DIY Record Labels Guide

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description

A Cultural Enterprise Office guide explaining the practical considerations of setting up and running a record label. Written by Haftor Medboe of Edinburgh Napier University, as part of the Interreg ICV Creative Growth Project.

Transcript of DIY Record Labels Guide

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This is one of three Creative Growth Project guides focussing on the

music industry. It explores the practical considerations of setting up

and running a record label, including:

Product

Know your product, recording, release format, product image

Label

Label compatibility, the deal and deal models, distribution, label

infrastructure

Buzz

Publicity, know your market

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Product Label Buzz

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Areas to consider

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Product Label Buzz

Distribution

Compatibility

Digital Physical

Release

format

Image

Artwork

Reputation

Own music /

other artist

Recording MCPS

The deal

Currency

Infrastructure

Artist / label

collaboration

Live

Press &

marketing

Radio

Viral

WOM

Web

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Before investing time and money into establishing a label, research

your product thoroughly.

If planning to sell your own work through the label it would be wise to

canvas opinion on the artistic quality and perceived commercial

potential of your product from trusted professionals and peers.

Objective, valued opinion is key.

Know your product

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If you intend to release the work of others, research:

• Artist’s track record

• How long the band has been together?

• Whether they have a manager

• Whether they are gigging regularly

• How stable does the band appear?

• Where would you position them in the current music scene?

• The band’s ambitions and work ethic.

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Having fully considered whether you believe that there is a market

for the recorded works, you can begin to imagine the full package:

• Recorded work

• Associated artwork

• Band image

• Product format and packaging

• Presentation to the press

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• Have you / the band already recorded the product? If not how will

this be financed?

• Will recording costs be met by the label or will external funding

be applied for?

• The budget should include;

• pre- and postproduction

• studio time with an engineer

• musician costs where applicable and

• Red Book, digitally encoded master copies of the recording

Recording

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If the recorded work is your own, you should apply for an MCPS

waiver. If it is not, you will require an MCPS licence to cover

whichever formats you intend to make available for sale. Most

reputable pressing plants will not release stock until the relevant

paperwork is presented.

MCPS levies are currently 8.5% of dealer price or 6.6% of units

manufactured multiplied by number of copies shipped, which are then

passed on to the artist less an administration fee.

Mechanical copyright protection society (MCPS)

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Currently the most common formats are CD, MP3 and vinyl. Other

options include mini-CD, memory sticks or cards, cassette tape and

even Gameboy cartridges. Thought should be given to the most

appropriate format for the music and its intended consumers.

Each format has pros, cons and cost implications. MP3 is by far the

cheapest mass cloning method and easiest to disseminate in that

there is no physical product. CD reproduction has become cheaper

through vigorous industry competition and currently costs around £1

per unit for basic packaging in quantities of 1000+.

Release format

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Vinyl is currently around twice the price of CD production on orders of

1000+. Be aware that mastering for vinyl is significantly different to

mastering for CD and will require an additional process if releasing in

multiple formats. A poor master can render vinyl unplayable.

Other formats are generally more expensive and should only be

considered for tightly targeted promotional use or if product price can

support it.

Physical product requires physical distribution and stock control.

Digital product requires a download facility such as iTunes or the

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All products require a bar code (UPC – Universal Product Code) if

intended for third party retail. This code identifies your product as

unique and can be purchased from a variety of third party retailers

typically for around £20. The code is sent to you as a graphic which

can either be embedded in your product design or produced as a

sticker.

Each track must also be assigned a PPL ISRC code for the ease of

digital identification for Performing Rights Society / MCPS royalty

collection.

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Whichever format or combination thereof is decided upon, the product

also needs a visual representation. Whether in the form of cover-art or

video, animation or still photography, arresting imagery will encourage

more people to listen to, write about and promote your music. With

the advent of digital photography and editing, visuals do not

necessarily require an enormous budget.

Choose images that are sympathetic to the band, the music and its

fan-base. If the image does not correspond, the fan will be left

confused.

Product image

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Take particular care that artwork submitted for manufacturing

complies with file type and template requirements. Lack of attention to

this can turn into an expensive learning curve. Make sure that images

used have copyright clearance and are properly credited.

Innovative packaging can also boost interest and sales. Homemade

covers give fans a point of perceived contact with the artist. Limited

editions imply rarity and collectability. These approaches can also cut

manufacturing costs (but will extend assembly time!). Examples of

innovation in this area stretch to releasing an album as a tin of soup

with a download code on the label.

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The next question is whether the product is compatible with the label's

identity. If the label is to be built around the product, this identity can

be tailored accordingly; but if the product is to sit side-by-side with

existing releases the question of identity holds greater importance.

Label identity can be as critical as artist identity. A label without a clear

mission statement often finds repeat custom elusive.

Customers are more likely to return and extend loyalty if they feel that

the label understands and represents their listening tastes. This can

be an extension of life-style aspirations/perceptions that are

suggested by the look and feel of the label and its merchandise.

Label compatibility

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Label identity can be as critical as artist identity. A label without a clear

mission statement often finds repeat custom elusive.

Customers are more likely to return and extend loyalty if they feel that

the label understands and represents their listening tastes. This can

be an extension of life-style aspirations / perceptions that are

suggested by the look and feel of the label and its merchandise.

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Once all considerations have been addressed it’s time to think about

doing the deal. Up until now most efforts have been creative and by

nature, fun. It is at this point where you could lose a lot of money,

sleep and credibility if business isn’t properly addressed.

There are as many models for a deal as there are record

companies. First consider what you will be offering the artist for a

percentage of their revenue.

The deal

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• Is the label covering recording costs?

• Is the label covering design costs?

• Is the label covering pressing costs?

• Is the label responsible for press and marketing?

• Does the label hold exclusive rights to the product?

• Are you licensing limited use of the product?

• Are you offering additional services such as tour support?

• What are you charging the artist for retail / promotional stock?

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Recording costs can easily extend to thousands of pounds and initial

pressing of 1000 CDs will cost around £1000.00, including glass

mastering*. Add to this artwork, MCPS, the administrative costs of

press and marketing, stock-control, shipping, accounting, website

hosting and maintenance, tax liabilities.

These costs can be covered or split between the artist and label in a

number of ways depending on the nature of the deal.

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(*Glass mastering refers to the process of transferring data from a master onto a stamp

used for high quality CD pressings.)

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Recording costs = £2000

Pressing (1000 units) = £1000

Artwork (design and print prep) = £ 500

Press and marketing = £ 500

Total costs = £4000

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Here are four common models of deal structure which use the

following basic costs to form the basis of their comparison.

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A 50/50 deal after costs on physical release only.

Assuming a unit retail price of £10, the label / artist would have to sell

400 CDs before the band started receiving royalties or the label

started to make money after initial investment.

200 units are generally held back for press and marketing, leaving

potential additional revenue of £4000 between label and artist from

the remaining stock.

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Model 1

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Selling all 800 units represents a high number of sales for most

fledgling bands (and even for many established acts). There are

also additional costs not accounted for in this example – legal

fees, shipping, MCPS and the tax liabilities of both parties.

To earn a basic living solely from this model a DIY label operator

would require no less than 25 successful releases per year. 25

releases would in turn require a substantial investment by the

label ahead of any returns.

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The artist is responsible for delivering Red Book, mastered

product and artwork. The label finances the manufacture and

press campaign. The label starts making money after the first

150 unit sales cover the initial outlay, and the artist makes

money after recording and production costs have been met.

This model is clearly more attractive to the label in that it carries

less financial risk and a faster return on investment. The artist

takes the lion’s share of the risk and the onus is on them to sell

sufficient stock to cover expenses. This model is also currently

popular on the 50/50 basis.

Model 2

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The artist delivers mastered product and artwork and pays for

pressing. The label provides access to press and industry

contacts. The deal on revenue share may be adjusted in favour

of the artist in that risk to the label has been all but eradicated.

Model 3

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Download sales are not included in the above projections. These are

generally set up through an aggregator who gives the artist and label

access to providers such as iTunes, Napster, Amazon and Spotify for

a fixed fee or percentage of revenue.

Each of these providers also takes a fee, leaving the artist, if lucky,

with around 50% of the track price. In the case of streaming providers

such as Spotify the return is significantly less.

Deals with aggregators or indeed the providers themselves improve

with enhanced volumes of sales.

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The '360 deal'. Artist and label divide revenue on all associated

product from the outset. The artist signs over 50% of everything,

including merchandising, MCPS, PRS and PPL in return for

label’s initial financial risk and access to press and industry

contacts.

Model 4

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The four described models are all fairly common within the

industry at present. Many labels offer limited free stock in lieu of

tour support. Others sell stock, to be resold at the artist's gigs, to

the artist at reduced or cost price. Some charge a nominal sum

for units distributed to press and radio.

Digital sales can be added to any of the above models but

generally deliver a modest return at the outset. For an overview

on digital returns see on-line statistics:

www.informationisbeautiful.net/2010/how-much-do-music-artists-

earn-online/

.

All models

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Having taken delivery of 1000 CDs or vinyl records, before you can

commit to a release date, you need to arrange distribution.

As physical sales are substantially down from those in previous decades,

distributors are naturally wary of taking risks and therefore drive an

increasingly hard bargain.

The wholesale price per unit on CDs is currently just under £5. This

means that any previous sales models based on a gig unit price of £10

have to be adjusted accordingly. Often the label is responsible for buying

back returns (unsold stock) and paying for shipping in both directions. On

high volume distribution this can be prohibitively expensive.

Distribution

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Artists can distribute cheapest from their own web shop, incurring

only P&P costs and PayPal fee, or from a third party vendor such as

Resonance or CD Baby. Such vendors will usually ask for a modest

start up stock to be shipped and reimburse the label - having taken

commission and handling fee - as the stock sells. The benefits of

using a third party vendor are that they handle stock control, P&P

and sales accounting. As an artist, benefits from running your own

web shop include the personal touch when mailing out to customers

to encourage repeat custom.

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Digital distribution can be done through an aggregator such as

Tunecore or CD Baby at a cost of around US $50. While this will

distribute your music to every corner of the web, it still doesn’t

guarantee that anyone will listen (far less buy!).

Distributing locally through independent record shops can also be

beneficial. Independents usually take around 30% of the sale price.

A benefit is that shipping and returns can be expedited on foot.

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It will be clear by now that artists require a working knowledge of the

music industry, graphic design, the internet, web design, press

relations and marketing. Additionally you they have to familiarise

themselves with music law, tax liabilities and accounting.

It is inadvisable to sign any agreement with a third party without

appropriate legal advice. The Musicians' Union offers a limited service

in this respect, but to get comprehensive advice artists should find a

legal professional with music industry expertise. This advice doesn’t

come cheap but can save considerable trouble and or money at a later

date.

Label infrastructure

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A standard agreement between artist and label will require moneys

owed to be paid at quarterly intervals. The artist generally has the

right to inspect label accounts annually to ensure there are no

discrepancies. Both parties must make themselves aware of their tax

liabilities to HMRC.

A label can be run with minimal hardware. A phone, a laptop

connected to the Internet, a printer and stationery will be sufficient for

most daily needs. Targeted databases for press and radio should be

compiled well ahead of contemplating a release unless an outside

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Mechanisms are now all in place to distribute and sell the product.

The artist now needs to tell the world all about it and how to buy it.

Allow plenty of lead-time and be aware of targeted publications’ print

deadlines. Most publications prefer to review ahead of release – it

gives them a sense of ‘scoop’. Some are happy to review post-

release but it can be a long wait in that their reviews are not time

sensitive and there can be a queue of considerable length.

Publicity

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Compile a press release (one-page) that describes the product in a

factual and engaging manner. Post copies physically or electronically

to carefully researched databases. There is, for example, little point in

sending a jazz release to Kerrang for review.

Make contact with the press in as many ways as possible – preferably

in person or over the phone. Emails and unsolicited post often get

ignored. Don’t be a snob. Metro and The Sun have huge readerships

that specialist, favourite, independent publications can't hope to

achieve.

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Electronic press kits work well for printed press – keep in mind

journalists are often equally interested in what the band looks like and

any human-interest angle, as in the music itself.

Encourage artists to do interviews on local radio and record messages

for stations further afield that can be sent along with an electronic

press kit (EPK). Many reviewers and stations require two copies of the

CD and many are still unwilling to accept non-physical formats.

Invite local journalist contacts to gigs. Show them hospitality and they'll

be more disposed to writing kindly.

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Labels should encourage their artists to post videos and blogs on as

many platforms as possible and to play every gig that is offered. Word

of mouth is also a powerful medium for creating a buzz and amongst

fans and industry.

Viral marketing is an additional tool for raising awareness of product.

Notable examples of viral campaigns include efforts by Sandi Thom

(YouTube 'phenomenon'), Arctic Monkeys (MySpace 'phenomenon'),

Lily Allen (flash-game), Weezer (composite YouTube video ‘Pork and

Beans’), Greg Pattillo and OK Go.

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For the label and product to succeed both should have currency

relative to the marketplace. Even if the product sits in a niche,

subgroups within the listening public are constantly redefining

themselves through choice and allegiance.

The Internet presents an unparalleled window into shifting trends by

affording access to blogs, user-groups and ‘imagined communities’.

This has widened and enhanced research possibilities into target

markets and the competition far beyond the local arena.

Know your market

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The music industry has become increasingly 'long-tailed‘, (i.e. sales

volume stretched over a longer period of time). It is almost inevitable

that label owners will have to exercise considerable patience before

recouping investments, let alone seeing profit. Running a label for

profit has never been harder. Operating within this challenging

environment demands an ever-watchful eye on digital and creative

marketplaces and the ability to adapt to changes as they happen

(preferably before!).

In conclusion

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Despite obvious risks and possible lack of remuneration, there are still

many benefits to setting up a label. Above all, they enable useful

contacts right across the industry. If the label represents part of a

portfolio of activities within the music industry, these contacts are

invaluably transferable. If the owner is also the artist, there are added

bonuses of control and personal accountability. If releasing other

artists’ music, the label is helping to create a ‘scene’ that the owner

can release their own product into. Ever since the internet’s

democratisation of music, which has lead to more releases than ever

before, there is truly safety in numbers and benefit by association.

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A selection of CD manufacturers:

www.testa-rossa.com

www.birnamcd.com

www.discwizards.com

Barcodes:

www.cdbaby.com

Useful links

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A selection of digital distributors:

www.tunecore.com

www.cdbaby.com

www.theorchard.com

A selection of physical distributors:

www.properdistribution.com

www.shellshock.co.uk

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Cultural Enterprise Office would like to thank Haftor Medboe,

Edinburgh Napier University and the Interreg ICV Creative Growth

Project for use of this content.

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Disclaimer: Cultural Enterprise Office is not responsible for any advice or information

provided by any external organisation referenced in this document.