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How to Start Your Own Record Label

It’s hard to get a leg up in the music industry. There are so many artists out there. This makes it difficult to get noticed.

One thing you may want to do to stand out is start your own record label. The fact that you have a label means you will look impressive to people (they don’t have to know it’s your own label). It will also put you in complete control over your music and how it’s distributed.

Of course, a record label is not only a vanity project. It can also be started by someone who is passionate about music and wants to see artists succeed.

But starting a record label isn’t easy. This article will provide you with the tips you need to make your record label business a success 

Pick a Name for the Label

The first step to starting a record label is picking a name. The name should be unique, it should stand out, and it should be a good representation of the music you want to carry.

But most importantly, the name shouldn’t be taken. If the name is taken, you will end up getting a cease-and-desist letter at some point down the line.

You can check for name availability on the following platforms:

  • Web domain registrars such as GoDaddy and EHost
  • Your state’s database of corporations and LLCs
  • The Federal Trademark Registry (gov)

If you are planning on selling merchandise with your record company name on it, consider getting the name trademarked.

Decide on a Business Structure

Deciding on a business structure may seem like a lot of bother if you are just intending to work out of your basement, but it will be necessary if you want to open a business bank account or get a business credit card.

An LLC is a good business structure as it will separate your assets from the business’s assets. So, if you end up getting sued by a disgruntled artist, they will only be able to go after your business assets, not your personal assets.

Other types of business structures include:

Sole Proprietorship: This type of business is owned by a single owner. If the owner registers as an LLC, it would no longer be considered a sole proprietorship. Although it does not separate your personal and business assets, it is beneficial in that it gives you complete control over your company.

Partnership: Partnership companies are owned by two or more people. Generally, the main owner will have unlimited liability while the other partners have limited liability. The partners with limited liability will have less control over the business. All owners are subject to self-employment taxes.

Decide on the Music You Want to Carry

Earlier in the article, we discussed how starting a record label is a good way for artists to promote their own music. If you plan on including yourself on your label, you will also want to sign other artists. This will make your label seem more legitimate.

If that’s the route you are going, it’s likely you will want to sign bands that have a similar genre to yours.

If you are staring the label as a business venture, you should work with music genres that you are passionate about. Here are a few other steps that will help you get established:

  • Put the music and artists before the label. If they are successful, the label will be too.
  • Quality should come before quantity
  • Establish a niche that makes you stand out from other labels

Create Your Artist Deals and Recording Contracts

The nice thing about indie record labels is, they allow you to be flexible with your terms. So, you can decide exactly what you want to do with your contracts. Here are some things to determine:

  • Will the label be financing pressing, recording, illustration, etc.? Many labels will provide distribution only, but some may offer a budget for other needs.
  • Is the label paying the artist in advance?
  • How will the profits be split? Will the label recoup expenses before paying the artist?
  • Will you be setting a budget for promotion?
  • Is the deal for one album? Or several?
  • What rights will the artist have? Will they still own the music?
  • Will the label be making any money off the artist’s merchandise, shows, etc.?

Contracts between labels and artists can be very casual, but it’s best to have yours drawn up by a lawyer. That way you can ensure that there will be no legal issues in the future.

Determine How to Get Distribution for Your Artists

The main thing a record label does for a band is get them distribution. Nowadays, digital distribution is easily attained by just about anyone. So, if you are going to offer digital distribution only, you can make your label seem more attractive by covering digital distribution costs and doing extra promotion to help your artists make money.

There are several digital distribution platforms to choose from. They work by having you upload your music. They will then send your music to various streaming sites and platforms, or they may just sell it directly to fans. They will pay you a portion of your earnings and keep a cut.

They may also provide you with an option for selling physical copies of the album.

There are many digital distribution services out there. When considering which is right for your label, you must think about:

  • Upfront costs
  • Payouts and how they are paid
  • What platforms they will release your music on
  • What other services they offer, i.e., physical sales, mastering, etc.
  • How transparent they are about the income you are making

Some top platforms to consider are:

There’s also physical distribution which helps your artists get into record stores and sell records.

Finding a distributor takes a little legwork. You will need to look at album liners and find out what companies are distributing them. Smaller companies will be easy to work with while larger companies will require you to get through some heavy red tape.

Once you find a distributor you think you’d like to work with, make your pitch. This will involve discussing your artists and their accomplishments. Things like press clippings, radio playlists they are featured on, tour dates, and press and radio campaign plans will look impressive.

If you don’t have the materials you need to make your artists look impressive, you may want to hold off on getting distribution. If you try to get a deal before you are ready, you will have trouble getting approved and you may damage your reputation for future opportunities 

If a distributor gives you the green light, be prepared to seal the deal. You will need to figure out the following:

  • How many of each release the distributor will want to start with
  • How they will handle restocking
  • Who will pay for manufacturing
  • How many promos they will need
  • How far out before the release will they need the promos
  • What price they will sell the albums for
  • What cut they will take from each sale
  • How, when, and how often you will be paid
  • How you will get access to sales sheets
  • Whether the distributor will have the right to cut album prices and by how much

You must also be aware that there are different types of distributors you can work with. There are indie distributors that work with indie labels, indie distributors that work with larger indie labels and major labels and so on. But the main two categories are clearinghouse distributors and selective distributors.

Clearinghouse Distributors 

Clearinghouse distributors will work with just about anyone. They act as the middleman between the record label and the record store.

However, they will only provide your products to the store if the store starts ordering. They will not try to pitch your products. Sales and promotion will be your responsibility.

When you consider this, you may wonder if clearinghouse distributors are worth it at all. The fact is, they come with their share of benefits.

For example, they provide a way of getting your product out making you look more attractive to selective distributors. And because they work on a consignment basis, you don’t have to worry about losing your deal if you miss a release date or have to cancel an album.

Clearinghouse deals are also non-exclusive so you can distribute the album yourself as well if you so choose.

Selective Distributors

As the name suggest, selective distributors are more selective about who they work with. Getting a distribution deal with one of these labels can be as challenging as getting a deal itself.

A selective distributor will work with you closely through the distribution process helping you choose the best release dates and taking care of promo. They will have a team going store to store to try to sell your album.

While selective labels seem ideal, they come with their share of downsides. For example, if you are a small label working with a big distributor, you may not be a priority. Therefore, your releases may not get the attention you want them to get.

Promote Your Music

In addition to promoting your music to record store owners, you will also want to promote it to the masses. This will be beneficial in increasing record sales on and offline 

Social media is key. You must continue promoting music by posting and building followers. However, if you really want to reach the masses, you may want to hire a publicist.

A publicist will get your label’s music written up in major publications. They will help your artists reach bigger audiences.

Collect Your Royalties

Hopefully, pretty soon you will start seeing those distribution checks starting to roll in. You may also be making money off your artist performances, public appearances and more. This will depend on the type of deal you have worked out.

What Type of Record Label Do I Want to Start?

Another consideration to make is, what kind of record label you want to start. Options include: 

360 Deals

360 deals allow the record label to generate income off, not just the sale of the artist’s music, but everything the artist does. This includes merchandise, public appearances, endorsements, sponsorships and more. Advances are typically worked out, so artists are paid as soon as the deal is signed.

These types of deals are beneficial to the artist in that they show the label is truly invested in them. It tends to get them advanced connections as well. And with multiple revenue streams coming in, the label stands to make more money.

On the downside, these deals are hard to get. There is also more on the line to be lost if the deal fails.

50/50 Deal

A 50/50 deal is also known as a profit split deal. The label and artist will evenly split all the money made off the album. The artist will keep all other forms of revenue they make with their music.

This type of deal may not come with an advanced payment, or the advance payment may be very small.

50/50 deals are good for artists in that they help them get their name out there while allowing them to maintain control of their music. They are less risky for both the artist and the label. They are also flexible so they can easily be renegotiated.

Disadvantages include the fact that the label does not have as much on the line and may not work as hard to promote the artist. Artists also stand to make less money with this type of deal. 

EP Deal 

With an EP deal the artist must sign a contract with the record label to release a certain amount of music within a certain period of time. The music can be released as a single, LP, or EP. The artist is typically paid an advance against future royalties. 

EP deals are good for artists because they allow them to retain control over their music. They provide an advance that helps them cover recording expenses. The label covers production and recording costs and handles marketing and publicity taking the weight of those responsibilities off the artist’s shoulders.

However, labels don’t have as much of an investment in EP deals as compared to other types of deals and may not put as much support behind their artists. They may also provide a low budget towards recordings.

Distribution Deal

As the name suggests, a distribution deal involves the label offering the artist distribution only in return for a percentage of their royalties. The artist will give the label exclusive rights to distribute their music through a set period of time. If the deal goes well, it can provide artists with leverage so they can get better deals in the future.

Distribution deals are good for artists because they help them get their name out there. They also get the support of a record label which may provide them with sound advice.

On the other hand, artists don’t stand to make a lot of money off a distribution deal. And because they don’t take as much of an investment from the label, the label may not work as hard for the artist. Finally, because the deal is exclusive, the label may demand creative changes that the artist doesn’t agree with.

Licensing Deal

Licensing deals are recommended for artists that already have lucrative sales and a large catalogue of music. They allow artists to retain ownership of their music while providing them with exposure. They offer many of the perks of a 360 deal, but they don’t require artists to give up control of their works.

A licensing deal is a wise choice for artists as it allows them to retain ownership of their music while providing them with advances, and promotion. However, you will only make money when your music is sold, and the label will take a cut of your royalties.

Traditional or Standard Record Deal

The traditional record deal involves a contract being signed by the artist and label that sets the terms for how the album will be created, distributed, etc. However, the label itself will not handle the marketing and distribution. Those responsibilities will be passed on to a third-party company.

The deal requires artists to give up some of their creative control and ownership of the music. It is best for those who already have established a following.

Traditional record deals are good for artists because they tend to pay well. The label will also take care of all the relevant expenses.

However, the artist will not retain ownership of the music. The deals may also not be good for less well-known artists as they may not be a label priority.

Starting a record label isn’t easy. It involves getting distribution, working out contracts, promoting artists, and more. But if you are passionate about the music, it can be a great way to earn income.

 

We wish you the best of luck pursuing this endeavor.

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