Topping the charts: starting a record label is risky business. But with the right mix of music, marketing, and manpower you can hear the sweet sound of success.
WHEN C. MICHAEL BRAE brae
A hillside; a slope.
[Middle English bra, from Old Norse br ENTERED THE doors of Oakland's Alien Temple Baptist Church in 1991, he didn't expect to find an opportunity to own his own record label. But as chance would have it, that's exactly what happened. "I played the organ on Sundays, but on this particular Sunday, a gospel artist named Grady Harris Jr. was playing," remembers Brae. "We met after service and I noticed that he had left a cassette on top of the organ marked 'Sounds of Soul Records' so I asked him about it and he said that it was his label. He could see that I was intrigued so he invited me over to his apartment, but when I got there he said 'this is my label.' He just had a keyboard and all these 24 tracks. That's it."
Excited by the chance to exercise his business chops, Brae, a former investment banker Investment Banker
A person representing a financial institution that is in the business of raising capital for corporations and municipalities.
An investment banker may not accept deposits or make commercial loans. , offered to partner with Harris. The two drew up a partnership agreement: Brae would get 50% of record sales and 25% of publishing. Using a small portion of his $20,000 in savings, Brae leased a 1,800-square-foot office in downtown Oakland Downtown Oakland is the central business district in Oakland, California. This part of town is bounded, depending on the definition used by either Interstate 880 or the Oakland Estuary on the southwest, Interstate 980 on the northwest, Grand Avenue on the northeast and Lake Merritt , built a small recording studio inside, and through consignment began distributing the label's sole artist--Grady Harris and Friends.
Delivering cassette tapes out of cardboard filing cabinets, Brae sold nearly 1,200 units in over 100 mom- and-pop stores throughout Oakland, San Francisco San Francisco (săn frănsĭs`kō), city (1990 pop. 723,959), coextensive with San Francisco co., W Calif., on the tip of a peninsula between the Pacific Ocean and San Francisco Bay, which are connected by the strait known as the Golden , San Jose San Jose, city, United States
San Jose (sănəzā`, săn hōzā`), city (1990 pop. 782,248), seat of Santa Clara co., W central Calif.; founded 1777, inc. 1850. , Sacramento, and Los Angeles Los Angeles (lôs ăn`jələs, lŏs, ăn`jəlēz'), city (1990 pop. 3,485,398), seat of Los Angeles co., S Calif.; inc. 1850. . Still, Brae wanted more--more artists, more units, and more distribution. He realized quickly that he needed to go solo. "[Grady] was leaning more toward the production side and was focusing primarily on gospel music. I was leaning more toward the business, record label, and distribution side and wanted to focus on gospel, hip-hop, R&B, and everything else," he says. Later that year, Brae created Hitman Records.
Today, atop the 41st floor of an upscale office building in San Francisco's financial district, Hitman Becords is home to nine artists, including Young Mike, Elijah Henry, and Damaris. Brae, 42, now works with distributors such as Kansas City's Harvest Media Group and New York's Sumthing Distribution Sumthing Distribution is a New York based company started by Nile Rodgers that distributes recording artist and independent record labels. It is the largest African-American owned distribution company in America. to distribute music to more than 9,000 U.S. retail accounts. Tower Records, Virgin Mega, Best Buy, FYE FYE For Your Entertainment
FYE First Year Experience
FYE Fiscal Year End
FYE Funding Your Education
FYE For Your Eyes (CSD-TV magazine)
FYE For Your Enjoyment
FYE Full Year Effect
FYE First Year Enrichment
FYE For Your Edification , Sam Goody Sam Goody is a music and entertainment retailer in the United States and formerly in the United Kingdom. It is owned and operated by Musicland, which itself is owned by former rival Trans World Entertainment which also runs Suncoast Motion Picture Company and, until January 2006, , Wal-Mart, and Target are just a few stores that stock the label's tunes. Through its own distribution pipeline, Hitman Records also helps circulate the songs of over 30 other independent labels such as Roc Music, JazzyBoo Records, Tune Key Productions, and Jewel Thief Entertainment.
With nine employees, Brae's company earned approximately $900,000 in revenues this year. He's also working on a partnership with Audio Lunchbox, a Los Angeles-based digital download The perspective and/or examples in this article do not represent a world-wide view. Please [ edit] this page to improve its geographical balance. company that would put Hitman in charge of retail distribution for the company's 5,000 labels. In addition, Brae is also crunching numbers for a new project with R&B's Tony! Toni! Tone!
Brae is just one of many entrepreneurs reaping the benefits of the music business. According to according to
1. As stated or indicated by; on the authority of: according to historians.
2. In keeping with: according to instructions.
3. the National Association of Record Industry Professionals, the record industry is a $38-billion-a-year business fed as much by the thousands of small independent labels operating out of the basements, car trunks, and studio apartments of music mogul hopefuls as it is by the four major multinational establishments. However, very few new record labels survive the startup phase due to of poor cash flow. They also succumb suc·cumb
intr.v. suc·cumbed, suc·cumb·ing, suc·cumbs
1. To submit to an overpowering force or yield to an overwhelming desire; give up or give in. See Synonyms at yield.
2. To die. to the pressure of having to wear many hats and not truly understanding the business.
There's no doubt that this business is tough. Fewer than 2% of all songs released in the U.S. make a profit, and with Mp3 bootlegging bootlegging, in the United States, the illegal distribution or production of liquor and other highly taxed goods. First practiced when liquor taxes were high, bootlegging was instrumental in defeating early attempts to regulate the liquor business by taxation. eating into overall sales, the industry is in a crunch. However, those who plan properly, set realistic goals, and exercise patience and perseverance can find success. In this installment of the BLACK ENTERPRISE Dream Business series, we'll look at some of the pros and cons pros and cons
the advantages and disadvantages of a situation [Latin pro for + con(tra) against] of starting a record label.
RECORDING THE COSTS
Whether you want to produce smooth jazz This article
* Its quality may be compromised by peacock terms.
* Its neutrality is disputed.
* It needs additional references or sources for verification. , soul-stirring gospel, or has multiple issues:sultry sul·try
adj. sul·tri·er, sul·tri·est
a. Very humid and hot: sultry July weather.
b. Extremely hot; torrid: the sultry sands of the desert. R&B, starting a record label doesn't have to be a costly endeavor. Startup costs vary depending on a number of factors--location, the size of your staff, the budget for recording costs, promotions, manufacturing, and the amount and types of equipment used--but new label owners can begin mixing beats for as little as $5,000.
"I've seen record companies start with $5,000 and I've seen some people start with half a million dollars. But it doesn't really cost a lot of money to start a record label today because new technology and digital recording have made it possible to record with a lot less equipment than you needed in the old days," says Brian Lassiter, owner of World Premier Distribution and PowerPointe Publishing. "So basically, if you have a computer, the right software, a couple of speakers, sound modules, and dram machines, you're in business."
While the startup phase may be easy on your bank account, maintaining and growing a label requires much deeper pockets. Lassiter, whose company has distributed products for artists such as Twista, Young Jeezy Jay Jenkins (born September 28, 1977 in Columbia, South Carolina) better known by his stage name Young Jeezy, is an American rapper. He was formerly known as "Lil' J" in his early rap career. , and Ghetto Mafia, says the biggest expense for new labels is marketing and promotions. This figure can sometimes account for nearly 50% of expenses. "In fact, it costs more to promote and market music than it costs to make music," he says.
Whether you start your label on a shoestring budget or break the bank trying to get into the biz, the costs can mount quickly. Record executives say typical startup costs for a label include:
Licenses and legal paperwork: In order to sell your CDs to the public you will need to obtain a retail license. Fees vary from state to state, so check with your state department of revenue for the exact cost. Also, secure a Universal Product Code (U.P.C.) from GS1 US GS1 US is the GS1 Member Organization in the United States of America. Note: GS1 US was formerly the Uniform Code Council, Inc.
GS1 US is responsible to manage the GS1 System in the USA. GS1 US assigns GS1 Company Prefixes to companies/organizations in the USA. (formerly known as the Uniform Code Council, www.uc-council.org). You must become a member of GS1 US to obtain a U.P.C. Bar Code. The membership fee is based on your gross sales Gross Sales
A measure of overall sales that isn't adjusted for customer discounts or returns, calculated simply by adding all sales invoices, and not including operating expenses, cost of goods sold, payment of taxes, or any other charge. revenues and the number of products that will be identified with the U.P.C. More than 85% of all retailers use Soundscan, the technology that monitors retail sales, so this bar code is required on the back of a product. If you plan to grow your label into a brand you may also want to consider trademarking your company name (www.uspto.gov). The trademark process can cost from $500 to $5,000. To protect against someone lifting your lyrics without your permission, register your songs with the U.S. Copyright Office (www.copyright.gov). The registration fee is $30 per submission.
Recording fees: This depends on whether you operate from home or rent studio time. Costs also vary according to the types of equipment used and whether outside musicians, producers, and engineers are hired. With an in-home studio, use of the popular software program Pro-Tools (the basic version), a computer with lots of memory, and a keyboard, you can spend less than $15,000 in recording fees. If you plan to rent studio time and bring in known musicians, producers, and engineers, the costs increase. Entry-level studios charge anywhere from $30 to $60 an hour, mid-level studios cost $60 to $125 an hour, and top-of-the-line studios command $250 to $300 an hour up to a few thousand dollars per day. As for top-level musicians and producers, they charge by the song, some making $50,000 for a single track. If the label owner builds a digital recording studio, it can cost upwards of $20,000.
Manufacturing: The cost varies depending on which pressing plant you use, but expect to spend at least $1 per CD. That includes the CD, jewel case The plastic container used to package an audio CD or CD-ROM disc. See tray card. , shrink wrapping, and cover insert. Lassiter says make sure the plant can handle the quantities you need and can turn around finished product quickly. Cost to manufacture a CD ranges from $1 to $1.30 per 5,000. Most independent labels manufacture about 5,000 to 20,000 units for the first round of pressing.
Marketing/promotions: Spreading the word about your label doesn't come cheap. There are flyers, posters, postcards, press kits, street teams, and other buzz-building materials. "Marketing and promotions should be between 25% and 50% of your budget," says Steve Lurie, who teaches a course called "Developing a Record Label" at New York University New York University, mainly in New York City; coeducational; chartered 1831, opened 1832 as the Univ. of the City of New York, renamed 1896. It comprises 13 schools and colleges, maintaining 4 main centers (including the Medical Center) in the city, as well as the . When Brae signed his first artist, 16-year-old R&B singer Melody, to his label in 1992, he spent nearly $15,000 on radio advertising ($5,000), music video production ($5,500), photographs and postcards ($300), retail advertising ($1,500), and publicist pub·li·cist
One who publicizes, especially a press or publicity agent.
a person, such as a press agent or journalist, who publicizes something
publicist fees ($2,000). It varies greatly, but Lassiter says promotion costs start at $50,000 and go up.
Artist advances: Some label owners provide an advance against royalties In the field of intellectual property licensing, an advance against royalties is a payment made by the licensee to the licensor at the start of the period of licensing (usually immediately upon contract, or on delivery of the property being licensed) which is to be offset against in the amount of several thousand dollars. Brae doesn't offer advances. Instead, he pays for full production without recouping the costs from his artists. These fees can range from $5,000 to $50,000 for new artists. If the independent label has major distribution, the artist advance can be $100,000 to $350,000.
Administration fees: Depending on how you outfit your office, these costs can vary, but set aside a couple thousand dollars for phone lines, computers, travel, and other incidentals. These costs should average between $3,000 and $6,000 per month.
Star search: A record label is only as good as its artists, so finding true talent is key. Lurie suggests going to live shows, getting recommendations from others in the business, and soliciting demos from prospective talent by placing an advertisement in the paper or on your company Website. Once you find your "American idol American Idol is an annual American televised singing competition, which began its first season on June 11, 2002. Part of the Idol franchise, it originated from the British reality program Pop Idol. ," sign the artist to a recording contract. Many contracts last five to six years, with most artists receiving about 6% to 8% of retail sales, but how the terms are outlined is strictly up to you. Brae signs his artists to two-year contracts with one-year options and gives his talent 16% to 16.5% in mechanical royalties from record sales.
Finding talent and negotiating a deal that creates a win-win for both label and artist can be tough, but promoting that artist can be even more difficult. "The average major label spends in excess of $1 million to get a new record to basic levels of consumer awareness," says Tess Taylor, president of NARIP NARIP National Association of Record Industry Professionals . "But the average independent just doesn't have that kind of money to throw around."
As a new label your marketing push is not Likely to include MTV MTV
in full Music Television
U.S. cable television network, established in 1980 to present videos of musicians and singers performing new rock music. MTV won a wide following among rock-music fans worldwide and greatly affected the popular-music business. , BET or Vibe magazine, nor will it include commercial radio, since startup record companies don't have the financial resources or following required to promote their songs on mainstream television or the FM dial. Still, you must find cost-effective ways to spread the word about your music so people will buy it. Some label owners rely on the word-of-mouth generated behind an artist's live show. Others let their Websites and flyers do the talking for them.
Doing the distribution deal: Another challenge for start up Labels is obtaining distribution. Once Brae decided to form Hitman Records he headed for Los Angeles to secure a distribution deal. For an entire month, he pounded the Hollywood pavement, leaving press kits and demos at virtually every label, including A&M Records, Sony, and Capital Records. But it was to no avail. Although frustrated frus·trate
tr.v. frus·trat·ed, frus·trat·ing, frus·trates
a. To prevent from accomplishing a purpose or fulfilling a desire; thwart: and ready to call it quits quits
On even terms with by payment or requital: I am finally quits with the loan.
[Middle English, probably alteration (influenced by Medieval Latin , he approached yet another company called SOLAR (Sounds of Los Angeles Records). The label had produced the music of big names such as The Deal, Jody Watley, The Whispers, and Howard Hewett Howard Hewett (Born October 1, 1955 in Akron, Ohio) is an American R&B and gospel singer and former lead vocalist of the R&B group Shalamar.
Raised in Akron, Ohio, Hewett moved to Los Angeles. .
Brae met with the vice president's assistant and was promised a call back in one week. Not only did Brae receive the call, he also landed a joint venture with SOLAR. It was a 60-40 split in which the company agreed to pay for the manufacturing, distribution. and promotions of artists signed to both Hitman Records and Sounds of Soul Records in exchange for 40% of record sales. The deal gave Brae's label national distribution with entry into stores such as Tower Records, Musicland, and 20th Century Music in Oakland.
Getting distribution can mean the difference between the success or failure of your label. But attracting distributors is not easy. It's not enough to have hot beats. Distributors want to know that you have a plan to market your music, the financing and manpower to carry it out, and a track record of making some sales on your own. In short, you have to prove to them that your music will sell.
"Too many labels fall into the habit of saying 'well you're the distributor. You're going to do everything,'" says Clay Pasternack, owner of Clay Pasternack Inc., an Ohio-based consulting firm Noun 1. consulting firm - a firm of experts providing professional advice to an organization for a fee
business firm, firm, house - the members of a business organization that owns or operates one or more establishments; "he worked for a that negotiates distribution deals. "The distributor is there to make sure the records are in the stores when there is demand. Creating that demand is incumbent upon the label," he says.
Start by building some awareness at home. Sell your music at flea markets See computer flea market.
yard sale of used items at low prices. [Pop. Culture: Misc.]
See : Inexpensiveness , barbershops, beauty salons, birthday parties, car washes, and any place you think people will buy it.
Some experts say major distributors won't be interested in your label until you've sold 20,000 to 50,000 records, so consider no place off limits. "You can't say 'I'm going to press up 20,000 CDs and I'm going to sit here and wait for Sony Records Sony Records is a record label courtesy of Columbia, Epic and American Recordings. It has many divisions, including the preceding. As with other labels, other divisions may be region or genre-specific. Other divisions of Sony include Harmony Records. to call me up.' It's not going to happen," Lassiter says. "You have to get out there and hustle hus·tle
v. hus·tled, hus·tling, hus·tles
1. To jostle or shove roughly.
2. To convey in a hurried or rough manner: hustled the prisoner into a van. . You have to have that Girl Scout mentality and sell your CDs like they are Girl Scout cookies."
Once you've built a modicum mod·i·cum
n. pl. mod·i·cums or mod·i·ca
A small, moderate, or token amount: "England still expects a modicum of eccentricity in its artists" Ian Jack. of success, research the distributors that handle the type of music you make. Also consider what stores you would like to carry your music and note the distributors that handle those accounts. Ask other labels they distribute for feedback on their experiences. Then, write up Distributor One Sheets, one-page reports that include your label's contact information, promotion and marketing plans for your artists, a brief description of your talent, and the CD list price, release date, catalog number, and U.P.C. Bar Code. Distributors will want to see these.
After locating a distributor, Pasternack says expect to pay a distribution fee between 20% and 35% of retail sales. These companies will also keep a reserve of at least 25% against monies due the label to offset any store returns.
"Starting a record label takes preparation and hard work. There is also a certain amount of luck involved because success in this industry is often about having the right artist, the right record, and the right promotion," Lassiter says. "But if you start small, build your business slowly, and are persistent and patient, you can make it."
To Putting Your Record Label on the Right Track
1. Know your motives: The record business is a tough industry to navigate. It will help to define the objectives of your company and manage your expectations for success.
2. Cover the business basics: Starting a record label requires legal formation, a business plan, employees, a location, and everything in-between. Choose a name for your label and begin the trademark process. Obtain the required business licenses so that you can sell your CDs. Also, retain a good accountant and entertainment attorney who specializes in music.
3. Learn the language: Many labels fail because they don't have a sound knowledge of copyright laws, royalties, music publishing The contractual relationship between a songwriter or music composer and a music publisher, whereby the writer assigns part or all of his or her music copyrights to the publisher in exchange for the publisher's commercial exploitation of the music. , and distribution. To remedy the situation, Lurie says, "Do your homework. Take a class. Go intern intern /in·tern/ (in´tern) a medical graduate serving in a hospital preparatory to being licensed to practice medicine.
in·tern or in·terne
n. with an independent label and see how it works from the inside." Also, join a performance rights organization like ASCAP ASCAP
American Society of Composers, Authors, and Publishers (www.ascap.com) or BMI BMI body mass index.
body mass index
Body mass index (BMI)
A measurement that has replaced weight as the preferred determinant of obesity. (www.brni.com).
4. Stack up some cash: To help ease your financial burden, Taylor says barter wherever possible. "Creativity doesn't happen only in the recording studio. Creativity happens in business. So if you're starting a label and need money for recording costs, find out who has a home studio, and in exchange for studio time, see if you can mow their lawn, wash their windows, or even babysit for them. That kind of thing happens all the time."
5. Find and sign true talent: There are artists everywhere just waiting to be discovered. To find your Mariah or Usher, comb the clubs as well as churches. Visit talent showcases, put a classified on your Website, check with college music departments, and get referrals from others in the business. Before signing artists to a contract, Lurie says, check out their live performance. Brae adds, "Make sure the artist has a fan base or the potential to develop a fan base. This will go a long way when trying to persuade a distributor to carry your music."
6. Locate manufacturing: Until you obtain major distribution you will have to manufacture CDs on your own. There are several pressing plants from which to choose, including DiscMakers (800-468-9353) and Universal Duplicating (510-430-1000). Check the classifieds section of Billboard magazine for others.
7. Get distribution: Label owners sell their music to distributors and distributors then sell it to retail stores. Apart from the four major record labels, there are three other resources for finding distribution: one-stop distributors, independent distributors, and rackjobbers. A one-stop distributor supplies independent and major label products to chains, morn-and-pop stores, and other retail outlets retail outlet n → punto de venta
retail outlet n → point m de vente
retail outlet retail n → . Independent distributors carry only independent labels, providing products both regionally and nationally. A rackjobber gets a product from distributors for large discount department store chains. Distributors pay label owners about 50% of the retail list price for their CDs and typically settle invoices within 60 days. They will also require several promotional copies Promotional Copy is the second LP release of the indie band Reggie and the Full Effect. Caption on the inner cover
8. Form alliances: A savvy record label owner has a network of people he can contact for advice and help in the business. Build relationships before you need them by joining an industry organization and visiting clubs and radio stations to talk up your label.
9. Build a buzz: People can't buy your music unless they know it exists. But it's up to you to spread the word. Book your artists at conventions, charity organizations, shopping malls, and other venues where they may be able to perform live and attract a following. Also, use flyers, posters, and "street teams" to build awareness. Street teams pass out T-shirts, hats, and other promotional items Promotional items or promotional products refers to articles of merchandise that are used in marketing and communication programs. The items are usually imprinted or decorated with a company's name, logo or message, using techniques such as Embroidery, Silkscreen, or at concerts, festivals, and other events.
10. Roll up your sleeves: Starting a record label is not for the faint of heart. There is a lot of hard work involved, and since most new labels can't afford to hire a huge staff, label owners often have to wear many hats. To ease the pressure of operations, consider setting up an internship internship /in·tern·ship/ (in´tern-ship) the position or term of service of an intern in a hospital.
n the course work or practicum conducted in a professional dental clinic. program.
Resources for Breaking into the Biz
National Association of Recording Merchandisers National Association of Recording Merchandisers (NARM) is a U.S. not-for-profit trade association based in Marlton, New Jersey that serves music retailing businesses in lobbying and trade promotion. (www.narm.com) is a trade organization that consists of music retailers, wholesalers, distributors, content suppliers, consultants, and many other industry players. Among other things, the organization maintains a distributor database, previews upcoming industry conferences, and lists the latest music news.
Music Distribution: Selling Music in the New Entertainment Marketplace by C. Michael Brae with Dameon V. Russell (Hitman Records; $14.99) is a guide to marketing, promotions, distribution, and other aspects of selling music.
National Association of Record Industry Professionals (www.narip.com) is a membership organization that provides educational programs, seminars, mentor networks, and other development opportunities for those working in the recording industry.
Billboard's international Buyers Guide (www.billboard.com) is an annual publication that lists contact information for more than 13,000 national and international record labels, music publishers, wholesalers, distributors, industry associations, entertainment attorneys, equipment manufacturers, and more. It costs about $200 and you can purchase it online.