What Does a Record Label Do?

A record label’s sole function is to create and sell records. The term “phonorecords” is defined in the copyright law and was originally created to refer to all recording configurations created and eventually was used by the music industry to refer to physical configurations such as vinyl records, cassettes and compact discs. Though it is perfectly acceptable to refer to all configurations, including digital downloads as "records", since its likely that physical configurations eventually will become obsolete, the industry has been transitioning to the term “audio products” or just "product" to refer to generally refer to all formats.

Except for the money a label invests in producing audio products, every dollar it spends has one purpose: to sell these audio products. In this sense, a record label is really no different than a company that sells soap or cereal. It will conduct marketing studies to determine the type(s) of consumers that will like its product. Then, the label will promote its products to encourage those consumers to buy it. And like soap or cereal, both the artist and the recording that he or she has worked so hard to create are considered products—sources of income—to the parent company.

Record companies promote their artists’ audio products through advertising in the media, such as magazines, radio, television and the Internet. They may hire independent radio promoters to seek radio airplay. Labels also may promote sales in record stores by paying for those posters you always see on the walls, and by having a copy of the record at a listening station or in special high visibility areas in the store. A label’s publicity department will send newly released audio products to magazines and newspapers, hoping to obtain good reviews or stories about the artists. The size of the label and its monetary resources will dictate the kinds and amount of promotion it is able to do.

Not surprisingly, smaller labels tend to have smaller promotion budgets. Therefore, they have to find creative ways to promote their artists’ audio products. If you’re starting a small independent label, you may be able to do no more than produce the artist's recording, pay for minimal advertising and promotion, and provide the artist with audio products to sell at his or her live performances. This arrangement benefits both parties and should be acceptable to an artist who is in the early stages of his or her career. Your label is able to make a small investment in its product and your artist gets someone else to pay for recording, packaging, and promoting his or her audio products.

 There are some things a label should not do. The record company’s job is to promote and sell the artist's audio products, not to develop an artist. Yes, an independent label will sign artists who are less experienced and less developed than artists on major labels. Therefore, artists will be developing their talents and gaining experience while recording for your label. But many small labels make the mistake of signing artists who have raw talent but no performing or recording experience. Certainly, you want artists with talent, but ideally, you want to sign people who also have been playing live and spent at least some time in a recording studio. This will allow your label to spend its time and money promoting audio products, while your artists perform at live music venues and make appearances to promote their audio products further.

It may be difficult for your new label to attract developed artists, especially at first. But you should make it a priority to seek artists with some level of experience. very helpful to find artists who already understand this concept and will do the things necessary to develop their talents. They will utilize your record company as one resource in their endeavor, but will not rely on the label to develop them.

 One note of caution: you may hear about labels, usually locally, that say they can do it all for an artist. They’ll provide coaching to help develop the artist's live performance and recording skills. They’ll manage the artist and book the artist’s shows. And of course, they’ll produce, promote, and sell the artist’s audio products. This is too much. They’re spreading themselves too thin, and are almost certain to fail to live up to their claims.

 Don’t be one of these labels. As I tell my clients, if you are going to be a record label, be a record label and leave the coaching, managing, producing, etc. to the professionals who know those jobs best. Through networking, you’ll meet managers, agents, etc. who develop talent. The best thing you can do is to establish a good relationship with these professionals and introduce your artist(s) to them. Allow them do what they do the best, while you focus on your business: producing, marketing, and selling high-quality recordings.

Things You Can Do Today To Build Your Label

1.    Understand that a record company’s sole purpose is to promote and sell audio products, and think of creative ways to promote and artist’s record with limited resources.

2.    Seek out talented artists who have at least some prior recording and performing experience.

3.    Focus on running a record label and leave the coaching, managing, and booking to other industry professionals.

This blog entry is an excerpt from the book titled Music Business Made Simple:  Start An Independent Record Label that can be purchased at this link: Music Business Made Simple.

 MusicContracts.com provides all the necessary contracts for an independent record label at this link: Record Label Contracts.