Record Label Starting...
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Posted on Jun 02, 2005 01:14 pm
whosyourdaddy00
Hold 'Em Czar
Member Since: Dec 30, 2004
ok the studio owner that i'm gonna be workin' for suggest i start a record label.....we've got the production side taken care of because we will be able to record, mix, master, print and duplicate cd's in house.....what we are lacking is some kinda "street team" adn maybe a booking agent maybe? what exactly is the job of the label? we're gonna focus on artist development in a big way. but i just don't know where to start.
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Jun 02, 2005 01:20 pm Ya know, WYD, I am now considering doing the exact same thing. I have been seriously pondering starting a label...a label's role, by default, I don't think involves booking at all. What it does involve is marketing their bands recordings and gear, such as t-shirts and such things. Generally funding the recording sessions and guiding the production thereof.
Myself, I am consideirng a less "totalitarian" approach to running my possible label by letting the artist remain in control of, and ownership of, their material, and just helping them market it. Of course, with that agreement, the label would also be able to say "that sucks, I am not investing in marketing that".
So, I dunno...exactly...what the role is, I suppose at our rather indie level, it varies greatly from label to label. Hero has his own label, as does coolo, I would be curious to see what they have to say on the subject.
Jun 02, 2005 06:47 pm Dunno either - I always thought a label took care of promotions, productions etc, paying for studio times etc and gleemin it back when ye make the bucks...
I dunno. I started my own OMD type thing a short while back but thats not quite the same (tho it does offer bands and artists self promo). I actually need to promo that but alas, time will come after the Hibs song!!
WYD, good luck if ye go for it man - I hope it works oot.
Coco.
Jun 02, 2005 07:17 pm Yeah. Its one of the next steps. Good luck man.
Cheers,
C_S
cooloFrisco's Most UnderratedMember
Since: Jan 28, 2003
Jun 03, 2005 02:01 am Yeah, I have a little label called Paraphan that I "run" with a couple other guys. We are not on top of our game at all and pretty unprofessional. So, I'm starting another one by myself (so as to actually get some stuff done) so I should be running two concurrently (mine will be called Boss Monk).
Anyhow, as I see it, it is the labels job to pay for the production costs (studio time, cd pressing, graphic design, etc.). It is also the labels job to sell the sound recordings whether it be through album and singles sales, ring tone licensing, movie soundtracks, etc. Additionally in order to sell albums, the label must market/promote the act and the album, as well as try and find distribution avenues for the album.
Street team is part of the marketing. The band should have their own booking agent, but you can include that as part of your job as a label if you want, cuz bands that play more, sell more. But really, this is generally something the bands do for themselves.
If you want more specifics, let me know. I have a pretty good grasp on most of this stuff, except on how to secure physical distribution from a distributor company. And licensing is kinda tricky for me too, I guess.
WillumIdiot.Member
Since: Apr 22, 2004
Jun 05, 2005 10:00 pm Woop :)
I started Pith Records a while ago, and I've got a section on our site pretty much entirely for folks like you whosyourdaddy!
The Pith diaries are pretty much a blow-by-blow account of our trails and tribulations starting a label, so hopefully you'll get some ideas.
www.pithrecords.com/indie-record-label/
(Gads I haven't updated this thing for ages)
We're just about to release the labels 3rd album, and it's damn good fun.
There's a BUGGERLOAD of work that goes into doing the record label thing, and the one thing to remember is that your artists are your gold. Treat em well. :)
Realistically there is no set criteria for who does what with a label, we do management + web design + print design + recording + promo + distro + booking for our bands, but often you'll find small scale labels doing _just_ management, outsourcing for recording + promo + distro + booking etc.
It really depends on how much startup capital you have. :)
Oh, and DAMN good on ya for wanting to start a label (you too dB, bloody do it already :P), the more indies the better in my books!
Jun 05, 2005 11:13 pm Basicly what I do is pay for the pressing, and I market the bands. Sometimes I book shows for them, but I like them to do that on their own. I also produce merch, and of course I sell everything on the web store on my website. I also spend a lot of time convincing record stores to sell my bands' music.
Basicly, I view my job as putting my bands' records in the hands of as many people as possible, and gaining them as much exposure as I can.
Just make sure you're putting out bands because they're your friends AND (and this is the important part) they make music you enjoy, NOT because you think you're going to make money off them, because the reality of it is, you won't.
Jun 06, 2005 11:53 am word up everyone!!!
willum i will definately check your site out later today!!
thanks all...i'm definately not as intiminated as i thought i was!!!
"oh boy this is gonna be GREAT" - Animal House
cooloFrisco's Most UnderratedMember
Since: Jan 28, 2003
Jun 06, 2005 12:27 pm Wait, off topic, but how did willum get my avatar???
Jun 06, 2005 01:12 pm hmmm, weird, I must not have worked on a "after a Pro member quits" conditional...hmmmm, I'll have to look in to that.
riffgodwww.charlienaebeck.comMember
Since: Apr 10, 2004
Jun 09, 2005 05:16 pm For starting a record label, you guys are going to want to consider what exactly that your label is going to be doing first of all.
1. what styles are you going to work with?
2. who will do your art work?
3. Sole Proprietorship, LLC, S-Corp, Corp?
4. Capitol: how much money you need to get your first artist off the ground.
Here is a brief background of what happens:
Take label X for example: Label X acts like a bank that gives out a huge loan of X amount of dollars for Band A to make an album, get artwork, record, press, distribute, hire a radio promotion team..etc.. the label also hooks the band up with Agent B who books their tour, does press sometimes (sometimes has a different Press agent depending on the artist), Agent B sends out tour manager C on the road with Band A to keep the bands stuff in order like their budget, keeping on schedule, managing the band on the road basically in a nutshell.
Label X gets in return from Band A Z% of return on their investment of $$ into the band. Usually labels have to recoupe all of their expenses in a standard contract before Band A will even make a red dime, so Bands be sure to keep working your day job and bank up while you are still making the record because the label will expect you to spend every penny of the "advancement $$" that they give you for your deal to make a certain number of records.
Bands do make the going rate of royalties for being registered with ASCAP, SEASAC, or BMI though which will give them some chump change to live on on top of their Day Job savings til the label recoupes the initial investment.
Mind you that if you want to have a band in the top 100 on the charts now days that it will take a minimum of a 1 million dollar investment by the label to "break" a band so to speak so that every teenager on the planet knows about the band and is buzzing about the next big trend.
A few things you'll want to keep in mind also is: Who will be working A&R to discover/wine & dine the bands to get them into bed with the label? You'll need a great accountant that can get tax breaks for the label. You'll need a couple decent lawyers to do up contracts, keep the artists out of jail, keep the artists from sueing the label..etc.. You'll need to be networked with a good roster of booking/management companies. Most of the majors use WMI, but there are a lot of cool indies popping up now days also.
This is only the tip of the iceberg so to speak and about all I have time to post at the moment here...... There are some great books out on Amazon about stuff like this that will help. I worked A&R for a couple of labels in the past though as well as I own my own label currently and it is not an easy task and I would only advise for those who truely dig what they do with music and tunes.
If you guys have any questions that I may be able to answer also, please feel free to drop by: www.almostfamousmusic.com/boards and post and I will do my best to help. Gotta run. peace
Charlie
flame...bringing sexy backMember
Since: Jul 01, 2002
Jun 09, 2005 06:36 pm thats ace, thanks for sharing riffgod
riffgodwww.charlienaebeck.comMember
Since: Apr 10, 2004
Jun 13, 2005 06:23 pm no prob. anytime. :) Just figured I'd share some insite where I can. :) If you guys have any specific questions, please feel free to let me know. If I don't know, I know a couple folks that might. peace
riffgodwww.charlienaebeck.comMember
Since: Apr 10, 2004
Jun 15, 2005 03:30 pm Found a great article that explains a lot of the financial stuff that you guys might dig:
Link to original: industryclick.com/magazin...5&siteid=15
"Follow the Money, Who's making the real dough?":
Money gets a bad rap. You've heard the clichés: money is the root of all evil, money can't buy happiness, and so on. Money itself can't be bad — it's just a thing, like a rock, a chair, or a blender. It's the pursuit of money that gets people into trouble. People who enjoy making money are often labeled as superficial, shallow, and greedy. That's why you never see “money” on the Playmate of the Month's list of favorite things. That's why professional athletes embroiled in contract disputes always claim, “It's not about the money.”
Record companies are often characterized as the ultimate embodiment of money-grubbing evil. Unfortunately for them, the Napster unpleasantness has merely exacerbated that characterization. In fact, many people think record companies are just plain bad. Why is that? Certainly, record companies exist to make a profit, but so do most companies. Perhaps it's because of the way record companies make their money: they make it from our heroes, the musical artists.
All notions of musical parasitism aside, record companies perform the critical functions that allow artists to reach the masses. That's fine, you say. The problem with the record companies is that they're too greedy. You see them selling millions of albums at $15 to $18 a pop. Where do the truckloads of cash go if not into some big-shot executive's pocket? What about artist advances and money for marketing and promotional budgets? Where does all that money come from? Who gets what along the way? In this column, we will look at how record companies work and how the money finds its way from the consumers to the artists and everyone else who works to get the music to the public.
LABELS 101
In their most basic form, record companies are like music venture capitalists with production, marketing, and distribution arms. They locate, finance, and develop new talent; oversee music production; market the music through promotion and advertising and by securing airplay; and distribute the finished product through retail outlets and online services. That is expensive stuff, and risky too: only about 5 percent of new artists even sell enough records for the record company to break even, and as few as 5 to 10 percent of a label's artists pay for all of the music released by the company.
Before looking at the math behind record deals, a brief disclaimer is in order: the following numbers are generalizations based on a mainstream artist at a major record label. Every negotiated record deal contains different terms and conditions of payment.
IT TAKES MONEY …
When a label signs an artist, the record company advances the recording budget to the artist at no risk. If the album fails to sell, the artist is not personally responsible for paying the money back. The record company recoups its investment in the album only if the public buys it. However, the artist does not see any money from the album sales until the label makes back its investment.
A typical recording budget for an artist's first album is between $250,000 and $1 million. The record company will also spend approximately $250,000 to $500,000 to market a new artist to the public. Pressing the album and shipping it to retail outlets costs from $1 to $2.25 per unit, depending on the size of the pressing (more units cost less per unit). A new artist typically receives between 12 and 16 percent of the album's suggested retail price as a royalty. In addition to those costs, the record company must pay royalties (called mechanical royalties) to the music-publishing company for every unit sold. The record company usually caps its mechanical royalty costs at $0.755 per album (10 songs at $0.0755 per song). To recoup those expenses, the record company receives a wholesale price for each unit sold by the distributor from $7.50 to $11.50 per album, depending on the genre and artist. (For a look at where the money from a single CD sale goes, see Fig. 1).
With those numbers in mind, we can make some assumptions and show why every record an artist releases is a risky investment for the record company. If the artist receives a $250,000 advance and the record company spends $250,000 on marketing, the record company has spent $500,000 dollars before one album has been sold. If the record company receives $10 per unit from the distributor and has to pay $1.25 for pressing and shipping and $0.75 for mechanical royalties, the record company ends up with $8 per album ($10 income minus $2 pressing, distribution, and mechanical royalties) before deducting the artist's royalties. Assuming a suggested retail price of $14.99 and an artist royalty rate of 15 percent, the record company owes the artist approximately $2.25 per unit sold. After deducting the artist's royalty, the record company's net income from the sale of the record is approximately $5.75 per unit sold. The record company must then pay for its overhead and all of the albums that don't sell well enough to pay for themselves, $5.75 at a time. For that hypothetical album, the record company must sell 86,957 units to cover its out-of-pocket costs, which do not include the everyday costs of running an international business. Although 86,957 units may not sound like many units to sell, only about 16 percent of all record releases reach that sales figure.
TO MAKE MONEY
So what about the artists? They're really raking it in, aren't they? Well, yes and no. Huge stars make lots of money, but most artists, even if moderately successful, generally struggle to make a buck. First of all, the artist won't see any royalty money until the record company recoups its advance production budget. To further complicate the math, the artist usually must pay 3 percent of the royalty to the record producer. Deduct the 3 percent from the royalty rate, and the record company recoups its $500,000 advance at $1.80 per unit sold. Therefore, the artist won't begin seeing money from sales until 277,778 units are sold, and only about 3 percent of records ever reach that sales figure.
At least he or she will have fun with the advance money, right? You've heard about the parties artists throw when their big advances come in. Actually, that $250,000 represents a relatively small cost-of-living budget, even if the album sells relatively well. Assuming that no management, attorney, or other professional fees were paid from the recording budget, which would never happen, the artist will probably spend $200,000 of the $250,000 advance on actual recording costs. That leaves $50,000 to split among the band members. If the band has five members, each member receives $10,000 to live on until the album recoups its budget, as calculated above. That time period is generally about a year to 18 months if the album sells well.
Furthermore, those calculations don't include the money that the band must pay to its legal team or management for the deal. Lawyers typically charge an hourly rate (from $175 to $350) or a percentage of the artist's total gross income (between 3 and 10 percent). Managers typically charge between 15 and 25 percent of their client's gross income. Accordingly, the manager and the lawyer could easily end up with $75,000 of the $250,000.
OTHER MEANS
Before you run out to loan Metallica some money, keep in mind that other streams of income are available for reasonably successful artists. For example, artists can earn money from touring, though most bands tour primarily to support album sales and airplay. Also, some artists can make money through endorsements and other marketing strategies. However, the best opportunity for artists to make serious money is to write their own songs. I'll never forget seeing the lead singer of a moderately successful band flying first class while the rest of the band was condemned to coach. You can guess why: he was the songwriter.
The primary source of income for artists who write their own songs is mechanical royalties. Typically, a performing songwriter owns his or her own publishing company. That company enters into a copublishing agreement with a larger publishing company whereby the two companies co-own the copyrights to the songs. Of the mechanical royalty income, the songwriter receives 50 percent, the songwriter's publishing company receives 25 percent, and the larger publishing company receives 25 percent.
Assume that all of the songs on the hypothetical album are administered by a single publishing company (in a copublishing deal with the songwriter's publishing company), and that, according to the mechanical royalty projections laid out previously, $0.755 total mechanical royalty income is generated per album sold. Of that amount, the songwriter is paid 50 percent($0.3775). Of the remaining publisher's share, the songwriter's publishing company and the larger publishing company each receive $0.18875 per album sold. In the end, the songwriter receives a total of $0.56625 per album sold ($0.3775 plus $0.18875), and the publishing company receives $0.18875 per album sold.
Furthermore, the publishing company and the songwriter make money from any public performances (for example, airplay and live cover performances) of the album's songs. Although public-performance income is difficult to hypothetically quantify, approximately $0.013 to $0.014 is generated per public performance. That money is divided among the publishing companies and the songwriters. Public performance income is generally not as significant as mechanical royalty income, but think about how many times you hear a popular song on a single radio station in a single day and multiply that by the number of similar format stations around the world.
Songwriting money can add up fast. For the songwriter, an album that sells a million copies generates $566,250 in mechanical royalties alone and added income from airplay, which is above and beyond what the band members in coach are making.
That's where the money goes. Hopefully, those figures will help you realistically assess your risks as an artist or songwriter and maybe go a little easier on the record companies. For better or worse, selling music is and always will be a business. Caveat emptor!
WillumIdiot.Member
Since: Apr 22, 2004
Jun 16, 2005 04:52 pm oh btw whosyourdaddy00... good luck! :)
Jun 16, 2005 05:16 pm Hey Charlie
That is one helluva a post bud. But, a darn good one.
Again a good share...cheers bud.
Coco.
