How to start your own record label company

For many artists it’s not always easy or even the goal to get signed to a major or indie label. You can read here what a label exactly does, but how to continue if you want to start your own label? I’ve gained some experience the past couple of years running my own hardcore punk label, as well as working with and for several labels, so I thought I’d share this experience with you all.

Why start a label?

So why would you want to start your own label? Perhaps it’s because you can’t get a record deal and you still want to release your music, or you’re in a music collective and you want to release everyone’s music in the collective. But it could also be that you’re ambitious as an artist and you want to have a company that consists of more than just your own music.

Added value

Now the biggest question is what you can add in value to the music you will be signing. It is of course very valuable to check out this little article on what traditional labels do but as a starting label it’s also good to think more along brand terms. Essentially, your name or your ‘label’ can become synonymous with a certain type of music and especially a certain quality.

Distribution

Digital distribution should be one of the easier aspects. You can simply subscribe to a aggregation service (such as Distrokid, Tunecore, CD Baby etc. check out a whole list here) and you’re ready to go.

Fabrication

It gets a little more tricky if you want to make a physical product. Depending on your geographical location you’ll have to find a manufacturing plant. CDs should still be easily doable but vinyl will be a little harder to find. What’s important is that you make sure you make a balance sheet in advance with all out-of-pocket costs and the expected income. Of course, the goal should be to break even on physical within a certain time frame.

Promotion

Now this is where a small label can really add value. It’s often impossible for these parties to hire expensive radio pluggers or press promoters, but it’s amazing what a small team can accomplish with smart and hard work. With the rise of the internet it has become possible for everyone to reach across the globe.

My advise would be for the label to make a promotional plan for each release and to simply do it. Email those blogs, approach those radio DJs, send out promos to magazines. But be smart about it. Don’t cold-call everyone in one one BCC email (or worse, CC) but do your research and find out what blogs, platforms or radio stations will fit the music of the release.

Costs

It’s important to make a clear cost overview before operations commence. Think of the following items:

  • Distribution fees (often a percentage)
  • Office or storage space
  • Salary for employees (or yourself if you’re alone)
  • Fabrication and/or pressing costs
  • PRO costs (in some countries you need to pay PROs to press a record if the band members are members of a PRO)
  • Packaging when sending out physical records
  • Shipping (you can include this in the price or have the customer pay it on top of the product)
  • Web hosting costs
  • Bookkeeper costs (unless you’re a genius at bookkeeping you are going to want somebody to go over your books)
  • Promo costs (printing flyers, posters, stickers)
    • If you produce a physical product make sure to book some away as promo copies, as these will not make you any money and will go to magazines, radio stations etc.

Income

Of course, without income there can be no company. In the beginning it will be tough but it should be doable to break even within a couple of years. Try to maximize your profits:

  • Streaming income (this can be marginal but if you get playlisted or get a humble hit you can actually make some money off of this)
  • Sync income
  • Merch income
    • You can make a deal with your artists that you also produce and distribute merch for them. The margins on merch are often way better than on physical records or streams.
  • Physical sales
    • Of course, every time you sell a record or a CD you will make money.
  • Downloads
    • Bandcamp is a great artist-friendly platform to offer downloads on. You can set a fixed price or have customers pay what they want. A great way to generate extra income with little work.
  • Distro
    • You can of course also buy in records from other (indie) labels and sell those online and in your physical store or at your merch stand. It’s smart to stick to your niche and become the place to go to for your preferred genre.

Deals

What’s influential for your income is also what kind of deals you make with your artists. If you are a one-man self-releasing musician then this won’t be of consequence for you as you will pocket all the money yourself.

As soon as you sign others, however, you’ll need to decide what kind of deals you want to make with these artists. It’s important to consider the following aspects:

  • Type of deal (what are you signing)
  • Duration of the deal
  • Territory
  • Percentage (officially this is part of what type of deal you strike, but it’s worth mentioning)
  • Options

Type of deal

What’s important for a new indie label to decide is what kind of deals they want to engage in with their artists. Do you want a standard deal across your roster or do you want to fine-tune a unique deal for each new signing? The possibilities are endless, and it’s possible to adjust, amend and change any type of deal as you see fit, if you keep it within the legal confines of course. Please bear in mind that this is just a short summary, if you want to know more about the types of record deals I suggest you do more research online.

Master deal

This means the label will actually buy the master from the artist or rights holder

License

Basically the same situation, but only for a set amount of time. See this as ‘renting’ a master from an artist.

Distribution

In this case the label only handles distribution for the artist, often both physical and digital.

Joint venture

This means you basically embark on a venture together. All costs are split equally and all income is split equally as well. This can be for short term or long term. It somewhat resembles a license but it’s more equal in its terms.

Artist agreement

This means that you sign an actual artist to your label. This is quite a complicated deal and is seen less and less nowadays.

360 deal

With this deal, the label is entitled to a share of every revenue stream an artist has. It was popular in the ’00s, but it’s less seen nowadays and not as popular anymore.

Duration of the deal

The duration of the deal is somewhat dependent on the type of deal, but in general anything is possible. I would suggest not making the deal too short so to be sure to be able to recoup. At the end of the day it’s up to you what kind of deals you want to make. If you’ll be investing heavily it might make more sense to sign an album or artist for the duration of a lifetime, but if it’s a simple license then 10 years or even 5 could work as well. It’s good to double check the industry standards, but having said that, also don’t be afraid to trailblaze and go your own way if you feel confident enough (within the legal framework of course).

Territory

But where will we be working? It’s getting harder and harder to imagine a deal being made with just one territory included, such as Benelux (Belgium, the Netherlands, Luxembourg) or GSA (Germany, Switzerland, Austria) but this is still happening. The danger of course is that they can blow up in a country outside of your territory, and as a label you’ll miss out on loads of revenue. I always suggest signing artists worldwide, and then you as a label can always license the master to a suitable party in a different territory.

Percentage

Again, this is dependent on the deal. Common for indie labels is a 50/50 split after costs have been recouped, but I’ve also seen 70/30, 80/20 and 40/60. So it’s really up to you how you want to approach this. If you have to use a percentage – joint ventures simply split 50/50 of course – I would suggest running the numbers to make sure that you, as a label, earn enough to stay afloat. The time of ripping off artists is long behind us so make sure that in the end it’s a fair deal for the artists as well. Remember, artists talk, so if you rip off an artist chances are high your reputation will slowly deteriorate.

Options

The last thing you want is to release a succesful record with an artist, only for them to turn around and sign to a major label. This is why labels often include options in their contracts with artists. This means that after they have released a record together, the first label can choose if they want to release the next record or not. Some labels even take two or three options if they feel like the act will be succesful.

Conclusion

Hopefully now you will have some idea of what to do when starting your own label. Of course this can become very complicated and I strongly advise anyone with these ambitions to seek out extra counsel and advice from weathered industry professionals. It’s also good to have a talk with accountants, bookkeepers and legal counselors to see if the business plan you have is sustainable. If you have questions, got comments or if you just want to drop a line email me at info@bohemianmgmt.com.

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