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Thread: Starting A Record Label ? . . . Article

  1. #1
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    Starting A Record Label ? . . . Article

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    PART 1 :


    Research is the key ingredient that defines the salability of a product. In your case, it's your music. So before you head to a government office to incorporate and spend money on any other official documentation regarding the creation of a legal business entity, you have to have good product to sell.

    Most artists mistake themselves, because they think that if they like the song, everyone else will too. How do you really know who likes your music?

    1. Define your market

    Who are you trying to sell to? Are you selling hip-hop to underground fans? Are you making commercial hip-hop meant to be consumed by teenage women and young adults? Who would buy your music? Be specific. Are the people you are trying to sell to in different income levels, where do they live, where do they shop?

    For instance take the following example, use it like a worksheet.


    My Name: M.C. Artist

    My Product: Song Name: "I'm Angry at the World and I Hate My Girlfriend And I Use Abstract Vocabulary and Weird Background Noises"

    Style: It's underground, the lyrics are sophisticated, and I use a lot of heavy and big words. Kind of like Company Flow.

    Who would buy it? Definitely not teenage girls looking for love songs or kids. They don't understand the words, and it doesn't sound like anything mainstream. Underground Hip-Hop fans would like my song. Maybe college kids and more sophisticated Hip-Hop listeners.

    Where do the buyers hang out/live? Most fans of this music live in the big cities. A lot of people are on the internet. They are of diverse races and different income levels. I've noticed a lot of kids from the suburbs who are middle-class like it. Also, I know of a pretty big group from the East Side that likes it. From what I know, they hang out at "Dick's Hip-Hop Cafe and Store" on Lexington Avenue and etc. They go to M.C. Stupid's concerts at the Roxy. Some of these people are my friends.

    If you could test out your music, could you do a test? Uh, yeah.

    There is a pseudo-scientific audience assessment that will help you understand the people you are going to market and music for. Remember, that even though you think you are making your own music for yourself, in fact, there will be a consumer. The objective of my little exercise is to take a pseudo-logical approach at analyzing your potential consumer.

    After you have done such a sheet, defining who buys your music, who it would appeal to, you have to see if anybody actually likes your music. Now, major labels, as I've said many times, test their audiences in order to know if the album is a flop or not. Negative reviews can mean that an album might not be released!

    So, how do you test your music ?

    You can't do it scientifically, because you don't have the resources to use population samples of that nature, nor the drawing power a company has to get a pool of people. You must test the music yourself. Friends don't help much because they may be overtly supportive, or will be jealous of you. Spend a month having different people from your potential audience listen to music that you say is NOT MADE BY YOU. The best thing to do is to lie and say "Hey I work for So-and-So hip hop records. I would love it if you'd take your time to listen to a snippet of this song and give us your input." Don't say that you made the song, no matter what, because that will bias the listener extremely. Go to the place where people that listen to the same type of music congregate, tell them, "hey what do you think of this rapper?" or "this song?" Just get a general feedback of what people like and dislike. If you see a pattern, like 20 people saying "this part of the song sucks," and you don't think so, you should head back to the studio and see if that part of the song REALLY sucks. Usually, it does. A lot of artists can't look at the situation objectively. In this scenario, you are forced to look at the situation objectively.

    Make sure you have all the opinions written down. After you talk to somebody, write their opinion. You are trying to gather people's opinions of your music in a pseudo-scientific way. Though it's not perfect, what people's opinions are of your music, indicate their desire to buy a specific product, which in this case is your song.

    If you have more time, you can test your hypothesis on other people. Go out of who you think is your target audience (in my example case, it was an underground crowd) and take it to the jocks and the cheerleaders at your school, the fraternity or sorority girls at your college, or whatever crowd is different in your social environment. Go to them and say "I work for So-and-So Records Street Team, and they want me to ask you what you think of this song." Have a portable CD player ready, and just have them listen to the song. Maybe you'll find a whole new market you have to focus on. What if 10 out of 12 sorority girls like your sophisticated underground Hip-Hop? Well, then, that gives you more information in which to strategise your plan of action.

    The outcome of your pseudo-research will make you go back to the studio, retouch your tracks, change them, or not even use them. If you ask 100 people, and 80 hate your track out of your target audience, you should ask yourself: is it worth my time to pursue this track, or do I have others I can work with? Furthermore, you'll see if anybody actually likes your music and will buy it. If nobody likes it, going back into the studio may be a more prudent option than jumping the gun.

    Let's say you find tracks people really like. Ultimately, you would want to have every track diagnosed so your album will be strong, but the fact of the matter is, that 2 to 4 tracks usually carry an album for a mainstream audience. If you're underground, that is a different take. The ambiance of your record may carry the album. Either way, let's say you have the product ready after 1 month of asking questions like a crazy person to your target audience and other members of the consumer pool.

    You should really be thorough in your research. It shouldn't take a day or two. It should be around several weeks to a month of actively trying to get as many people from your target audience to give you their opinions.

    We've done so much already, and you haven't even went to making an Ltd. or Inc. yet!


    Don't think of research as "crap" first of all, because it's telling you who is going to give a f--- about your music and buy it and who won't. The next step is to find out how you get your album out there.


    Look, wiseguy. You have to find who is going to DISTRIBUTE your record. You can't sell your record without knowing what distributors, retail outlets, corner stores, smoke shops, are going to want to sell your record.

    So, you already have your compilation, um, album. It's called "M.C. Artist: Lyrical Dali" or something like that (jk, underground fans, I love you all.)

    Thus, the next rational question: WHO IS GOING TO SELL MY ALBUM?

    Oh, I bet you would like a large retail outlet to sell your record. Odds are, they won't. Why? Because nobody knows you. Go on the internet and find records of artists similar to your style and see who distributes them. If it's WEA, UNI, or any of the biggies, you are in a different game. But look at similar styles in smaller selling artists, is Caroline Distribution their main arm? Who else is doing it? Who are the local distributors in your area? What stores that are NOT record shops, will they sell your record? Perhaps a Hip-Hop clothing store? What about the smoke shop? What about... WRITE DOWN EVERY POSSIBILITY... brainstorm who will sell your records! After you've done this, categorize each type of shop and distributor, and then start calling.

    Here's an example:

    "People that would sell my record"

    1. Arseface Records shop on Ventura.
    2. Tower Records (maybe)
    3. Ganja Joe's Smoke Shop
    4. Dick's Cafe
    5. The Internet
    6. The BP filling station on Figueroa.
    7. My friend Louise.
    8. Jumpstart Distribution (in my area)
    9. Caroline Distribution (national)
    10. Chong's Hip-Hop Clothing
    11. My shows

    Once you brainstormed, go to the internet, or to a telephone book, and find similar companies to the ones you've listed (not your friend Louise, or the internet.)

    You look on the internet, and find that there is a competitor to Ganja Joe called Acid Sam's in your area. You find that there are five other distributors like Jumpstart. Arseface Records has competitors called Hellhole Record Shop and others. - Your Music Marketing & Design Solution

  2. #2
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    PART 2 :

    Go to the places, and ASK QUESTIONS. Ask who Arseface Records Shop deals with regarding local distribution. What about Hellhole, do they use the same distributor, or a different one? They probably use different distributors. Ask them to supply you with a list of distributors, or find it yourself through RESEARCH. Ask them who handles Hip-Hop distribution, get names, get contact numbers. Go to each store and see who are the distributors that get the product on the market. Maybe the store itself is also a distributor. Don't go promising albums to anybody on a consignment basis just yet, you haven't even incorporated. You're still setting up your business strategy.

    Go to the distributor's office themselves. Ask for information, do I really need to press 1,000 units, or can I just give you 5, to see if they sell? Ask them that you are just doing research and want to be prepared with foreknowledge should you elect to go into business as a record company. Ask them how long it takes for them to pay you should you place product in their hands. The first question an indie distributor will ask is, do you have a press package? How are YOU promoted? Basically, avoid answering these by saying you are on a fact finding mission. From the distributor's standpoint, they want to know how they will make money off you. Here are a couple things that you should not answer, or deflect, but a distributor will ask:

    1. Are you on the radio, or have a massive promotion?
    2. Do you have a large following?
    3. Do you have articles in publications?
    4. Who promotes you?
    5. How many releases do you average per quarter, or per year?
    6. Basically: Why should we try to sell you into rack space at a record shop? Who the hell are YOU?

    Ouch! OK, that last one is basically what they are trying to ask you. The answer is that you don't have an answer, you are simply educating yourself. Talking to these people, and don't be afraid, will put more of what I said into context regarding the logistics and tactics of executing the success of an independent label. The more you learn about it firsthand, the more you see how much you have to deal with, and the more it looks like a full-time job. If you go to smaller distributors, they may be more lenient with their figures, but the whole point is that YOU are going on a field trip to educate yourself about the marketplace in your area.

    Maybe Tower Records will take your records on consignment? Maybe Ganja Joe? Anyway, it's looking a bit more complex now, and you still haven't formally started your record company.


    No, don't jump the gun.

    Look at #11 on the brainstorm list. You can distribute through your OWN SHOWS. Or the Internet. Your own shows are quite possibly the most effective and profitable venues to sell your CD should you print it. The thing is. Will anybody come to your show? How do you book a show? Remember that once you made a CD, your art is already being dated, sales are being assessed, you need to know how to book a show, and the venue landscape of your area.

    So, relax, take a deep breath, grab a pen and paper, and write down Hip-Hop venues that would support your type of music. (In my example, it was underground hip-hop).


    Venues that would let me use them:

    1. Roxy Thurs. Night
    2. Open mic at Slim Jim's in Inglewood.
    3. Pay for play at Some Rap Club.
    4. Urban Hip-Hop Festival every year at Melrose Park.

    Also, write down a list of promoters you see on fliers of artists that are just like you.

    Promoter names:

    1. Rip U. Off (he promotes my favourite shows!)
    2. Johnny Gimmeyourmoney
    3. O.Bleak
    4. Clear Channel

    Now you have a list. Again, research for other possible venues and promoters, did you get all of them down? This is necessary. These shows will be places where your fledgling independent record label will have its strongest initial sales, and your first shows. If you are a producer dealing with an artist, this will be taken the same way, where your artist will have the same sales.


    No. We haven't even set your company up yet. That's an endeavor in itself. Patience, patience. 'Tis better to not make a hasty move than to make a move and regret it.

    Call up the venues. Find out specific information about booking information. See how you need to get booked. Do you need experience, press packages? Do you need to pay to play? Are there group deals? Is there a Hip-Hop venue that supports acts like yours? Where do you go to see your favourite artists? If you don't have experience do they not let you play? Do you have to lie? What is the overall impression you get from each venue? Do they give you X amount of tickets, and expect you to pay the difference in sales? Etc., etc. Learn more about the policies of each venue. Ask where the artist sets up a merchandise centre/table. How far is it from the stage? What kind of lighting is there? Who is the soundman? Etc., etc.

    Each venue will have their own policy, and their own way of collecting money, you have to find this out. Also, ask what promotions companies do these people deal with? Ask who opens up for your favourite artists in your genre from the local scene. Who is their promoter? Is the venue also a promoter? Write everything they tell you in what is now becoming your Record Company Log Book.

    Don't call up Clear Channel yet, please don't, that comes later.

    As for selling CD's on the internet, you need a cost-effective solution. Something that will do everything for you, but will take a larger cut of sales. You don't have time for a merchant account, or you can pay with PayPal. Research which is best for you. See if the cost maintaining a site is worth small record sales in the beginning. All in all, you should have some form of a web-presence.


    Well, now you're hopefully overwhelmed with information. If you're not overwhelmed, maybe you neglected, or didn't collect all the information necessary. Remember, you have to be truthful to yourself about the odds of your soon to be new record company.

    What you now have in your book is pertinent information (contacts, figures, etc.) about.

    1. Distributors/Stores
    2. Venue information.
    3. Booking information.
    4. Your potential audience.
    5. Derived information from audience gives you a product or CD.

    You should have a lot of pages of information.

    Now, you will probably see that an initial print of 1,000 records is not necessary. The local distributors only ask for 10 a piece, maybe. At your venue if you perform, you'll be lucky if you sell 10 CD's on your first time out. You'll also know if you have to pay to perform, and how much will it cost, versus your expected sales at that venue. You'll have a better understanding also about how indie distributors think and how much you might not have known was involved in making your own record label. You first thought that you needed 1,000 CDs for pressing. Now it looks like 100 CDs. What about promotional copies?

    Things are going to get more complicated. Yes, I'm holding your hand through this... here we go.


    You've spent all this time gathering a gargantuan amount of information, collecting all sorts of data on the subjects I touched on. How do you use it?

    You make a marketing strategy of your album. You have to focus on your target audience, which in my example was underground Company Flow type Hip-Hop fans. You've tested your songs on that group. You have weeded out the good and bad tracks by asking that target group about the different songs. You will sell at places they buy their music from. You will perform, or have your artist perform, at places they go to. How do you know this? Because you have been watching them, and have gathered that information, like I told you to.

    A major label does this on a bigger and more complex scale. Indie labels do it on a smaller scale. I'm simplifying it for you.

    From the places that you think could sell your record, maybe 3 out of the 11 I listed above are regularly frequented by your target audience. That doesn't mean you neglect what is NOT frequented by your target audience, (like the BP filling station on Figueroa) but you should put all of your focus on MAKING sure you get your record into those 3 or 4 places that you KNOW because of your RESEARCH, are frequented by your target audience more often than the other places.

    For example. If I work at a major label, and I have to promote Usher's new album, I am not going to pay for ad-space in Reader's Digest, I'm going to have Usher in some TeenBeat magazine, and pay for play on MTV. Reader's Digest's audience is comprised of senior citizens. I don't care how much ad space I have Arista buy for me in Reader's Digest, senior citizens will not buy Usher as much as teenage girls reading Teen Elle, will. It's not cost effective to buy ads in Reader's Digest, when I can have more impact with Usher having an ad, or doing a photo shoot for Teen Elle. Do you catch my point? That's kind of how you're discriminating your audience. Are there underground Hip-Hop fans hanging out at the BP gas station on a more frequent basis than Ganja Joe's? That's pretty much your probability assessment on how to handle the placement of your album.

    See you know that, because you've done your RESEARCH.

    So, you need to get your records into the places that YOU KNOW are frequented by your target audience. Also, if Jumpstart Distribution handles your type of music, you will work to forge a relationship with them, not another distribution company that only deals with the distribution of punk music. That's common sense. Don't jump the gun with talking to a distributor just yet.

    What else, God?

    Also, you will, after having researched all the venues you can play at (or your artist can) that the Roxy on Thursday attracts an underground Hip-Hop crowd. That looks like a good bet for you, should you press your CD and start off. The problem with another venue you've researched is that they want you to pay to play. You're not ready to do that yet.

    So what do you know now, should you put out a CD?

    Here's the logic:

    1. I have found my target audience. The target audience are the people that will pay for my music.
    2. I have gathered the opinion of my target audience on the music I am putting out (IF the opinion is favorable on the music from my target audience I will proceed to step 3).
    3. I will use information gathered from research of distribution and stores to target a figure for the number of CD's I will press (IF the opinion is not favorable on the music, I will redo tracks and repeat 2 until the outlook is more favorable).

    Ok, so we are at "3" so to speak, in the logical progression. Each step is a hassle, and the hassle will expound itself, but you have to stick to it if you want to really make your own record company.


    Before you book a show, you need your product. Which means finding a pressing house for your CD. You will know how many CD's you can press by having gathered the estimates the distributors or stores have told you they would handle. Let's say for brevity's sake, each distributor will throw 5 of your CD's into the throe, and each store will put 5 of your CD's on the rack for consignment of some sort.

    So, if you have 4 outlets, other than your shows or the Internet, you'll have about 20 CD's for distribution. You should honestly be happy if you sell 100 CD's from outlets initially. 20 is concerning only 4 outlets. If you do research, and figure out other outlets, you can knock that number of distributors and stores to maybe 10-12 outlets in your city. Then you're talking 100-120 CD's. In either case, the number of actual CD's in stores will be small.

    You figure that you will sell maybe 5 CD's a night (if you're lucky, nobody knows about you yet). You think that you will play 2 shows a month. Possibly more. Say 15 CD's will be sold there.

    Depending on your estimates, your initial pressing will most likely be small. There are CD pressing houses that will do small professional runs. Again, you have to spend time and find out what pressing house offers what price, and the minimum amount that they will press for you. You don't want to spend too much money. Again, research and find a spot that will press a small run for you at a competitive rate. Make sure the art is done nice, and make sure that the colors you use are print-ready. The CD house will let you in on that. Obviously the more you press, the cheaper the cost is per unit. But can you honestly sell 1,000 CD's immediately? Chances are, you won't. But if the price you get for a small run is not cost effective, you might have to settle for a larger run. If you settle for a larger run, you better be sure that your research indicating your target audience numbers, your distribution outlets (stores, shows, internet) can disseminate that amount of CD's.

    Finding the right pressing house is another form of research, so get cracking on it. See how much it costs. You need to get an estimation of the amount of investment you will put into pressing the CD. - Your Music Marketing & Design Solution

  3. #3
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    Excellent post

  4. #4
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    Yeah I just read that, good stuff.
    For fans of Dilla, Pete Rock, Premier, Madlib & Others. 90's Era represent represent.


  5. #5
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    Thanks . . . I thought they would be good articles to post here because theirs not alot of info and alot of people always ask about these types of things. - Your Music Marketing & Design Solution

  6. #6
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    Nov 2004
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    damn man, u been droppin good industry reads in here like crazy lately...thanx

  7. #7
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    Thanks, i read everything, ill use most of it in my business plan, but if i have a few questions, will it be alrite to ask u in pm?

  8. #8
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    Aug 2003
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    wow... that like touched upon basically everything, thas a good find H&R... that really shed some light on a lot of topics, I got a senior project comin up soon, im thinkin of doin somethin along the lines of a record company... that helped a lot... thanks

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  10. #10
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    Without a doubt, best post i've seen on FP. Answered a hell of a lot of questions i had about promoting and distributing an artist.

    Props H&R, great read!!

    Last edited by Stréetwíze Productnz; 12-22-2006 at 04:31 PM.

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