The cost of setting up a record label company to a large extent has reduced from what it used to be; many thanks to the advancement of technology and perhaps the internet. These days it is now common to see people set up recording studios in their homes. All they need to do is register a recording label and pronto! they are in business.

If you are considering starting your own record label, you might not start making profits immediately, but if continue in the business; it won’t be too long before you gain fame and fortune. All it takes to gain recognition in the music industry is to nurture a world-class music artiste under your label.

Basically, it is not expensive starting a record label company in the United States of America, Canada, Australia and the united kingdom. The amount required to start a record label company may vary slightly from country to country and from state to state. Part of the factors that can influence the start–up cost of a record label is the amount needed to rent or lease a facility, the cost of the equipment you would need and the money needed to brand your business.

On a more serious note, starting your own record label is to a large extent dependent on your preference and budget. You could budget and spend millions of dollars, or you could choose to spend moderately; far below a million dollars.

Examples of Record Studio Equipment Prices

  • For the purchasing of microphones and head phones, you can go for Neumann u87; it will cost you about $2000 or more.
  • For mixers, you can go with Euphonix or any other brand of your choice. But Euphonix seems   great (especially with is sweet sounding preamp and on board compressors). It will cost you about $30,000 or more.
  • On the alternative, you can choose to go for purely digital and skip the mixers altogether. This means you will need a good audio inter face with multiple inputs. 12 stereo pairs minimum. The emu 1820m is a good one.
  • The cables (nothing else but mogami cables), are the best audio cable in the market for now; you can explore other options.
  • You would need to create budget for pre amp. Avalon are perhaps your best bet and you can get it for about $2500 or less.
  • You should also prepare a good budget for monitor; monitor is one of the most important gadgets you would need in starting your own record label / record studio. You can go for a Yamaha monitor; it is simply one of the best you can get in the market.
  • When it comes to acquiring a computer, you just have to budget for a high end computer designed for such purpose. Your computer should of very large memory, high end graphic card, and 2.6 GHz quad core processor and you can search for a good software to work with.

Other factors that may be slightly different in terms of costing when it comes to starting a standard record label in any of the countries listed above are cost of labor, cost of transportation and logistics, local tax, business incorporation fee, rent/leasing amongst other factors.

Over and above, when it comes to starting a medium scale record label company, you should be prepared to either rent or lease a standard and centralized facility in a business district; this is going to be one of the areas where you are expected to spend the bulk of your start–up capital.

Estimated Cost Breakdown for Starting a Record Label

These are the key expenses you are expected to make when starting a medium scale but standard record label company in the United States of America;

  1. The total fee for registering the business in the United States of America – $750.
  2. The amount required for obtaining licenses and permits as well as accounting services (software, P.O.S machines and other software) – $3,300.
  3. Marketing promotion expenses for the grand opening of the music label company in the amount of $3,500 and as well as flyer printing (2,000 flyers at $0.04 per copy) for the total amount of $3,580.
  4. The cost for hiring business consultant (including writing business plan) – $2,500.
  5. The cost for insurance (general liability, workers’ compensation and property casualty) coverage at a total premium – $2,400.
  6. The cost for leasing a standard facility for the studio and administrative office – $150,000
  7. The cost for remodeling the facility and construction of studio – $100,000.
  8. Other start-up expenses including stationery ($500), phone and utility deposits ($2,500).
  9. The operational cost for the first 3 months (salaries of employees, payments of bills et al) – $60,000.
  10. The cost for start-up inventory (CDs supply, notice board, printing papers, printing ink/cartridges, pen and stencil et al) – $2,500
  11. The cost for cash register, security, ventilation, signage – $3,750
  12. The cost for the purchase of studio equipment (Headphones, Mixing console, Multi-track recorder, Microphones, Reference monitors, which are loudspeakers with a flat frequency response, Keyboard, Acoustic drum kit, Digital audio workstation, Music workstation, On Air or Recording Light, Outboard effects, such as compressors, reverbs, or equalizers, DE-essers, Cables, Pre-amps, Computers, Audio interfaces, Monitors, Software, Effects racks, CD duplicator, and CD printer) – $200,000.
  13. The cost for the purchase of furniture and gadgets (Telephone, printing machines, computers, tables and chairs, book/CD shelves, cabins, standard library, photocopier, fax machine, amongst others) – $4,000.
  14. The cost for building and hosting a website – $600.
  15. The cost for opening party – $2,000.
  16. Miscellaneous – $5,000.

You will need an estimate of three hundred and fifty thousand dollars ($350,000) to successfully set up a medium scale but standard record label company in the United States of America. Please note that this amount includes the salaries of all the staff for the first 3 months of operation and it applies to a record label with standard recording studio.

Starting a small scale but standard record label company that can only carry out basic recording services/studio works in the United States of America will cost about twenty thousand dollars to fifty thousand dollars ($20,000 to $50,000). Please note that with this budget, you will be expected to settle for fairly used studio equipment and the studio will be built in your home so as to enable you cut cost and overhead drastically.

When it comes to starting a standard and large-scale record label with several studios in key cities in the United States of America, a record label company that offer services in various niche areas in the music industry and a record label company that has the intention of selling franchise, then you should look towards budgeting well over two million, five hundred thousand dollars ($2.5 million).

7 Factors that Determine the Cost of Opening a Record Label

While each recording label and deal is different, there are common areas of investment that usually feature, although record labels are all about the artist and less about locations. However, there are factors and models that will influence the startup cost of a record label in modern America. These factors include:

  1. Recording Costs

Since most startup labels begin without a physical office location, the paramount cost is always the cost of using a recording studio for the talent. Note that a record at a commercial sound studio can cost hundreds of dollars an hour. Some label owners enter the field as audio engineers or music producers and can record talent in their own commercial or at-home studios.

Others might only contract with artists who’ve already recorded their work and focus on marketing and distribution of the music, avoiding recording costs altogether. However, for smaller labels, recording costs average $15K per album. For large labels, the average cost can be from $100K to $500K and up.

  1. Graphic design

A start-up record label is expected to prep itself for business. This includes the appearance and brand building for the record label. It involves the cost of the label’s logo design and the look of your first product.

  1. Video Production

Video production is more important than ever in an era where many consumers access music through audio visual services such as YouTube and Vevo. Record labels typically produce two or three videos per album. Note that this cost can vary widely between individual projects, with some superstar artists’ videos costing more than US$500,000, while some innovative low budget videos can cost as little as US$10,000.

The average cost of video production for an emerging pop act in a major market is estimated to be around US$50  –  300,000 for three videos. Such high expenditure is not always needed, of course, and videos can be produced much more cheaply. The approach will depend on the needs of the individual project.

  1. Advances

Record labels are known to pay advances to enable artists to concentrate on writing, rehearsing, recording and performing music. Advances are recoupable against future royalties from sales and streaming, but are not recouped if revenues fail to reach a certain level.

The record label is therefore bearing the risk of the investment in a highly competitive marketplace. Nonetheless, a typical advance from a major record label to a new act in a significant market is estimated to be between US$50,000 and US$350,000 and this rate can be much higher in competitive situations.

  1. Marketing and Promotion

Note that marketing and promotion costs are the biggest single item of spend for a new record label with new upcoming artists. Popping an artist into a significant audience unlocks a wide range of revenue opportunities, from live to merchandising.  This requires a significant investment. Record labels have more or less switched their marketing spend towards digital platforms which enable them to more tightly target individual groups of consumers.

Yet the costs of online marketing are increasing, and record labels also have to continue to advertise across television, radio, print and outdoor media to drive awareness of their artists. A record label can spend between US$200,000 and US$700,000 trying to break an emerging artist in a major market.

  1. Legal services

Just like every other business, even without a physical location, a startup record label is expected to be duly registered in the United States. Also, although you can find artist contract templates online, it is advisable a new record label enlist the professional guidance of a legal practitioner when writing at least the first contract.

  1. Tour Support

Upcoming artists often need to be heavily supported by record labels. The level of tour support required is highly dependent on the nature of the artist. Typically, tour support is the one area where rock acts require greater investment than pop acts. Artists who require a backing band or orchestra can drive the highest costs in this area. The average amount paid in international tour support for an emerging artist is US$50,000-US$150,000.

Conclusion

While every recording label or deal is different, there are common areas of investment that usually feature when starting a new record label, particularly in an agreement involving emerging artists. However, the factors above ultimately dictate the amount of money needed to build a music brand in the United States. It can cost between US$500,000 and US$2,000,000 to break a new label and a new artist in a major recorded music market.

Ajaero Tony Martins