Are you interested in starting a record label online from scratch? If YES, here is a complete guide to starting a record label with NO money and no experience.
Okay, so we have provided you an in-depth sample record label business plan template. We also took it further by analyzing and drafting a sample record label marketing plan backed up by actionable guerrilla marketing ideas for record labels. In this article, we will be considering all the requirements for starting a record label business. So put on your entrepreneurial hat and let’s proceed.
Table of Content
- Record Label Industry Overview
- Market Research and Feasibility
- Record Label Business Plan
- Record Label Marketing Plan
- Record Label Name ideas
- Record Label Licenses and Permits
- Cost of Starting a Record Label
- Record Label Marketing ideas
Are you a music lover? Did you know that even if you didn’t have an appealing voice to sing and are eager to make some money that you can still make some cool bucks from owning a record label?
Truth is that as an entrepreneur and a music lover, one of the easiest ways of making money from the music industry is to start your own music label. What is more; it is not difficult to start a record label from the scratch in any part of the world.
What is the role of record labels all around the globe, you just might wonder? Well, the role of the record label industry is to nurture, promote and distribute music all around the world. Furthermore, the term “record label” originated from the circular label in the center of a vinyl record, which prominently displays the manufacturer’s name, along with other key information.
What is a Record Label?
A record label can be defined as a brand or trademark that is established with the major aim of marketing music recordings and music videos. In most cases, a record label is also a publishing company that manages music brands and music trademarks; coordinates the music production process, manufacture, distribution, marketing, promotion, and enforcement of copyright for sound recordings and music videos.
Record label companies are also in the business of conducting talent scouting and development of new and upcoming music artists; and they maintain contracts with musicians, as well as their managers.
Is the Record Label Industry Evolving?
In the recent time in the music industry, a larger percentage of recording artists have become increasingly dependent on record labels to promote them and increase their consumer base. It is easier for a record label to attract influx of upcoming artists, if the record label is well established and recognized.
Record labels that are just starting out would have to go out there to search for music talents that can help launch them out with their robust talent. The truth is that it is a win – win situation when a record label discovers a good music talent. The music label will help promote the recording artist and the recording artist, also gives publicity to the record label.
With the advent of the internet, it becomes pretty much easier for music labels to increase their range of operations. A music label with large followers on the several social media platforms can easily promote artists under their label. All they need do is to release free downloads on their website.
Thereafter, if the music is good, it wouldn’t be too long before it starts to trend on a global stage. A very good example is the famous 2012 dance pop single – the‘PSY -gangnam style’ from far away South Korea, which was heard and viewed by an avalanche of people.
One good thing about starting a record label is the point that even if you decided to start it in the United States of America, your market wouldn’t be restricted to only artistes in the U.S.; the world will be your target market. Many thanks to the internet that have made the world a global village. All you need do is to strategically position your record label brand on the internet.
Starting a Record Label Online With No Money – A Complete Guide
- Industry Overview
The global revenue of the music industry is estimated at 15 billion U.S. dollars in 2013, and that is about the lowest revenue recorded since 2002. Of course it is an indication that the record label industry needs to become more creative and leverage on the changing tides in the world of technology.
Even the strong growth in streaming revenues was not enough to stop the music industry globally from experiencing income dropping below US $15bn for the first time in recent years in 2014.
- Interesting Statistics About the Record Label Industry?
Statistics has it that in 2013, the three largest markets in the music industry, measured by the revenue they generated were the United States of America, Japan and Germany. Hence, it is no surprise that the top three record labels that dominate the music industry in the globe are all headquartered in The United States of America.
Recent statistics from the IFPI revealed that overall global record industry revenues dipped by just 0.4% last year – but that was enough to pull the annual tally down from $15.03bn to $14.97bn. The biggest offenders for the fall were an 8.1% decline in revenues from physical format sales (to around $6.89bn, according to MBW calculations) and an 8.0% decline in download sales (to around $3.56bn). Single track downloads declined by 10.9% in the year, while digital albums sales saw revenues drop by 4.2%.
In the early years of the recording industry, record labels were just the leverage any music artiste needed to become successful in the music industry; which is why upcoming artistes or music bands source for good recording labels to sign a contract with.
Well, it is important to note that most upcoming artistes or even established artists ensure that they engage the services of an entertainment lawyer to help them negotiate the terms and condition of the contract. From past experiences, no artiste wants to sign a contract that will enslave them.
Recently, due to easy to access recording technology, combined with the wider reach of the internet, record labels and record production have become more popular. It is an indication that the business is growing globally. However, there just might be a snag, and that is that despite the growth in the industry, the revenues generated in the industry still is depreciating.
Entrepreneurs that are venturing into the industry are coming in with creativity and good business skills. The fact that revenue is nose – diving in the industry does not in a way stop some record labels from declaring profits years in year out.
The factors that is responsible for encouraging entrepreneurs to start their own music recording label is the fact that they can easily become an instant celebrity on the global stage if they can successfully produce a world class music artiste.
Starting a Record Label With No Money – Market Feasibility Research
- Demographics and Psychographics
When it comes to music, there are no exemption to who you can sell to. Different genres of music appeals to different groups of people. Christians generally prefer gospel music; older people naturally prefer countryside kind of music and high-life, whilst youths prefer pop, reggae, rhythm and blues et al. That is basically how the market is segmented.
But when it comes to sourcing for recording artistes to sign on to your record label, it is no longer news that you will probably get a good catch from the 16 – 35 age brackets. This is because they are the group of people that are ready to take the music career really seriously. People outside that age bracket are either too old to start pursuing music career or are too young to consider pursuing a career as a musician.
- Record Label Niches / Specialization
There are several niches in the music industry. It is therefore left for you to choose that which you think might attract people and make you make cool cash and profit in the long run. Here are the niches that an aspiring entrepreneur can choose if they want to start their own record label;
- Independent Music Label-: Independent music label which is also known as the ‘indie label’, are music labels that adhere to independent criteria of corporate structure and size, or any record label that releases non-mainstream music, regardless of its corporate structure. Independent record labels are often considered more artist-friendly.
- Subordinate Music Label-: Subordinate music label which is also referred to as sub – label is a record label company that operates under the cover of a large music company. Better put, they operate within a group.
- Vanity Music Label-: Vanity music labels are labels that carries an imprint that gives the impression of an artiste’s ownership or control of the recording label. It is an ideal standard artiste – record label relations. In other words, it is a win – win relationship. Under this label niche, the artiste will control nothing more than the usage of the name on the label, and they may also enjoy a greater say in the packaging of their music work.
The level of Competition in the Record Label Industry
The level of competition in the record label industry is on the increase as the years roll by. Which is why in the 1970s and 1980s, there were consolidation in the record industry which led to almost all major labels being owned by a very few multinational companies. The development led to CDs production to flow through a handful of sources, with the majority of the sales going through the “big three” record labels.
Most recording label companies now leverage on the internet to spread their tentacles and increase their revenues. This is because they know that it pays a great deal not to concentrate only in the U.S. market. Hence, they are now more concerned in spreading the marketing of their record label to the rest part of the world.
- List Of Well – Known Record Label Brands In the Industry
These are the most popular record label brands in the music industry. They have produced artistes in the past and present who have made great hits. Some of these artistes have soared so high, as their albums sold platinum and even double platinum. Most of these music labels have music artistes from all the continents of the world and not just the country were they are registered. Here are some record labels known by all and sundry…
- Warner Music Group
- Sony (known as CBS Records until January 1991 then known as Sony Music thereafter)
- Universal Music Group
- Atlantic Record Label
- Neutron Label (Own by ABC)
- Island Records, Ltd.
The cost of setting up a recording label company to a larger extent has reduced from what it used to be; and many thanks to the advancement of technology and perhaps the internet. These days it is now easier to see people set up a recording studio in their houses. All they need do is register a recording label and pronto, they will be in business.
If you are considering starting your own record label, you might just want to consider not making profits immediately. This is so that your ability to be consistent might be established. If continue in the business, it wouldn’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.
- Starting Your Record Label from the Scratch or Buying a Record Label Franchise
If you want to own a record label company, then you are only left with one option; and that is that you must be willing to start from the scratch. There is hardly any place where you can see the franchise of a record label being sold. The option that is available to you if you don’t want to start from the scratch is to go into partnership with an existing record label or out – rightly acquire an existing record label company.
- Possible Threats and Challenges You May Likely Face When Starting and Running Your Record Label Company
Technology and the internet which of course is a major tool for the advancement and gains achieved in the music industry can also poses a threat to the industry. The truth is that with the advancement of technology, it is now easier for new record labels to come into the industry and compete with existing record labels.
The internet and social media platforms now makes it pretty easier for record labels both legally registered and un – registered to promote their company and attract new artist as well. Just like any other business, government unfavorable government policies and also economic downturn can pose a threat and challenge to the survival of a record label company.
Writing a Business Plan for your Record Label
If you are serious about starting a business, then you should ensure that you prepare a business document before officially launching the business. The fact that there are loads of record label companies in the United States means that the business is self – sustaining and at the same time competitive. So, if you want to compete favorably with the loads of record label company in the United States, then you should be able to put together a workable business plan.
What really is a business plan?
A Business plan is like a blue print that is needed to successfully run a business; it is the document that will influence all your business decisions and actions. The whole idea of writing a business plan is not just for the sake of having a business document in place; but a detailed guide on how to effectively administer and manage your record label.
Your business plan should outline and cover strategies on how you intend to generate your start – up capital, attract recording artists and also promote and market your business. These are some of the key components that must not be missing in your business plan. Other key components that should be included in your business plan are as follow;
Executive summary and your company’s descriptions; This is the section where you are expected to clearly state what your record label company is all about, your company’s corporate culture, your sales and marketing strategies and the owners and key members of your management team, You are also expected to state your company’s vision statement, mission statement and the location you want to operate from.
Lastly, other key components that should not be missing in your business plan are; your products or service offering, SWOT analysis, marketing and sales analysis / strategies, pricing, costing and financial projection, publicity and advertising strategy, budget and start – up capital generation et al.
Choosing a Location for your Record Label
When it comes to choosing a location for your record label company, you don’t have to break the bank to pay for rent. Record label company can thrive in any location as long as there youths or pool of aspiring musicians. As a matter of fact, you can conveniently start your record label company from your home especially if your plan is to start it on a small scale.
Some of the factors that you would need to look at before settling for a location for your record label company are;
- A location with appreciable numbers of youths and aspiring musical artists.
- A location that is close to the hub of music in your city or state.
- A location that is easily accessible and secure.
- A location notable for producing some of the finest musical artist in your city, or state.
- A location that is free from noise; noise can frustrate your effort.
Starting a Record Label – Technical & Manpower Details
Running a record label company can be made as simple as possible with minimum work force. If you just want to build the business from the scratch and not to run it like a corporation, then you don’t have to break the bank to create budget for a large number of employees. The fact that you can run this type of business from the comfort of your home indicates that you can work with just a handful of employees.
On the average, you would need a manager that can double as administrator, promotion manager and tour manager, talent manager / sales and marketing executive and a music producer / beat maker and music writer and sound engineer cum maintenance engineer. Other roles can be contracted; roles like company’s lawyer (entertainment lawyer), graphic artist and brand manager et al.
Although you can buy most of the electronic gadgets needed to set up your record label as fairly used, but it is always cost effective to acquire brand new gadgets especially when you have the money. Even if you don’t have the money, you can explore other avenues that can allow you to pay by installment. Some of the equipment that you would need to set up your record label company are as follow;
- Mixing console
- Multi – track recorder
- Reference monitors, which are loudspeakers with a flat frequency response
- Acoustic drum kit
- Digital audio workstation
- Music workstation
- On Air or Recording Light
- Outboard effects, such as compressors, reverbs, or equalizers
- Pre amps
- Audio interfaces
- Effects racks
- CD duplicator
- CD printer
- Supply of CD
The Production Process Involved in Running a Record Label
Owning a record label is basically about helping recording artistes release their music album or singles to the general public. And the process starts with agreeing on a deal or contract and then writing out the music lyrics before entering the studio to start work.
The process of doing this is simple; once the studio recording starts, the music or record producer works closely with the sound / recording engineer- who helps him or her find or achieve certain specific sounds or feelings to portray through what matches with the lyrics.
Usually, this process continues throughout the entire durations of the studio session. During this process, the music producer will inject his or her personal opinions on what sound will bring out the best flow for the lyrics or the kind of genre of music they have chosen to work with.
It is important to point out that, though record studios charge by the hour, it is the responsibility of the record producer to ensure that the set time duration is met within the stipulated time. This is because the more time is spent in the studio, the more money you would have to pay.
The next stage after the songs are successfully recorded, is the stage where the music producer, sound engineer and mixers go ahead to mix the songs into the final version of the music album. This is done with the contribution of other stake holders and employees in the house.
Even at this point, the Record Producer still has plenty of work to do. Most often than not, an entire album is recorded in the studio, and yet some songs don’t end up making the final album. Yet, part of the Record Producer’s job is to help choose which songs make the final album and which don’t. Record producers also help decides the order of the songs (i.e. the songs’ track numbers, etc.).
The Manger, the Record Producer and the marketing and sales manager also selects the songs that gets to be promoted, as well as the songs that will be sold as singles. After that is done and the album is ready, then the marketing team goes out to market and promote the album.
The truth is that, if a record label company becomes successful in discovering a talented musician, it becomes easier for them to attract more talented upcoming artistes and recording artistes.
Starting a Record Label from Scratch – The Marketing Plan
- Marketing ideas and strategies for a Record Label Company
If you run a record label company, in order to generate incomes, you would have to go out there to market your record label known by a lot of people and also search and discover talented musician who need exposure to grow. If your record label brand is a successful one, then recording artistes both aspiring and professionals would want to sign on to your record label.
In essence, there are different marketing strategies and approaches that you are expected to adopt per time at different stages of your business. The bottom line is to ensure that you build your business on professionalism and excellence, and you wouldn’t struggle to achieve your market and sales target.
No doubt with the advancement of technology and of course the internet, there has been tremendous increase in file sharing and direct-to-fan digital distribution, combined with music sales plummeting in recent years. Record label companies and organizations have had to change their sales and marketing strategies and the way they work with artistes.
- Factors That Help You Get the Right Product Pricing for your Record Label
When it comes to getting the right price of recording deal with artists, then you would need to conduct a market survey and identify what is obtainable in the industry. Of course choosing a price or contract agreement in this type of business is entirely your choice. Once you are able to put other factors in the consideration, you can decide to choose the pricing that is suitable for you.
On the flipside, If you are new in the industry and you are still trying to get artistes to sign under your record label, then it will be wise for you to offer artistes mouth – watering deals and prices that are a bit lower than what your competitors are offering.
- Possible Competitive Strategies for Winning Your Competitors in the Music Industry
The key strategy to stay competitive and attract talented upcoming artistes and even established recording artistes is to offer mouth – watering deals. You contract should not in any way appear to be a slave – type of contract. No recording artiste wants to be exploited.
As a matter of fact, ensure that you offer excellent deals for pricing- making it lower than what your competitors are offering. Please note that if you have a wider reach, if you have a stronger presence on the internet cum social media, it will definitely count as leverage for you. That means that ultimately it is your competitive advantage.
- Possible Ways to Increase Customer Retention for your Record Label
It is one thing to get recording artists to sign on your record label; it is yet another thing to retain them for as long as you want. The truth is that once musical artists become successful, the either would want to start their own record label, or they would want to sign with a multinational record label corporation.
One of the strategies that will help you to retain successful artistes under your label is to continue to help them explore new markets. Exploring new markets could mean organization musical tours, concerts or anything that will make artists under your record label release and sell more musical albums et al.
- Strategies to Boost Your Record Label Brand Awareness and Create a Corporate Identity
Your brand has to do with the way people perceive you to be, which is why it is important to deliberately communicate and promote your brand. In promoting your brand and corporate identity, you should leverage on the various print and electronic media.
As a matter of fact, it is cost effective to use the internet and social media platforms to promote your brands, and besides it is pretty much effective and wide reaching. Lastly, part of what you need to do to promote your brand and corporate identity is to sponsor community musical shows or even organize your own musical talent hunt reality show.
- Creating a Suppliers/Distribution Network for your Record Label
When it comes to the distribution of music albums; the larger the quality of your network the larger the income you will me make. Although most big – time music marketers usually would want to become the sole distributors and marketers of any album you entrust in their care, but that does not stop you in generating sales from music downloads via the internet and on smartphones and also from musical tours, concerts and shows.
Tips for Running a Record Label Successfully
One of the major reasons why people go into business is to make profits; and to make the business successful in all fronts. The success of your record label company lies in the daily activities of the business. So, all you have to do is to ensure that all hands are always on deck whenever there is a project and also to always be on the lookout for talented and upcoming artists and also established artists.
You have to also be deliberate in hiring members of your team. This means that you have to hire skilled people who will be able to run with your vision and mission. Hiring novices could be tantamount to failure and stagnancy.
Lastly, it is very important to ensure that all the members of your team (employees and management staff as well) are always on the same page per time. You can achieve this by having regular meetings – meetings where you all will meet to review your company’s goals, missions and vision et al. The meetings can be once in a week, twice in a week or even every day of the week, coupled with monthly reviews, quarterly reviews and of course annual reviews.
Starting a recording label and nurturing it from the cradle to the very zenith of success is no child’s play at all. It sure does needs some deliberate efforts and a dedicated team that works tirelessly in seeing to it that it does not fail. In addition to all these, it also takes optimism to see that all activities being carried out in view of success is followed through at all times.