We are in an era where it is possible to create and release high-quality recordings without an established record company involved. That doesn’t mean that the roles and functions of a record company can be neglected. In order to have a successful release, and to reap the rewards of that success, you need to think and act like a record company.
One of the mandatory questions on the PPL rightsholder registration form is “label name”. Quite often people would get stuck on this question and call in…
“…I’m not with a record label, I’m just an independent artist…”
…was a common statement regarding that question.
My response was always the same if you own and/or release sound recordings you ARE, by definition, a record company.
It’s really important to know that and to keep it in mind. We are in an era where it is possible to create and release high-quality recordings without an established record company involved. That doesn’t mean that the roles and functions of a record company can be neglected. In order to have a successful release, and to reap the rewards of that success, you need to think and act like a record company.
First of all, what is a Record Company?
Simply put a record company is a company that markets sound recordings. They will either own the sound recordings outright or they have licensed them from the owners.
The sound recording has its own copyright separate from the composition of the song, the owner of the sound recording has the right to copy and distribute them. They will also receive “neighbouring rights” revenue, as long as the recordings have been correctly registered with the relevant society.
Quite often a record company will release using a variety of different “label” names, especially if they release a variety of genres that may not have the same audience, they are basically trading names for the record company.
The benefits of being your own record label
As a self-releasing artist, there are a few key benefits to creating a record label.
When you are releasing your own music you are both the label and the artist. Usually, independent record deals are “50/50 net profit” between the artist and the label. Meaning that once all the costs have been recouped the profits are shared equally between the two parties. Any featured artists, producers and session players involved in the recording are paid from the artist’s share. Any percentages agreed are from the artist’s share, so if a featured performer has agreed to 10% of the royalties this is actually 5% of the overall profit.
A mistake often made by self-releasing artists is that in the absence of a record label the label share and the artist’s share become one and collaborators are paid a percentage of the overall profit which will be double what they would normally get.
Adopting the independent label model is a really good idea, split the profits 50/50 and put half aside for the record company (open a separate bank account if possible and keep separate accounts for your record company). This money will fund your label, paying for future releases and providing tour support. The other half of the profits, the artists’ share, should then be divided between the collaborators as per your agreements with them.
It’s a good look. Being a “signed artist” is, for most people, a badge of honour. Having the backing of a record label will, in many instances, encourage people to take you more seriously. Owning and running your own business can also be really impressive, just don’t oversell it. Don’t be one of those people that puts “CEO” after your name on emails and business cards when you are the sole employee of the label.
By creating a record label you will also create a brand, connected to, but separate from, your artist brand. Having a strong label brand increases your potential merchandising revenue as now you can sell label merch (t-shirts, hats etc) as well as your artist merch. You will also increase your ability to sign other artists and launch them to your label’s audience.
4. Limited Liability
Another benefit of starting a label, if you register the business as a limited company, is reduced liability. By creating a separate legal entity you will no longer be personally responsible for any financial losses your company makes (providing no fraud has taken place). The band Radiohead set up a separate limited company for each album they release meaning that the losses from one album cannot affect subsequent releases. In fact, Radiohead has around 20 companies between the members to handle the various revenue streams the band generates.
Limited companies will generally pay less in tax than a sole trader, and registering the label name with Companies House prevents other businesses from registering companies with the same or similar names.
“If you label it this, then it can’t be that”
Ultimately, the main benefits of setting up a record company are financial, and it can also add to your overall image.
By choosing to put out your music independently, you have become a record label, whether you like it or not. Learning, and performing, the functions and duties of a record label is key to your success. Many people proudly state “I made this record without a record label” when actually they should be proud to announce, “I made this record with my own record label”
Record labels are often maligned and have been accused of everything from generally exploiting artists to “modern-day slavery”, usually by people who have made millions of dollars from them, and maybe for some labels, there is some truth to that.
Despite what you may have read, been told or believe, record companies are not inherently evil. How you choose to run your label is up to you.