Over the years we have all seen the big players in the music industry: Jive Records, Sony, Emi, Virgin etc. These large record labels have a huge market share in the music industry in terms of signing international music artists. However, more creatives, music artists and entrepreneurs are creating independent record labels & securing distribution deals through these major record labels. Now there are both business and emotive reasons for those that want to start their own record label.
An emotive reason for building a record label would be supporting a niche genre that you were a fan of growing up, for example the music genre Grime in its early stages was very much a popular but underground scene. Over the years independent labels such as XL recordings and Dirtee Stank Recordings have signed music artists from the Grime genre and have helped commercialise it. Record labels give those a chance to support a local scene by providing opportunities to bring more music from a genre/subculture to the mainstream. Now from a business standpoint creating a record label allows those to branch out and expand their existing brand. You could be a music blogger, radio host or a party promoter and now you want to further support or push the music you have been championing.
So how do you go about building a record label? There is a lot of online content as you can see from the videos below but let me try and help summarise the information to help you out.
First, it's good to get a good concept of what is required of you to actually run a label as a CEO and the responsibility that it entails. It is also in your best interest to sign up to bodies such as AIM (Association of Independent Music) and BPI (British Phonographic Industry) who represent their label members in the UK and internationally. They provide training, publish research and bring music business related issues to the attention of government. You need to implement a business plan which will include: your logo, trademarking your brand name, ways to attract potential investors, who you require in your team and what distributor will suit you best. "Treat your label like any business, music is your product. Work out how you are going to generate income from your business, factoring in your digital strategy and work out a budget for marketing and promotion". You could buy or lease a studio if you are unable to raise funds to build one from scratch. One thing to note is that digital technology is readily available/accessible, record labels can be started from a bedroom or garage. Basic sound recording hardware can be bought for cheaper prices or second hand (many computers come with free recording software).
Obviously there are going to be legalities involved so you may need a music lawyer to help draw up contracts to outline technicalities when signing artists to your record label, such as: royalties, marketing budget, advance payment, copyright and master ownership, number of singles/albums to be released. I am sure a lot of us have heard about record label disputes between artists and management when disagreeing on contractual agreements, an example of this would be Frank Ocean dispute with his record label. Now it is important to understand the role of a distributor when running a record label, a distributor is a company who will manage your distribution for you. Distribution is the process of delivering your music to the public via channels such as Digital, where it can be downloaded or streamed. Digital distributors upload music to streaming platforms such as Spotify and Apple Music, as well as to digital stores including Amazon and iTunes. Distributors can work with both the artists and labels. So how do you go abouts getting a distributor? You would need to get together a music demo which you would need to send to distributors and assess which distributor is best for your label as package deals may vary. You would need to pitch to these distribution companies so promotion is extremely important to distributors, having a professional radio plugger or PR company can help your cause quite a bit. If you don't have the funds for a PR agency, then create an in-depth promotion plan and make that available to the distributor. If you click on the image below you can find out more on selecting a suitable distributor.
Now that we have a brief summary of creating a record label but I'm sure you are wondering where the money comes from. Typically record labels will take a percentage of the artist annual income to cover specific expenses such as touring, producer fees, promotion and marketing. To create profit for the company the label would look at record sales/streams, video views, concerts, merchandise, publishing, sync licensing (deals to place music in film/TV/games). It is apparent that concerts and merchandise provides the most lucrative profit for both the artist and record label. The Music Gateway delves into this further as they provide licensing and publishing information for artists. I do hope this article helps those who are considering setting up a record label as I get that some people want to be involved in the music industry but not necessarily at the forefront like the artists. There is a lot of content online which highlights the pros and struggles of setting up a record label but have a look at the book below which provides a step-to-step guide of building a musical empire. I would like to hear from CEO's newly established independent record labels that have set up their own companies and get an insight into their journeys.