Launching a record label combines a passion for music with strategic business. A modern label champions new talent by operating at the intersection of artistic curation and enterprise, guiding their work to a wider audience. This requires a structured approach to transform an appreciation for music into a viable business.
Create a Business Plan
Before signing an artist, the first step is creating a detailed business plan. This document is a strategic roadmap that defines the label’s core identity and its place in the music landscape. A clear vision is needed, including the specific genres of focus, to establish what makes your label distinct.
The business plan must also include a realistic financial projection. This involves outlining anticipated startup costs, which can encompass everything from recording and production expenses to legal fees for artist contracts and business registration. Other budget items include marketing campaigns, artwork design, and distribution fees. Identifying potential funding sources, whether personal savings, small business loans, or investments, is a practical component of this financial blueprint. The plan should set tangible goals, such as aiming for a certain number of releases within the first year to establish a market presence.
A well-considered plan also identifies the target audience by age, location, and listening habits, which informs all subsequent decisions. This document is a tool for securing distribution deals, opening business bank accounts, and attracting potential partners. It solidifies the label’s mission and provides a clear path forward for the first several years of operation.
Handle the Legal and Financial Setup
With a plan in place, the next step is establishing the label as a formal business entity. This provides a legitimate foundation for all operations. The process begins with choosing and registering a unique business name, which includes a trademark search to ensure it is not already in use. This name becomes a core part of the label’s brand identity.
You must select a business structure, which has long-term implications for liability and taxation. A sole proprietorship is the simplest to set up, but it offers no personal liability protection, meaning the owner’s personal assets are at risk. A partnership operates similarly. For greater protection, many labels form a Limited Liability Company (LLC), which creates a legal separation between the business and its owners’ personal finances.
Separating finances is another part of the setup. Open a dedicated business bank account to keep the label’s income and expenses distinct from personal funds. This practice is required for maintaining the liability protection of an LLC. To open this account and file taxes, the business will need an Employer Identification Number (EIN) from the IRS.
Find and Sign Artists
Once the business is structured, the focus shifts to its artistic core: the roster. This is the domain of A&R (Artists and Repertoire), the process of discovering, signing, and developing talent. A&R finds musicians whose sound and vision align with the label’s identity, which requires active engagement with the music community.
Effective talent scouting involves multiple channels. A&R representatives attend live shows at clubs and festivals to find compelling performers. In the digital age, scouting on platforms like SoundCloud, TikTok, and Bandcamp can uncover artists building an independent audience. Networking with industry contacts, such as managers, promoters, and music journalists, can also lead to valuable introductions and recommendations. The goal is to identify artists who have creative potential and a professional mindset.
When the label finds an artist to sign, the relationship is formalized through a contract. This legal document outlines the partnership’s terms, including the agreement’s duration, royalty splits, and recording commitments. Given the complexity, work with an experienced music lawyer to draft and negotiate contracts, ensuring the terms are fair and clear for both parties.
Manage Music Production and Distribution
After an artist is signed, the label oversees the creation and release of their music. This phase begins with production, turning demos into polished recordings. The label helps the artist select a producer, schedule studio time, and manage the budget for recording, mixing, and mastering. The mastering stage is the final step, where an audio engineer ensures the tracks are sonically balanced and optimized for playback.
During production, the label must also handle administrative details. This includes obtaining an International Standard Recording Code (ISRC) for each track to track sales and streams. The label also coordinates the creation of assets like album artwork and music videos for marketing.
With a finished master recording, the next step is distribution. For digital releases, partner with a music aggregator like TuneCore or DistroKid to deliver music to online stores and streaming platforms. For physical products, distribution involves manufacturing CDs or vinyl and getting them into stores through local shops or a larger distributor.
Market and Promote Your Music
Once music is distributed, marketing and promotion begin. A cohesive brand identity is a powerful tool, as a consistent logo, aesthetic, and genre focus can make the label a trusted curator for fans. This branding should extend to all artist materials for a recognizable look.
A promotional asset is the electronic press kit (EPK), a digital package with an artist’s bio, photos, and music links. This kit is sent to media contacts like bloggers and playlist curators to secure coverage. Pitching new releases to streaming service editorial teams is another tactic, as a popular playlist can introduce music to millions of listeners.
Modern music marketing relies on social media platforms like Instagram, TikTok, and YouTube. These are used to share music, post behind-the-scenes content, and engage with fans. A content strategy that tells a compelling story can build a loyal community, while paid advertising can target specific demographics.
Understand How Record Labels Make Money
A record label’s sustainability depends on generating revenue from its music. The primary income source is royalties from sales and streaming. When a song is streamed or purchased, the label receives a percentage of the money, which is then split between the label and the artist according to their contract.
Synchronization (sync) licensing provides another revenue stream. This involves placing the label’s music in media like television shows, films, commercials, or video games. Each placement requires a license and a fee, and this area requires active pitching to music supervisors responsible for selecting music for these projects.
Labels also generate revenue by selling artist merchandise like t-shirts and vinyl records, often managing the production and sales for a percentage of the profits. For labels with “360 deals,” income streams can extend to a share of revenue from touring. This diversified model helps ensure the financial health of the label.