6 Things to Know When Starting a Record Label

Right now may be the best and the worst time in the history of recorded music for you to consider starting your own record label. If you’re only interested in profits and couldn’t care less what you sell so long as a relatively young demographic buys it, we wish you luck, but can assure you that this article isn’t for you. If your motivation is to sell records and music, break even on your costs (although you may indeed end up releasing a Grammy-winning hit record), and feel a sense of pride in your job at the end of the workday, then you’re a strong candidate for heading an adventurous, niche-oriented label. Here are six basic things you should know when starting a record label.

1. Know your labels:Take time to research independent labels in all genres of music; visit their websites and try purchasing a download or a physical product. Use Google’s search engine to find articles that tell their story and illuminate the reasons for their success, and reach out to the owners of labels you admire for advice. Knowing how other independent labels are doing business in the 21st century will only help you decide what you want or don’t want to do with your own venture. Go back and dig into the history of independent labels that changed the world of music. Richard King’s new bookHow Soon Is Now? is a great introduction to several independent British labels who introduced the sound and the bands that defined what we know today as indie-rock.
2. Find your niche:Major labels (as of this writing, there are only three still standing) are not interested in investing in an underground and creatively minded artist who ultimately will only sell a few thousand copies of a physical recording. In contrast, independent labels cater to music consumers whose tastes range beyond the latest Lady Gaga or Katy Perry track. Consider what kind of music you love and truly believe deserves, if not a large audience, support from an honest business person like yourself. If an artist on your label who makes such music trusts you, chances are they’ll stick around even if they end up going to No. 1 on the Billboard chart.
3. Get funding:In addition to getting a Doing Business As (DBA) license and opening a business checking account, you’ll need some cash for your fledgling label. How much cash you need depends on the scope of ambitions for your label. To get started, check out the federal government’s Small Business Administration website for lots of useful tips for starting a business, as well as information about small business loan programs. See if your state offers small business grants. Some independent labels are nonprofits themselves or are part of a not-for-profit organization, like Innova Recordings, which releases recordings by contemporary classical composers. Nonprofits can apply for funding for recording projects through organizations like New Music USA.
4. Learn the legal lingo:If you’re going to be selling music, either your own or by artists you sign to your label, you’re going to have to wrap your head around some business and legal terminology that only an industry as weird and corrupt as the music industry could create. Your goal should be to protect yourself, as well as your artists, from getting ripped off by people who want to license out the music on your label and major labels who might offer you a distribution deal. Check out Donald Passman’s book All You Need To Know About The Music Business for, well, all you need to know about the music business!
5. Educate yourself on duplicating and packaging:Decide how you want to package and distribute the music your label releases. Will you offer only MP3 downloads, or elaborately packaged, color vinyl records? Your decision will depend heavily upon the niche market you cater to, although it’s not unheard of these days for labels to offer downloads, CDs, and vinyl recordings. Duplicating CDs has gotten less expensive, with Disc Makers being a go-to service for many independent labels. But take time to ask other independent label owners who they use for CD duplication; you could end up with a better price and better quality service. Vinyl record sales actually increased in 2011, although they are most certainly still a niche market. Check outRecord Pressing, Ericka Records, and Dynamic Sun for more information about pressing vinyl.
6. Consider distribution:Just managing the selling of albums and MP3s, either through mail order or digital download, is a full-time job in itself. And for better or for worse, music lovers are getting more and more used to instant gratification when it comes to finding and purchasing music. With that in mind, your label will need to offer its artists quick and reliable distribution of their music. Setting up a site where you sell downloads isn’t difficult. Getting the physical product into record stores, which still exist, believe it or not, is a bit more challenging, but not impossible. Check out Redeye Distribution to see how they distribute CDs and vinyl records for independent labels. While you’re on their site, check out the list of labels they work with — it’s pretty impressive!