Starting a Record Label

These days, more and more artists are skipping over the middle-man and promoting, distributing and producing their own materials. With the internet, music can be easily distributed and shared online. This section looks at how you can produce your own record or start your own label rather than waiting around to strike a deal.

For information on starting an independent record label, see resources from AIM (The Association of Independent Music), which is a national organisation that supports independent artists and record labels. 

AIM's Starting a Label guide

Interview with Alison Wenham

Chief Executive, Association of Independent Music

 

What is involved in starting a record label?

“You have to decide whether you are going to be a limited partnership or a limited company; there are a number of vehicles to get you started. We would always recommend that some form of legal structure is in place, because you are dealing with copyrights, which have a value to them. You need to be able to represent those rights professionally, so you' need to start with the creation of a vehicle. You need to start looking at the relationship of how it's governed between various people, who might be starting with you. It might be your other band members, it might be an investor, it might be your aunt, it might be a bank manager, it might be all sorts of different people, but you need to look at the contractual relationship between those people from day one, because all the problems for music and musicians come down the road when they've achieved success.

There are never any problems when you're not successful. Failure has a way of just taking care of itself or the admin that goes with it. Success means that you will be challenged on the money that comes in, who owns it, who it belongs to, are there investors to pay back, what are the splits between the band, what is the contract between the band members and so on. And that's just governing your own relationships. You then must register with MPA if you're going to publish your own music, because they look after quite a lot of money that comes into the industry via Public Performance Broadcast rights, sync licensing and that sort of thing. You need to register with PPL. You need to work out how you're going to make a record, be it physical or digital release you nonetheless need an ISRC, so you need to be a member of the PPL and apply for ISRC registration. These are things that we walk companies through. There's a lot of this kind of work that's involved in a start-up.”

What are the realities of running an independent label?

“It's very easy to start something. It's not very easy to make it successful or grow it. Labels exist to invest in artists and to develop their careers. Labels large and small do that, so there's plenty of choice. Many artist labels don't make it to year two from our observation here, sadly. When you haven't got critical mass, ie. scalability, you're simply an artist that wants to put out their work and try and get paid for it, it's a very lonely life. We try to make it less lonely. It's too slim a catalogue and it's too small a starting point, given there are millions and millions of people attempting to do this to actually become successful.

The whole independent sector has always been typified by a great deal of flexibility, a great deal of agility and a lot of partnership arrangements between artists and themselves. Many independent labels are run by people who know what they're doing and have joint ventures with their artists. So they provide the business expertise, they might provide the investment as well. The artist is a partner. We see plenty of partnership arrangements. We see plenty of 50 / 50 net split arrangements. The model that is chosen will again be the decision of the people who are planning to go into this area of business. There are plenty of choices about how to build a company that is appropriate to the artist and the ambition.”

Finance of Running a Record Label

“Generally speaking, independent labels are not profitable. They are just ploughing back money that's made into a new band or a new record. Profits are not the main driver for independent companies. They do not need to pay shareholders generally; they do not want to take to pay corporation tax. You'll find that most independent labels can't even break even or make marginal profits. Unfortunately, many many labels run at a loss, because it's very difficult to make money in the music industry at the moment.

There are lots of different income streams. There are income streams from touring, from sync rights, from merchandising, from recording, from publishing. As an artist, those are the main income streams. You are going to need to be able to maximize all of those, and you're going to need to know what they are and how to go about getting them, which is why we tend to think that you need to be fairly well versed in the business side of the industry if you're going to be able to maximize those income streams.”

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