an artist would want to sign to an independent label as opposed to a major, or why the artist may be the person starting the record label. The main argument against major labels is the issue of freedom, or lack thereof.

As stated before, one of the reasons independent labels have become such a big player in the music industry is because they not only brought together a group of like-minded artists for music listeners tired of hearing what the mainstream had to offer, but also to give those artists artistic freedom. This is something that was, is and will be often taken away from artists on major labels.

Here’s why: the main advantage of being on a major label is money. A large label has the capital available to issue large advances to artists. Since the label can do this, they also (usually) have more control over the finished product. Additionally, they almost always will own the copyrights to the music, along with the master recordings, as part of their contract with the artist. (Read More)

V. The Nuts and Bolts of Starting a Record Label

So we finally arrive. For just a moment, let’s put aside the business aspects and technical difficulties of starting a label (which are numerous) to briefly discuss the real reason for starting a label: the love of music.

Independent labels are built on the premise that they are a business that will discover talented but unrepresented artists and expose the music to fans searching for their next favorite band. Hopefully the money will come that will sustain your artistic venture, and you must always remember that this is a business—but if you lose the love for music that got you started, you’ve lost the entire point. So keep that in mind as we continue down the long and winding path to starting a record label.

For the purposes of this book from this point forward, we will assume the label is being started by someone who is not a musician. The principles will be the same, but those distributing their own music will be able to skip some steps (and it will all apply once they sign other artists)…(Read More)

VI. The Mechanics of Running the Label

Now that your label is set up as a business and you’ve decided on at least one artist you want to work with as part of your label, it’s time to discuss what you actually have to do to run the label.

Distribution

Though the individual contracts signed between the label and each artist represented will be extremely different, one thing the label must always consider is how it will distribute the records. Distribution is exactly what it sounds like—the process of getting the physical record into retail stores to be purchased. These days, however, there’s another and relatively new facet of distribution concerning distributing digital copies, though the two are often kept separate. (Read More)

VII. Signing on the Dotted Line: Record Label Contracts

Now you must decide how you will work with your artist (for the purposes of this, we will assume there is just one artist involved at the moment). An important aspect to realize is that each artist at a label is dealt with completely differently. There’s no reason to believe that Lady Gaga signs the exact same contracts as TV on the Radio, even though both artists are signed to Interscope Records.

First, decide what type of deal will work best with the artist that you will represent. This can include recording, marketing, distribution and touring, depending on the type of deal. Here, we’ll look at a few different options common for indie labels. (Read More)

VIII. The Content of the Contracts

Regardless of whether the artist has a record already or will make one, there will be a contract signed between the band and the label. While these will obviously vary from artist to artist, there are a few points that must be included, which we’ll discuss here.

Term

Usually, this will be the number of albums the artist will be required to deliver to the label. For startup labels, this will typically be one with an option to renew, even if it’s the one the band already recorded. Additionally, the term will cover how long the record label will own the album, which can be from a year or two to indefinitely. This latter portion is also related (and may be exclusively covered) in the next section. (Read More)

IX. Manufacturing

If you do decide to release a physical album, one of the highest costs comes with the actual manufacturing of the product. There are many manufacturing houses that provide these services. Many CD manufacturing companies also produce vinyl, though it should be kept in mind that vinyl pressings require a specific vinyl master mix of the final product that is different than the master mix used for CDs.

The more copies of the CD or vinyl you order, the less expensive each unit becomes. CD reproduction is akin to distribution in this way, in that the more product you have to order, the less you will pay per unit, but small labels often have to order small runs of their first releases.

In this case, be sure to shop around for the best price to produce the amount of product you need. Some issues to keep in mind are that the simpler your product, the less expensive it will be. That is not to say you shouldn’t produce a high quality product, but it should be taken into consideration. For instance, even if you’d like to put the album out in a digipak, those cost more than regular CD runs, so it may be best to put out a normal CD and save the digipak for a later “Deluxe Edition” when the label has more funds available.

X. Promotion Options

Now that the record is recorded and manufactured, it’s time to get the word out to music fans about it. Promotion is one of the trickiest aspects of the record business in that there’s never a specific “right way.” In fact, one of the things that makes it so complicated is the sheer number of ways an album and artist can be promoted. We’ll look at a few options here.

Hiring someone to be solely in charge of promotion.

This can be a great method, particularly if that person brings a wealth of contacts with him or her they can draw from to help ensure the success of your artists, and by proxy, your label. The problem with this route, obviously, is that it is expensive. Even hiring someone part time will require a large investment that may not be possible for a young label.