How to Start Your Own Record Label
Becoming an entrepreneur in the digital age is simpler than ever. That doesn’t mean a lot of hard work doesn’t come after starting your company still, but creating a business is a fairly quick process these days. Building a record label is no different.
Quick Summary
In the digital age, launching a record label is achievable, yet demanding hard work and thorough planning is essential. Focusing on a specific genre enhances competitiveness, while choosing a unique name is critical for branding. Establishing a clear structural framework aids in attracting investors. Scouting talented artists is vital for success, and utilizing streaming platforms helps gain exposure. Effective promotion, including social media and professional PR services, ensures your label an
Record labels can no longer survive the way they did just a few decades ago, so being a newer, smaller label can work in your advantage. Investing any money in a small business is still a gamble, however. So proper planning is crucial to your success.
Pick A Genre
Start out with a main focus. Pick a type of music you want to represent and build your label around that. The music industry is extremely competitive. There are a lot of people out there who devote all of their time and energy into creating amazing music, you have to step up to their level if you want to compete. So focus in on one area that you believe in and establish a quality product.
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Name It
Obviously, your brand needs a name. While you’re deciding on a name, check domain names online to make sure no one else has it. You want the name you choose for your label to be unique (and also available).
Structural Integrity
In the not too distant future, once you create your label, you will need money. If you aren’t independently wealthy, you will need investors and they will want to know what your plan for your business is. You will need to decide on strategies in advance such as how people enter in to a partnership with your business, how they absolve the partnership, and the hierarchy of how decisions will get made. It’s important to establish these things in advance not just for monetary purposes, but also so that an organized system is in place.
Artists
One of the most important pieces of the puzzle when building a new label is finding amazing artists to be on it. The artists and repertoire part of your label, or A & R, is responsible for talent scouting and artist development. Get out there and look for some new artists who need representation. Go to open mic nights, get referrals from friends, and go anywhere live music is played and start searching for musicians that you feel will fit nicely into the business you’re building.
Use Streaming Platforms
Streaming platforms are a great way to start getting your artists music out without breaking the bank. Sites like SoundCloud, Bandcamp and Spotify are all ways to help your artists begin to build a following and start getting heard. Your label and your artists won’t get anywhere if no one is listening to the music you’re making.
Promotion
Your label needs the right music promotion or no matter how talented everyone you work with is, no one will know you exist. Social media is a good place to start building a following. But your label needs for your artists to have as much well placed exposure as possible. Find a professional public relations service that can help your artists get interviews and build effective ads to help grow your brand.
Legal Framework and Business Formation
Establishing the proper legal foundation for your record label is critical to protecting both your business interests and your artists' rights. Start by choosing the appropriate business structure - most record labels benefit from forming as a Limited Liability Company (LLC) or Corporation, which provides personal asset protection and tax advantages. Register your business name with your state's Secretary of State office and obtain an Employer Identification Number (EIN) from the IRS. You'll also need to secure appropriate business licenses and permits, which vary by state and locality.
Copyright and trademark protection should be among your top priorities. Register your label name as a trademark to prevent competitors from using similar branding. Develop comprehensive recording contracts that clearly outline royalty splits, ownership rights, marketing obligations, and termination clauses. Consider hiring an entertainment attorney who specializes in music industry contracts to ensure your agreements protect both parties fairly. Additionally, register with performance rights organizations like ASCAP, BMI, or SESAC to collect royalties when your artists' music is played publicly.
Insurance is another crucial component often overlooked by new label owners. General liability insurance protects against lawsuits, while errors and omissions insurance covers copyright infringement claims. If you plan to host events or recording sessions, consider additional coverage for equipment and venue liability. These legal foundations may seem expensive initially, but they prevent costly disputes and protect your growing business from devastating financial losses.
Financial Planning and Revenue Streams
Successful record labels diversify their revenue streams beyond traditional album sales. Digital streaming royalties now represent the largest income source for most labels, but understanding the payment structure is essential. Spotify pays between $0.003 and $0.005 per stream, while Apple Music pays slightly higher rates. Calculate that you'll need millions of streams to generate substantial income, making volume and catalog size crucial factors. Mechanical royalties from digital downloads and physical sales provide additional income, typically ranging from 9.1 cents per track for CDs to 70% of net receipts for digital platforms.
Sync licensing represents one of the most lucrative opportunities for independent labels. Television shows, commercials, video games, and films constantly seek fresh music, often paying anywhere from $1,000 to $50,000 per placement depending on the project's scope and budget. Build relationships with music supervisors and sync agencies who specialize in placing independent music. Create instrumental versions of your artists' tracks and organize your catalog with detailed metadata including tempo, mood, and genre tags to make licensing easier.
Consider alternative revenue streams such as merchandise sales, concert promotion, and artist management services. Many successful independent labels operate as full-service companies, taking percentages from touring, merchandise, and endorsement deals. Crowdfunding platforms like Kickstarter and Patreon allow labels to pre-sell albums and build direct fan relationships. Establish clear financial projections for your first three years, including realistic streaming targets, anticipated sync placements, and merchandise sales goals. Most successful independent labels operate on thin margins initially, so careful budgeting and multiple revenue streams are essential for long-term sustainability.
Distribution and Manufacturing Strategy
Digital distribution has democratized the music industry, allowing independent labels to reach global audiences through platforms like DistroKid, CD Baby, and TuneCore. These services typically charge annual fees ranging from $20 to $50 per album and distribute your music to dozens of streaming platforms and digital stores worldwide. However, choose your distributor carefully - some take percentage cuts of your royalties while others charge flat fees. Research each platform's reporting capabilities, customer service reputation, and additional services like playlist pitching and marketing tools.
Physical manufacturing still plays an important role, particularly for certain genres and demographics. Vinyl records have experienced tremendous growth, with sales increasing for fifteen consecutive years. However, manufacturing costs and minimum order quantities require careful planning. Expect to invest $1,000-$3,000 for 300-500 vinyl units, with 12-16 week production timelines due to high demand. CDs remain cost-effective for smaller runs, with 1,000 units typically costing $800-$1,200 including artwork and jewel cases. Consider print-on-demand services for smaller releases to minimize upfront investment and storage requirements.
Develop relationships with independent record stores and music venues in your area. Many stores support local labels through consignment programs or direct purchasing arrangements. Online platforms like Bandcamp offer excellent profit margins for direct-to-fan sales, keeping 10-15% compared to streaming platforms that may pay only fractions of pennies per play. Create bundle packages combining physical products with digital downloads, exclusive content, or merchandise to increase average transaction values and provide fans with compelling reasons to purchase directly from your label.
Building Industry Relationships and Networking
The music industry operates heavily on relationships, making networking essential for label success. Attend industry conferences like SXSW, MIDEM, and regional music conferences in your area. These events provide opportunities to meet booking agents, music supervisors, journalists, and other label owners who can become valuable collaborators or mentors. Prepare professional materials including business cards, one-page label overviews, and curated playlists showcasing your roster's best tracks. Focus on building genuine relationships rather than immediate sales pitches - industry professionals appreciate authentic connections over aggressive self-promotion.
Music blogs and playlist curators wield significant influence in breaking new artists. Research blogs that cover your genre and study their submission guidelines carefully. Many influential blogs receive hundreds of submissions weekly, so personalized, professional outreach is crucial. Follow playlist curators on social media, engage with their content meaningfully, and submit music that genuinely fits their aesthetic. Spotify playlist placements can generate hundreds of thousands of streams, but securing these spots requires persistent, strategic outreach and exceptional music quality.
Collaborate with other independent labels in your area or genre to share resources and cross-promote artists. Joint showcase events, compilation albums, and shared marketing campaigns can expand your reach while reducing individual costs. Establish relationships with local radio DJs, music journalists, and venue owners who support independent music. Many successful labels started with strong local scenes before expanding nationally. Consider joining organizations like the Music Business Association or A2IM (American Association of Independent Music) which provide educational resources, networking opportunities, and advocacy for independent label interests.
Written by Laurel Daggers
Laurel Daggers is a content writer at AMW®, covering topics in marketing, entertainment, and brand strategy.
Frequently Asked Questions
How much money do I need to start my own record label?
Starting a record label can cost anywhere from $500 to $50,000 depending on your approach. Basic startup costs include business registration ($50-500), music distribution services ($20-100/year), basic recording equipment ($200-2,000), and marketing budget ($100-5,000). You can start small with digital-only releases and minimal equipment, then reinvest profits into better resources. Many successful independent labels began with under $2,000 and grew organically through streaming revenue and smart partnerships.
What legal requirements do I need to fulfill when starting a record label?
Essential legal steps include registering your business entity (LLC or corporation), obtaining an Employer Identification Number (EIN) from the IRS, and securing appropriate business licenses in your state. You'll also need comprehensive artist contracts covering royalties, rights, and obligations. Consider trademarking your label name and logo. Additionally, register with performance rights organizations like ASCAP, BMI, or SESAC to collect royalties. Consult an entertainment lawyer to ensure all contracts and agreements protect your interests.
How do I find and sign talented artists to my new record label?
Actively scout talent at local venues, open mic nights, music festivals, and college campuses. Utilize social media platforms, SoundCloud, and Bandcamp to discover emerging artists. Network with music producers, booking agents, and other industry professionals for referrals. Look for artists with existing fan bases, professional work ethic, and growth potential. When approaching artists, offer clear value propositions like marketing support, distribution deals, and professional development. Start with 1-2 artists to build your reputation before expanding your roster.
What music distribution services should I use for my record label?
Popular digital distribution platforms include DistroKid ($20-80/year), CD Baby ($9.95 per single), TuneCore ($14.99-49.99/year), and AWAL (revenue-sharing model). These services place your music on Spotify, Apple Music, Amazon Music, and other streaming platforms. Compare features like pricing structure, royalty collection speed, analytics tools, and additional services. Many labels use multiple distributors to maximize reach. Start with one reliable service, then expand based on your artists' needs and revenue growth.
How can I promote my record label and artists effectively on a small budget?
Focus on free and low-cost promotional strategies: create engaging social media content across Instagram, TikTok, Twitter, and Facebook. Submit music to Spotify playlists and music blogs. Collaborate with local radio stations and podcast hosts. Organize showcase events and partner with other local labels. Use email marketing to build fan databases. Create compelling visual content like music videos using affordable tools. Engage with music communities online and build relationships with influencers in your genre. Consistency and authentic engagement often outperform expensive advertising campaigns.
Should I focus on one music genre when starting my record label?
Yes, focusing on one genre initially is highly recommended for new labels. Specializing allows you to develop deep industry connections, understand specific audience preferences, and build targeted marketing strategies. It's easier to establish credibility and brand identity within a niche market. You'll also develop expertise in genre-specific promotion channels, venue relationships, and fan engagement tactics. Once your label gains traction and resources, you can consider expanding into complementary genres. Successful labels like Stones Throw (hip-hop) and Captured Tracks (indie) built reputations through genre focus.
How do record label royalties and revenue sharing work with artists?
Typical record deals involve 50/50 revenue splits after recouping expenses, though this varies widely. Major costs include recording, marketing, distribution, and advance payments to artists. Revenue sources include streaming royalties, digital downloads, merchandise, and licensing deals. Establish clear contracts defining what expenses are recoupable versus label investments. Consider offering higher royalty percentages (60-80%) to attract artists, especially if they contribute to recording costs. Transparent accounting and regular royalty statements build trust. Use music industry accounting software to track revenues and expenses accurately for each artist and release.
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