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Heather McDonald wrote about music careers for The Balance Careers. She has worked in the music industry for over two decades.
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Updated November 20, 2019
Do you want to start a record label? Many a label has been started by someone saying, “ok, I’ve got a record label!” In some ways, it IS that easy. Some of the best labels have made it up as they’ve gone along.
However, if you want to give yourself the best chance of success, not to mention protecting your investment, going through a proper set-up process is important. This guide will walk you through getting your label up and running.
Before we jump in, though, let’s make sure you’ve thought this whole label thing through. Running an indie record label is fun, but it takes a lot of commitment and a ton of money. It’s critical you go into this with your eyes open. Here are a few things to consider:
If you are starting a record label with the sole purpose of releasing your music, be aware that being both label owner and only artist on the roster brings some limitations. Even with the best intentions, your label runs the risk of coming across as a vanity project.
That means that some distributors may be hesitant to work with you and some funding sources may hold off on investing in you. If you are planning to do promotion in-house, remember that it can be a little uncomfortable for everyone for you to be calling up journalists asking them when they think of your album. This isn’t to say that you shouldn’t start a label to release your own music. It just means you need to be aware that it brings along a few complications other labels don’t face.
You will almost certainly have to work on your label every day even if you have a full-time job. Do you have the time to invest in making the label work? However much you are budgeting for your label, it will cost more. Can you start a label and cover your bills? Here are some practical tips on how to start your own label.
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Many indie labels skip this step, at least initially, but it is a good idea to have your record label set-up as a legal business entity from the start. You will need to be an actual, legal business if you want a business bank account or credit card, and it certainly makes tax time a lot more manageable. Likewise, if you are applying for business loans or other kinds of funding, you will need to be a legal business.
The names and specifics of various business frameworks differ from country to country, state to state and city to city (for example, sole proprietorship, LLC, corporation, etc). You will need to spend a few hours with your computer or at the library to learn about the law in your area and to print up the forms you need to set up your company. There are a few general guidelines to keep in mind that apply everywhere:
- If you are starting the label with other partners, you will need a partnership agreement that details the percentage of ownership each partner has, how each partner can leave the business, how decisions will be made in the partnership, and so on. Depending on where you live, the laws associated with your business structure may dictate your partnership agreement, or you may need to devise a separate agreement.
- For most indie labels, the best business structure is one that is simple and that protects the partners from personal liability should something go wrong in the business.
This is also the time to figure out how the company will operate, such as who will be responsible for which tasks and how people will be paid. If there are issues not addressed in the paperwork to set up your business, then write up a separate contract detailing this info.
Of course, now is also the time for a label name. Do a little online research to make sure your name isn’t already taken.
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For most people starting record labels, the idea to get a label going in the first place came from hearing some great music that no one else was putting out. If that’s the case for you, fantastic—move on to the next step. If you just have the idea for the label and need some music to get going, now is the time. You will need to have a release, or even a few releases, lined up to move on to the next steps, like finding distribution and PR.
Finding music to release can be harder than it sounds; it’s a bit like finding the proverbial needle in the haystack. One of the easiest things you can do is to start locally. Go check out some local musicians and see if you can find a few artists you’d like to work with. You can also listen to some music on MySpace, Bandcamp, ReverbNation, and other sites that featured unsigned acts.
An indie label is a labor of love, so it is really important to hold out for some music you really believe in. When you’ve decided to start a label, you can feel like it’s pretty urgent to go NOW. In the long run, waiting until you have a record you love and can’t wait to bring to the world is worth it.
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Once you know the music you want to release, you will need to set up a deal with the artists. One of the best thing about indie labels is that you can essentially have any kind of deal you want. In fact, it makes life a lot easier when you create a deal that works for you and the artist on a case-by-case basis. Having said that, it is a good idea to know your limitations and to have some basic principles in mind. Here are some things you’ll need to think about:
- Do you want musicians to deliver a master, or will you go in on recording costs?
- Will you be paying advances, and if so, how much? (If you have a very small budget, your best bet is to try and convince your potential signings to keep any advance small so there is money left to promote their release.)
- How will any earnings from releases be divided up? Will your artists get a percentage, or will you split things 50/50? Will the label recoup manufacturing costs and promotional costs before paying?
- Will the artists get to approve promotional expenditures over a certain amount? If so, how much?
- How many promos/free copies will the artist get? Over that limit, how much will they pay for additional copies?
- What is the length of the deal?
- Is the deal for just one album or several?
- Will the musicians be entitled to audit your books? How often, and what kind of notice do they need to give?
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When you start a record label, finding music to release and finding distribution channels is a bit of a chicken and egg situation. Distributors want to know that you have some music ready to go before they will commit to working with you (in most cases), but musicians will want to know that you have distribution before they sign to your label.
Sometimes, when you’re starting an indie label, unsigned musicians will be willing to come on board before you find distribution. That is your best case scenario. If you can’t get this lined up, there’s not much you can do but try to juggle a little bit and work on getting soft commitments from people. Here are some things to keep in mind about distribution:
- Digital distribution is much easier to find than physical distribution. Aggregating services like Tunecore will put your music on sites like iTunes and Amazon. You can set up these services from the word go, so you don’t have to wait around with good releases on your hand that you can’t move at all.
- Some physical distributors will work with anyone, but your ideal situation is to land a distribution deal with a company that is selective about the labels they work with. These companies will actively get involved in selling your releases to the stores and will often help you advertise your releases. These sorts of companies usually want to know that you’ve got a busy release schedule planned—they don’t like working with a label with one release.
- Distributors sometimes often M&D deals in which they pay for manufacturing up front and recoup it from sales. It helps with your cash flow in the short term, but these deals are becoming more of a rarity.
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Promotion will be critical to selling your releases. There are a few different areas of promotion you’ll need to cover or at least think about covering, budget allowing:
- Radio: terrestrial radio, satellite radio, internet radio
- Print media
- Online media
- Advertising: posters, print ads, internet ads, and if you’re super flashy, TV ads
Your first decision is whether or not you will handle promotion yourself or if you will hire someone else to do the job. Note that most PR companies specialize in an area of promotion. They may cover commercial and college radio, they may cover only print media, and so on. In other words, if you hire out the work, you will likely be looking at paying several separate companies.
Although you will want to reserve the bulk of your budget for any release for promotional costs, upstart indie labels may not have enough money to hire outside PR for all parts of a promotional campaign. To cope with your budget constraints, there are a few options:
- Do all of your promotion in-house. If you have never done promotion work before, you will need to do some groundwork, like building up a press database.
- Hire PR for certain parts of a campaign. If you think you can handle print and web promo yourself, but you aren’t sure how to navigate radio, for instance, this is the way to go.
If you are going to be doing your own press, and the whole experience is new to you, be sure to build in some extra time before your first release to make your promo plan.
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OK then! You are ready to go. Now you have to pick a release date for your first release. If you are going for digital distribution exclusively, then you don’t have to worry about things like manufacturing turnaround time. If you are pressing physical items, there’s a little more to it. Here are some things that will impact your release date. Note here that we are assuming you have a finished master in hand and that we’re skipping promo factors right now:
- Artwork approval
- Manufacturing (be ready for delays, which happen often. Also be aware that, at least in your first few jobs with a manufacturer, you will have to sign off on the printing before the job is complete.
- The release date your distributor wants. They will want a good lead time to sell your release to their stores. They will also want your release to have an appropriate place on their schedule so that your release is not overshadowed by bigger releases they may have. Even though shuffling your release date to accommodate a bigger release might be a bit annoying, it is in your best interest to have your distributor focused on your project.
Now, let’s consider promotion. You need to give yourself enough of lead time with promotion so that reviews/interviews/radio plays are hitting just before or just as the release is becoming available.
Take into consideration the print schedules of the magazines that you think might give you coverage, and make sure your release date gives them a chance to write about the release around release time. As a general rule of thumb, giving yourself a good eight weeks or more to create a promo campaign, especially for your first release, is ideal.
Of course, sometimes these promotional time constraints just can’t be met. Don’t sweat it. Reviews may trickle in after the release date, and that’s okay. Your first release may very well be a slow burn.
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Running a record label is a learning process. Chances are, even with the best intentions and carefully made plans, you will have made a mistake with your first release. That’s fine. You’re going to make them with your second, fifth and fifty-fifth.
Here’s the trick: make sure they’re different mistakes each time. After your first release, take some time to evaluate the whole process and decide what went right and what could use some improvement. Apply your lessons to your next release. Move on. As long as you’re learning from each release, you’re doing just fine.
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- It has been said before, but it bears repeating: running a record label is a learning process. When you commit to starting a label, commit to riding out the ups and downs. Sometimes things are going to go wrong, even if you do everything right. The trick is not letting the disappointments derail your overall progress. It may sound a little cheesy, but staying positive and rolling with the punches has a lot to do with keeping your label running in the long term.
- Don’t overshoot or bluff your way through things you don’t understand. If you don’t have a lot of music industry experience and need to learn on the fly, then asking questions and being realistic and honest about what you don’t know is the only way to gain the knowledge you need.
- Be honest with your artists about what you can provide and what you can’t. If a problem crops up, be honest with them about that, too. Bad reputations in the industry are almost always derived from dishonesty.
- Unless you’ve got a nice financial cushion in place, starting a record label almost always means getting into some debt. You can soften the financial freefall by being smart about the way you spend your money. In other words, spending on promotion? That’s an investment in future earnings. Spending on a yellow vinyl 10″ pressing? Not so much.
- Don’t chase trends. Focus on releasing and promoting quality music, nurturing your fanbase, and being good to your artists. Things tend to fall into place when you focus on the basics.
- Be creative. Cheap and cheerful solutions to things like artwork often turn into a selling point rather than a negative. It’s not about razzle-dazzle and slick stuff—it’s about good music.
- Treat your label like one of your artists. Promote your label name and build an identity.
- It is supposed to be fun, remember? Enjoy it!