Introduction

I recently wrote a piece about how one of the best ways to get a job in the music industry was to act entrepreneurially and start a business. After considering this statement for a while, I believe now that it is not one of the best ways, it is the best way. I also believe that now is the best time in a long time to start a music related venture. You see, I feel that whenever people are seeing nothing but turmoil, that smart operators see opportunity. So, while the major labels are in full-on crisis mode, I believe that this represents a call to action to savvy entrepreneurs everywhere...start a label!

As I mentioned in my article on how to get a job in the industry, starting a music venture will force you to make connections, learn the business, and will show potential employers that you are energetic and motivated. Over the course of a number of articles, I’d like now to get more specific about this and outline how to start a label. While this is a big topic, and potentially touches on just about every aspect of the music industry, I think it’s a more manageable and approachable endeavor than most people imagine.

The reality is that, because of the massive technological innovations, the costs of starting a label are next to nothing. Of course, as these barriers of entry come down, more and more participants stream into the marketplace – so, competition is up. You must not only employ the new technologies, you must do so with great acumen and planning. Lastly, while I’m going to illustrate how I would go about starting a label where I am someone relatively new to the industry, these articles are not meant to be read as the way, but rather, you should dissect the pieces I write, and use them however they best fit your goals. Onward then!

1. The “35,000 foot view” of the start up label

Find some artists In this first piece, I want to lay out a broad, but complete, proposal for how one might start a label today. The subsequent pieces will go into depth, but think of this as the “manual for those who hate reading manuals” section.

OK…here’s what you do. You’re someone that loves music - maybe you’re in a band, maybe not…doesn’t matter. You consider yourself a maven (for more on maven’s see my review of Malcolm Gladwell’s The Tipping Point; that is, someone who is able to discern great artists, and is excited about exposing others to them. Maybe you have some contacts in the music business (you might know someone who DJs at the college station, or books the local coffee house…whatever…doesn’t matter), or maybe you don’t. You’ve managed to scrape together somewhere between one and five thousand dollars. Three thousand would be a great number, but if you don’t have it you don’t have it…keep reading.

Your first step is to find between 4 and 10 artists who you think are great. In addition to them being great, at least one or two of them should have some kind of decent local following (maybe they can sell out a 200 person venue), and none of them can be signed to a major label. It might be OK if they’re signed to indie labels, but it would be best if they were unsigned. That said, try and make sure that at least one or two of the bands have released something (either through an indie label, or on their own). Now, of course, it’s best if these bands share some kind of aesthetic continuity. Don’t have three death metal bands and a folk rocker – unless there’s something that binds them together (who knows what that might be). Try and imagine all of these bands playing at a club on the same night (because hopefully they will soon at your label launch party), and imagine if people would throw stuff at one of the bands while cheering for the others. If there is a band that would have things thrown at them because they don’t fit with the others, find a replacement (too bad it isn’t 25 years ago, and you could find The Replacements).

The beauty of the compilation album

OK, now that you’ve found your bands start getting comfortable with the idea of having a compilation album as your first release. Here’s why. A compilation, as they say in the business world, amortizes your costs and risks. What this means is that by doing a compilation, you get more bang for your buck in terms of exposure, and you limit your downside risk because you’re not completely reliant on the success of one artist. All you need is one artist on your comp to succeed, and they will pull all the others along.

Additionally, when you go to start selling this compilation, you know you will have a customer base. All of the artists on the comp are going to want copies so they can sell them of the stage or from their websites, and, if you budget wisely, you may very well be able to make a good chunk of your money back simply by selling the CDs back to the bands.

Of course, this is not your ultimate goal, and while it’s fantastic to have some cash flow coming in from the day you get the CDs back from the pressing plant, you really need to aspire to make a new for your label by getting the CDs out there beyond just the artists who perform on it. Releasing a compilation speaks to this as well. While we’ll talk about marketing in great detail in a later section, it should be obvious at this point that releasing a compilation will also increase your odds of getting media coverage (press, radio, blogs, etc.). This increased media coverage will not only help you generate interest in your release, it will also get your label’s name out there, and prep the market for future releases – which may or may not be compilations.

Of course, the main point of this media coverage is sales, and, once again, a compilation really works in your favor here too. Not only will the spread of artists on your comp increase media coverage, it will also increase the likelihood of sales. As I mentioned earlier, you really just need one artist to gain some popularity, and it will pull along all the others on the comp. This also speaks to the previously mentioned idea of making certain that at least one artist on the comp has some sales track record. This way, when you’re talking to retailers you’ll be able to present them with something they’ve sold in the past and will thus be more likely to take a chance on stocking now.

You may wonder why I’ve been talking about CDs so much in this age of downloads. Well, downloads are an important part of the equation here, and should not be discounted, it’s just that there’s not that much to say about them. Yes, you should get your compilation album up on all the download stores (iTunes, etc) — and if you need information on this, there will soon be an article on the AH site on how to do this, but in the short term, check out TuneCore. You should also make the downloads available for sale off your site, allow the artists the rights to do the same from their site, and use the mp3s as promotional tools (which will talk about soon), but, beyond that, you still need those physical goods to really establish yourself as a label.

So, to wrap up this 35,000 foot view of why it’s a good idea to start a label by using a compilation as your first release, the basic idea is that it increases your success rate (by multiplying your avenues for promotion and sales), and decreases your risk of failure (by not hitching all your hopes to one particular artist). It, of course, also exponentially increases your contact base of artists, and works as an A&R tool, because once you release the comp, you can judge which of the artists is getting the best response, and attempt to do a deal with this artist for more records. All of this will be covered in more depth as we move along.

The next part of this series will deal with the type of contracts you need with the artists, and what type of legal issues you need to confront for your new label. For now, go on out there and find some artists who you are passionate about!