10 Things Record Label Owners Need To Know

Kodi Vonn

1. Consider distribution

Will you release music digitally or put out CDs too? Digital is easy. Your artists are probably doing that already.

Physical distribution, on the other hand, is HARD to secure because distributors rarely want to work with labels seen as “high risk” due to a lack of proven sales. Make sure the business side of the label is fully established and that your artists have sizable fanbases before you approach distributors about partnerships. Doing this gives you better leverage when striking a deal (and assures you’re not giving away huge percentages of your profit).

LVRN, the label responsible for DRAM and 6lack, already had Billboard Hot 100 hits before partnering with Interscope Records for a distributorship. Nipsey Hussle’s All Money In label was more than just well-established—it was hugely profitable—before they signed a distributor deal with Atlantic late last year.

2. Who pays for promotion?

Promotion and marketing are the tools you use to make your label a recognizable recording entity. They are non-negotiable in importance. But will you pay someone to handle this? Will you manage it all in-house?

Advertising isn’t cheap. Ultimately you decide what you spend, but to reach larger and larger audiences–whether you’re buying Facebook Ads or radio spots–you’ll need to spend more and more money. Make a budget and prepare to overspend. You’ve got a lot of options: radio, print, internet, club shoutouts, tours, etc. A label’s job is to promote itself and its artists so do not neglect this step.

3. Learn the royalty and publishing rights systems

Whole college semesters are spent trying to understand the royalty and publishing aspects of the music businesses; lawyers spend years of their lives specializing in these fields. So no three-sentence tip is going to give you everything you need to know about intellectual property rights and payment (but it is critically important you understand them). Start with “What Is Music Publishing?” and continue your research from there.

Your label is responsible for handling royalties for your artists and paying them from the profits, so learn as much as you can. Then, speak with a lawyer or professional business advisor who specializes in the music industry to guide you the rest of the way. You’ll eventually need to sign up for a rights and/or licensing organization (like the Harry Fox Agency [handles licensing music], BMI [handles performance rights], SESAC [another performance rights organization]).

4. Be realistic

Goals are great and you should have a lot of them. But goals you’re not capable of accomplishing don’t help your business, they hurt it. Plot out every step no matter how small (even buying chairs and copy paper for the office) and see that you have the capital and manpower to reach it. Get several quotes before you open your wallet.

5. Make educated business decisions

Know what your business needs to thrive and what it doesn’t. Vinyl and merch are cool but if you can’t sell them, that’s wasted money. In the early days of your label, a quick turnaround from product to profit could mean the difference between profitability and bankruptcy. If you waste all of your funds on things that don’t further your business, you’re killing it (softly).

6. Seek out great music

Surf the web. Go to live shows. Network constantly. Your friends may make great music, but if you hope to grow as a business, you’ll more than likely need to invest in outside talent. Talent is the lifeblood of your label.

7. Be patient

All business owners have a special, manic sense of urgency that everything needs to happen NOW!! It doesn’t. Take a breath. Look at the forest and the trees. Analyze your options, weigh your pros and cons, and (sometimes) sleep on it before you make big decisions. Rushing things will lead to a lot of mistakes and setbacks—and will end up costing you even more time in the long run.

8. Be honest

The easiest way to earn a bad name in the music industry is to lie—believe those bad reputations last a lifetime.

Alt hip-hop/R&B singer, Raury recently left Colombia Records and his management company, LVRN, for this exact reason. Via Twitter yesterday (Jan. 8) the artist who hasn’t released an album since 2015 said, “I wish y’all would had told me y’all wish to focus on dram and black n I should sort it out.”

The result is two companies losing an artist on-the-rise because they weren’t up-front about their goals and resources.

Be honest about what you can provide for your artists and what you can’t. Don’t promise them global distribution and a world tour when you’ve only got enough funding for a bar tour through the lower southwest. If problems pop up, be honest about those too. Nothing’s going to go 100% according to plan. So plan for that, but keep everyone abreast of the situation.

9. Don’t chase trends

Don’t make your business or your artists look ridiculous by doing something off-brand and risk losing fans in the process. Focus on releasing and promoting quality music, building your fanbase, and treating your artists well. When you pay attention to the small things, the big things will fall into place on their own.

10. Keep records of everything

The paper trail covers your a** and helps you track where your money is going. If someone slips up, record-keeping tells you where and when it happened. You need records for tax purposes too.