How to start a record label

A record label is a company that is responsible for finding and signing musical artists, then marketing and distributing their music to the public. They typically provide financial and other support to the artists they work with, including paying for recording costs, music video production, marketing and promotion, as well as booking live shows and tours.

Record labels can range from large multinational corporations such as Sony Music Entertainment UK, Warner Music Group and Universal Music Group to small independent companies. Record labels of all sizes play a crucial role in the music industry by discovering and nurturing new talent, and by bringing music to listeners around the world.

The number of small independent record labels has experienced a boom recently, thanks to the affordability and availability of recording software. Whether you’re looking to record your friend’s band, promote a niche genre that you love, or use your label as a way to release your own music – starting your own independent label from home can be an enterprising – and effective – way to kick off your music business.

Here are the ten steps that we recommend following in order to successfully start your own record label. 

1. Identify your niche
2. Create your business plan
3. Decide on a name
4. Register your business
5. Obtain the right licences
6. Get legal advice 
7. Get financial advice
8. Build your team
9. Find artists to sign!
10. Distribute and market your music

Let’s go into each in a bit more detail…

Some of the most successful labels are famed for representing artists from one particular genre. This allows them to specialise in producing a particular sound and creating a strong brand identity that audiences can connect with. Have a think about the type of music you’re most interested in. What audience are you trying to reach? Do you want to focus on discovering new talent? Or promoting already established artists?

The UK music industry is very diverse, so there’s no shortage of niches to choose from. You could focus on a specific genre such as electronic music, rock or hip hop, or focus on artists from a particular region e.g. London, Liverpool, and Manchester.

Whatever niche you choose, make sure to do your market research and understand your target audience. Who are the major players within your niche? What kind of music is popular? What are the current trends? Once you have this information, you can make informed decisions for your business – increasing your chances of success.

A business plan will help you define your goals, objectives and strategies. It should include details about your target audience, marketing strategy, financial projections, and more. It can also be vital in persuading investors when first starting out, who will want to see evidence that you have an understanding of the music industry, the appropriate business knowledge and a long term plan to become profitable.

Just like any business, music is your product. Labels no longer expect to make the majority of their revenue from sales alone, as it’s very difficult to predict the success of your artists. You need to think of ways to maximise your revenue streams. How will you generate income for your business? For example, will you focus more of your activity on live gigs and festivals? This all needs to be mapped out within your business plan.

To help you get started, download our free UK business plan template below. 

The next step is to decide on a name for your label, which is unique and not already in use. Once you have a name in mind, you can check its availability by searching the Companies House register. (Read more on registering a business name)

Before you start recording and releasing music, you must ensure you have the trademark on your name. The Music Week Directory is a good place to start, as it’s filled to the brim with thousands of up-to-date contacts across every aspect of the music industry (labels, publishers, promoters, merchandisers, venues, etc). You will need to pay £50 to access it, but it offers additional benefits such as providing a starting point to build a network of affiliates or finding new partners.

It’s time to make things official. But before you do, you need to decide whether you’re registering your business as a sole trader, partnership or limited company. Each type of business structure has its own advantages and disadvantages, so make sure to do your research and if possible, seek advice from an accountant or financial advisor as to which structure best suits your requirements.

You also need to register your business with the Performing Right Society (PRS) and Phonographic Performance Limited (PPL). These organisations are responsible for collecting royalties on behalf of artists and record labels.

If you’re planning to release music, you must have a licence from the PPL, as well as the Mechanical Copyright Protection Society (MCPS) and Performing Right Society (PRS).

The PPL has been licensing the use of recorded music in the UK since 1934. It collects and distributes airplay and public performance royalties on behalf of the owner of the recording. Any public space that plays music – restaurants, salons, clubs, radio – must pay a licence fee, which is shared out to registered labels.

The Mechanical-Copyright Protection Society (MCPS) has a service agreement in place with PRS for Music (the home of the PRS), who provide rights management and administrative services to MCPS.

Writers and publishers of songs and compositions have certain rights. Once you become a member of the PRS, they can manage these rights by collecting money on your behalf – ensuring music creators are fairly paid when their music is used.

PRS pay royalties to its members when their works are:

• broadcast on TV or radio
• performed or played in public, whether live or through a recording
• streamed or downloaded

MCPS pay royalties to their members when their music is:

• copied as physical products, such as CDs and DVDs
• streamed or downloaded
• used in TV, film or radio

In some cases, money is collected jointly then split between PRS and MCPS. If you’re already a PRS member, you can join MCPS later, or vice versa, as and when it becomes relevant.

A great explanatory video can be found here – detailing the responsibilities and differences between the PRS, MCPS and PPL: prsformusic.com/what-we-do

It’s also worth being a member of both the Association of Independent Music (AIM), which offers education and training, expert advice and networking opportunities, as well as access to exclusive commercial opportunities for its members, enabling them to innovate, grow and break into new markets. This not-for-profit trade body exclusively represents the UK’s independent music sector, which makes up around a quarter of the recorded music market.

The British Phonographic Industry (BPI) represents the UK’s recorded music industry in the media and plays a key role in driving and supporting initiatives that inform and educate consumers about the value and importance of music. It also raises awareness of legal digital music services and the issues surrounding illegal downloading. It provides a forum where members can get to know and share knowledge and experience with other labels that face similar issues, and meet labels who may be potential business partners. It also provides a platform for members to discuss key issues facing record labels (and then agreeing joint action).

You’ve likely read in the news before of instances where artists challenge the details of their recording contracts – Prince, Michael Jackson, the Backstreet Boys to name a few.

Contracts are important legal documents that outline the terms and conditions of your business relationships with artists, distributors, and other stakeholders. Consult with a legal professional to ensure that your contracts are legally sound and protect your interests.

A recording contract should include several key provisions, including (but not limited to):

• The length of the contract should be clearly stated, including any options for extension.
• The amount of albums or singles to be released.
• The royalty rates for the artist should be clearly defined, including how they will be calculated and when they will be paid.
• The amount of any advance payment to the artist should be clearly stated, along with any terms for repayment.
• Recording and distribution. The terms for recording and distribution of the artist’s music should be clearly spelled out, including any territories and formats covered by the agreement.
• Marketing and promotion. Your label’s responsibilities for marketing and promoting the artist’s music should be clearly defined, including any budget and timelines.
• Creative control. The extent of the artist’s creative control over their music should be clearly stated, including any limitations or requirements imposed by your label.
• The ownership of the master recordings should be clearly defined, including any rights the artist may have to the recordings.
• The circumstances under which the contract can be terminated should be clearly stated, including any notice periods or penalties.
• The conditions for reversion of rights to the artist should be clearly stated, including any financial or other obligations.
• Dispute resolution. The procedures for resolving disputes arising from the contract should be clearly stated, including any arbitration or mediation provisions.

As you can see from these examples, it can be a legal minefield when it comes to starting a record label. Always make sure to seek advice from a legal professional that specialises in music contracts to ensure the contracts you offer not only protect your business, but are fair and properly reflect the interests of your artists to avoid any issues.

Your legal advisor will also run through other types of contracts available, including licensing deals (where an artist retains the copyright but allows the label to sell on their behalf). They might also advise you to create your own publishing company to take advantage of any hits your artists might release.

And let’s not forget band agreements! This will detail how royalties and advances are split, who will own the band name in the event of a break up, and how the label and members may use the name for promotional purposes. It’s also important to obtain consents to use art work, logos, photographs, as well as the rights to use the recordings of session musicians and samples you might use.

An accountant will help you with your finances and tax obligations. For example, an accountant can:

• Have input into your business plan such as financial projections, as well as the financial feasibility of your business to help you secure funding from investors or banks
• Help determine a realistic startup budget that covers recording equipment, marketing, distribution, salaries and more
• Advise on multiple revenue streams to reduce the risk of your business solely relying on record sales. For example, merchandise sales, live performances, sync licensing and publishing. (Securing a publishing deal with a platform such as TuneCore will help maximise your revenue)
• Advise on how to secure the best funding route for your label. For example, finding investors, taking out a business loan, crowdfunding
• Advise on the most appropriate legal structure when registering your label e.g. sole trader, partnership, limited liability partner or private limited company
• Assist with your tax admin, returns and payments to ensure your legal compliance
• Monitor your finances. An accountant can keep track of your expenses and revenue streams to monitor your cash flow. They can also advise on, and set up, the best accounting software for your business, which will track your finances and generate financial statements that can be used to evaluate the financial health of your record label.

Depending on the size and scope of your label, you may need to hire employees or work with independent contractors such as music producers, sound engineers, graphic designers, and more. As your record label scales, you will need a team of professionals to help you run your business. As well as a legal advisor and accountant, you will need to expand your team in key areas such as promotion and distribution.

There are a number of ways you can find artists – through social media, referrals, platforms such as SoundCloud and YouTube, or attending music events such as gigs and festivals. Take your time during your search. Your artists will define your label, so it’s important they fit your niche and have the potential for success.

Once you find artists you’d like to sign, it’s important to approach them in a professional and respectful manner. You can do this by sending them an email or message, introducing yourself and your record label, while expressing your interest in working with them. Make sure to include any relevant details about your label, such as your mission statement, the services you offer and the benefit of working with you.

If the artist is interested in working with you, it’s important to set up a meeting to discuss the terms of the contract, and negotiate if necessary. Your legal advisor’s input is essential here, as they can draft a contract that protects both you and the artist. Be transparent about the terms of the contract, including the percentage of revenue that the artist will receive, the length of the contract, and any other important details.

Once you’ve signed an artist to your label, it’s time to start promoting their music. You can do this via a number of ways, including working with digital distribution platforms, promoting via social media and reaching out to music blogs and media outlets. Another great way to showcase your artist’s talent is by organising live shows, which are also an effective way to build a fan base and sell merchandise.

As well as physical distribution of albums such as CDs and vinyl to retail stores, online marketplaces and directly to fans, there’s also digital distribution platforms such as iTunes, Spotify and Amazon that will help deliver your music to a global audience.

And let’s not forget about touring! Your record label might provide support for artists to go on tour, which would include funding for travel, equipment and marketing. Not only will this help build a fan base, but it can generate revenue.

Licensing your music for use in films, TV shows, commercials and video games is also a great way to promote your artists’ music, gain exposure for them and generate additional revenue.

Been there, got the tshirt? Don’t forget about merchandise! Not only will it generate revenue, but your fans can help promote your artist/s by wearing your artists’ merchandise.

While there are certain steps involved in starting a record label, you also need to consider yourself as an entrepreneur, and some of the actions and approaches that can go a long way in the music industry. For example, a successful record label is built on having good relationships with its artists. Honesty is important, especially when agreeing contracts. By establishing a mutually beneficial working relationship, you can avoid stressful and costly disputes down the line.

It’s also vital to have a good knowledge and clear understanding of how the music industry works if you want to be successful. As we all know, it’s an unpredictable industry, with tastes and trends changing and evolving regularly. You need to have an eye for what can sell, as well as being able to quickly spot emerging trends.

And, don’t forget the power of the pivot – if you’re finding your music isn’t hitting the mark, you might need to consider revisiting areas such as your target niche or your promotion and distribution strategy.

Starting any business is hard work, so be prepared to dedicate time and energy to make your music dream a successful reality. While passion will be a key driver, so is a solid business plan, so make sure to strike the right balance between enthusiasm and business acumen.

Singer-songwriter, actress, philanthropist and entrepreneur Dolly Parton once said: “You’ll never do a whole lot unless you’re brave enough to try.” Hopefully some of these tips have struck a chord with your inner entrepreneur – could this be the year you amplify your efforts in starting your own record label?