Setting up a Record Label

Sony Music Entertainment, Warner Music Group, Def Jam, and Universal Music Group are some of the most prominent record labels that everyone knows about. Marketing geeks and professionals from different managements aspire to work for such big names, and it is not surprising at all. Those who would like to work in the music industry but not make music would love the job of a record label A&R, artist PR rep, and so on. But getting a spot for yourself in any of these giant companies in the music industry could be extremely difficult and may seem like a tedious process. But if you have all the marketing genius and managerial skills, you could start your own record label. Well, you could start your own record label.

Of course, it is easier said than done, but is it impossible? NO. In this article, we have tried to answer a few questions:

1. What is a record label?
   
   
2. What are the different types of record labels?
   
   
3. How to start a record label?
   
   
4. How do you earn as a record label?
   
   
5. How is the music industry scene with starting a record label?

Let’s dive in!

What is a record label?

A record label is essentially a registered organization that primarily focuses on producing, recording, promoting, and sometimes distributing music. They essentially sign music artists and work with them to make professional music recordings and promote the artist’s music. Many independent musicians, would love to jump from their home studios to record labels mainly because of the resources the companies will give - recording studios, professional producers, sound engineers, and other materials that guarantee well-mixed and mastered music. 

Record labels are responsible for promoting their artists and music to a wider audience. It involves designing advertising strategies, obtaining media attention, planning for music videos, scheduling concerts and tours, and implementing branding tactics to enhance the musician's image and their following. 

What are the different types of record labels?

You might be surprised, but yes, there are various kinds of record labels that would suit different musicians in the industry. 

Independent labels 

Independent labels are the kind that become most important for indie musicians, (and perhaps the kind you could open as well). As the name suggests, they are independent of major record labels and primarily focus on regional music or specific genres that other record labels usually do not cover or give importance to. They are also known for flexibility and the kind of importance they give to the musicians they work with - musical freedom, creativity, and artist development. 

Pssst…come here: Independent labels are almost like a godsend because of the very objective of the type - to help independent musicians grow and give a better platform for underground artists. The downside, however, is that these labels often do not have the high-quality equipment that would be required to make a good professional recording, because their financial resources are not that great. 

Some independent music labels that have supported such specific music include Merge Records and XL Recordings among others. Merge Records is one of the oldest existing independent record labels that focuses more on representing hard rock music. They also brought in physical music promotion with vinyl records for such independent artists. XL Recordings is an independent label based in the UK. 

Music Label Subsidiaries

These are companies that operate under bigger umbrella record labels. Subsidiary labels generally have more freedom in recruiting and nurturing artists while still benefiting from the big label’s finances and distribution networks. These subsidiaries may specialize in particular genres or niche areas, allowing the parent company to expand its offers and reach a larger audience.

Although they have the freedom to choose the musicians they want to sign, they have limited autonomy when it comes to contracts, deals, and work policies, that is, they cannot fully focus on helping the musician build their careers, they would have to cooperate with the parent company rules. The parent corporation may have a say over the creative course of the subsidiary label’s projects. This can lead to some tensions because the company would have to choose between artistic standards and financial objectives while the parent corporation will, more often than not, value accessibility and general appeal over musical experimentation or market niches.

Capitol Music Group is one such subsidiary that works under Universal Music Group, whereas RCA Records works under Sony Music Entertainment. 

Major Record Labels

Sony Music Entertainment, Universal Music Group, and Warner Music Group are considered the Big 3 of the music industry and aptly fall into this category. These record labels dominate the music industry scene and have an extensive set of recording resources any musician would be lucky to use. 

These record labels have a large distribution base and a major influence in mainstream music. They make significant investments in advertising and publicity and hold a sizable market share. 

How to start a record label?

Brand Vision 

The initial phase is to consider whatever genre(s) of music your label will specialize in. It is critical to consider this initially since the genre of music you intend to release will influence the company’s name and image. You might want to be a specialty label that specializes in R&B. You might wish to broaden your scope and produce ‘alternative’ music. There are no rules, however it is always ideal to release music that you truly enjoy. 

What does my record label stand for?

Try to find a definitive answer to this question. The more well-defined your answer is, the better your vision is for your company. This means that you’d have already established a concrete brand vision and principle that your company would never falter on. This could be artistic freedom, representation of an under-appreciated brand, or anything, as long as you are really passionate about the purpose and wish to stand by it through time. 

Pssst…come here: Be very creative with your record label name and don’t keep something obvious. If your label produces mostly Indie Music, then ‘Indie Music Records,’ simply won’t work. You’d be surprised to know that most of these names would’ve been already taken. So, run a Google and social media search to see what you can find. Checking if your selected web domain is available is another smart technique to determine if someone has already registered your name.

Funding 

Understand how much you’d need to make the necessary investments and the ROI (Return on Investment) you could expect. You will need to establish your label, hire any staff members, and efficiently promote your artists. Thankfully there are different funds and grants available for record firms who need assistance obtaining their music ventures off the ground. 

You could potentially draw in investors who would contribute funds in exchange for equity or ownership holdings in the company. A fantastic pitch about your label to investors, who might be people, venture capitalists, angel investors, or music industry experts who are interested in backing promising businesses, would be quite beneficial.

Crowdfunding platforms like Kickstarter, Indiegogo, and GoFundMe enable entrepreneurs to solicit cash from an array of backers in exchange for rewards, perks, or pre-orders. Crowdfunding initiatives can assist to create buzz, engage fans, and gain money for specific projects or releases.

Pssst…come here: The minimum estimate on how much money you would need to set up a decent record label is $10,000. An amount anywhere between $10,000 to $50,000 is a good number. 

Business plan

You'll need to determine early on whether you want to be a single trader, a partnership, or a limited company. The benefits of being a Limited Company include having your label name registered legally, which protects your business name. It also protects your personal assets if the firm fails. Not to mention that it increases the reputation of your label and demonstrates to prospective artists that you are a legitimate brand.

A major part of developing a business plan is understanding your audience first and the market for the kind of music you would wanna produce. There is no point in starting a record label in a super niche genre that doesn’t have a lot of market in the industry, especially if you’d like to break even and hopefully make profits soon. 

Pssst…come here: You would also need to figure out the legal structure once you do decide how you would like to be registered. Choose the legal structure for your record label, such as sole proprietorship, partnership, limited liability company (LLC), or corporation. Each structure has various tax, responsibility, and administration implications, so select the one that best meets the requirements of your situation. Seek a legal specialist to guarantee that you are in accordance with local rules and industry norms.

You’d also want to decide on what kind of services you would like to offer, and what kind of record label contracts you’d be willing to offer to the musicians you’d want to sign. This includes extensive research and bridging this goal with your brand purpose and vision. 

Record Label Website

You should set up an official website. Try searching for a domain name (numerous websites can assist you). ‘.com’ websites are sometimes preferable for record labels because their work is frequently multinational; nonetheless, these are typically priced higher. The pre-requisite to this is designing the company logo, brand tag, brand line, and so on. 

The next step is to set up some social networking profiles. Instagram, Facebook, and Twitter are absolute must-haves. You should also set up a SoundCloud account for your label.  You could also pitch your demo tracks to other independent playlisters since SoundCloud could help you send private links to other representatives and artists in case of music collaborations. When you are starting the company, content to ensure online activity and presence is enough, but as and when you begin hiring and expanding, try to work on a solid social media marketing strategy as well. 

Building Team or Solo?

Going solo can be fulfilling, but it can also become difficult to manage when your artist roster grows. Taking on someone with their own music business contacts can certainly help with duties and generate more awareness for your company, but you'll also need to consider lesser payments due to profit sharing.

Ideally, a solid team should include a Music Lawyer, a Music Producer, a Digital Distributor, a PR representative, an Accountant, a Radio Plugger, and a solid A&R team. Now we understand that investing in human resources could be a tad bit difficult so you could upskill yourself and go solo until you think you could afford manpower. 

Royalty Collection Societies

Once your label is established and you have got things up and running, make sure you register your label to a royalty collection society as well. When your artists make money from the exploitation of their tracks, whether through radio, club, television, or retail sales, royalty fees are collected on their behalf. Some companies can accomplish this on behalf of artists. 

For instance, the Performing Rights Society gives members royalties when their work is performed, broadcast, streamed, downloaded, duplicated, performed in public, or utilized in cinema and television. In the US, BMI and ASCAP are prominent societies, whereas in the UK it is PPL. You could look up SOCAN if you are based in Canada. 

Find Artists!

Your A&R scouts and manager will hunt artists your label would like to sign. You could very well do this yourself in the beginning but you would need a handful of good music lovers to really get a good number of artists working with you. As a fledgling label, you can decide to hire a few energetic and passionate music fans who are prepared to go out and scout great artists in exchange for a percentage of the artist’s sales. 

You need to offer something for the artists you’d like to work with. If they are established artists, the chances of them working with you are very less, because they usually have access to bigger labels. So your services and the graph of the artist are two factors you should keep in mind while hunting independent musicians.

Many record labels go for an artist who already has a growing fanbase and good local press coverage. If you pick an artist who has very less or no fanbase, then returns on the investments you’d make on their music wouldn’t exactly be reliable. 

Pssst….come here: You can look for artists on Spotify. Check whose music gets more than 100k to 500k streams within the first two weeks of their release, give a look at their monthly listeners and social media game. This is a good safe spot because they are new but they seem to have a great local fanbase that has the potential to increase, given your services. Look at playlists curated by independent curators because more often than not, they push out independent musicians a lot. 

Attend local shows, gigs, events, and so on as much as possible to really get a fair understanding of how the scene is. Many A&Rs frequent popular music venues and network their way through to find artists and music bands playing at those venues. Building a reliable network is an integral part of establishing an excellent A&R team as well. 

How do you earn as a record label?

Record labels make money mainly through royalties, as we mentioned before. That is why signing up for different royalty societies is very important. Labels often take 30-50% of an artist’s net revenue, and you will also be able to recuperate any money you invested on recording, producers, touring, advertising, and publicity. If you provide physical distribution via CDs or vinyl records then the cost of production would also be a part of your investment. However, marketing charges can make up the majority of the money you are investing. 

There are different kinds of royalties that record labels are cut out for, like sync royalties, where the artist you have signed with, makes music that is utilized in moves, TV shows, and video games. Streaming royalties, a cut from the merch sale, as well as publishing royalties, are also a few sources of income for a record label.  

As the label, you will receive all artist payments directly. And it is your job to calculate your share before you pay the musician the remaining amount. Labels typically do this on two separate occasions to match with contributions from organizations like the Performance Royalties Society.

Pssst…come here: You, as the label, will be in charge of sending the musician a royalty statement documenting all of the revenue earned from each song. So, create a royalty statement form to track and pay your artists easily. 

How is the music industry scene with starting a record label?

The music industry is a lot more accommodating than it was a decade ago. With the rise of independent musicians and indie artists, there is a demand for more reliable and understanding labels. 

Setting a record label could be a long process because you would need to legally register, obtain licenses, copyrights, and so on. This is when things usually look a lot bleaker. You’d have to meet experts, and professionals and talk to different people in the industry to get a fair idea of how a small record label could operate in an intensely competitive and massive music industry. 

Although there is space for smaller labels, it doesn’t mean that developing your roster will be easy. Your record label would take a lot of time, effort, and hard work to break into the industry first and that could be intimidating. But once you do, and get a fair amount of traction, you will most likely make long-term benefits. 

We at GreaseRelease, have a bunch of curators on our network who are looking for new & exciting music to push on their massive playlists. If you make music and want to reach a wider audience, check out our submission platform and get a chance to reach millions of listeners! Submit your tracks now!