music label business model

Mechanics • 21 min read

A Hard Look at How Record Companies Make Money: Royalty Splits, Types of Record Deals, and the Label Business Model

music label business model

By Dmitry Pastukhov

Published December 31, 2019

How Does Our Model Work?

Key record deal terms, artist advance, recoupable costs, release commitment, how do record labels make money 4 different types of deals, exhibit a: standard or traditional record deal, exhibit b: distribution-only, indie record deal, exhibit c: net profit record deal, exhibit d.1: overhead fees in net profit deals, exhibit d.2: cross-collateralization in multi-album net profit deals, reflection on the record deals and the future of the recording industry.

The recording industry is, perhaps, the most volatile sub-section of the music business . Just take a look at the recording market in the last 20 years or so. First, labels got pummeled by digital piracy for a decade. Then, in part as a response to the piracy problem, both supply and demand sides of the recording value chain were disrupted by the streaming economy and music production software alike. 

Nowadays, anyone with a laptop and a TuneCore account can both produce an album and distribute it across the globe. The record labels had to adapt, trying to find their place in this new music value chain — in fact, some would say that this process is still well underway.

So, what is the role of the recording company of today? How do record labels make money in an environment where the tools of music creation are available to everyone? The growing sentiment across the music industry would suggest that there’s no need for the labels anymore. The artist management company can run all things marketing and promotion, and the distributor will deal with distribution and trade marketing (think playlist placement and on-platform promotion across streaming platforms like Spotify, Apple Music or Amazon Music). 

However, labels are still around. In fact, there’s a good chance they’re not going anywhere any time soon. But why? Why are labels still at the center of the music business? We’ve decided to try and get to the bottom of it — and follow the money. So, we’ve built a model. We love building models.

Essentially, we’ve created a tool that allows us to simulate a recording cycle and build an approximate projection of the cycle’s profits and losses, split between artists, labels, and distributors. 

Maybe you’ve seen recording streaming royalties calculators around the web. Well, our model is something alike. However, instead of multiplying a given number of streams by the average per stream payout , our model factors a couple of dozens of inputs: marketing and promotion investments, artist advances, deal types and splits, physical sales, sync licensing, and everything in between. 

It is still an imperfect representation of reality — but do let us know if you’d like to get firsthand access and play with the model yourself. Just leave your email here , and, if we get enough requests, we’ll figure out a way to share it with our community. But before we jump into the analysis, there is a couple of things we need to get through.

First and foremost, the model we used only takes into consideration the short term revenues of a given release cycle. In reality, the album will make money for a long time. If we’re talking about an artist deal — more about artists vs. licensing deals here — the label will likely retain the master rights for 35 years (or even more). In the case of a licensing agreement, the duration of rights will depend on the contract in place, falling within the range from 5 to 20 years for most deals. 

In any case, we won’t make such long-term revenue projections, focusing on the cycle of active release promotion and monetization instead. Usually, a record label will actively work a full-length album for about three years — and based on our experience, 36 months is the pre-release projection horizon that most record labels use. So, we’ll go with that.

There are a couple of common recording deal terms that we will use A LOT throughout our analysis. To make sure that everyone is on the same page, here’s a short glossary of the vocabulary you’ll need to know:

Advance is an upfront payment, provided by a label to an artist against the future contractual cash flows. You can think of an advance as a prepayment on the artist’s master royalties. In practice, that means that the artist will start earning additional royalties above the advance only once the artist’s share of royalties will exceed this initial pre-payment. 

Recoupable costs is a standard term you’ll find most recording contracts, applied to some of the initial investments made by the label. Until the label gets back the recoupable, 100% of the recording royalties will go towards making up for these expenses. In other words, if the label invested $1000 into recording an album and recording costs are recoupable, the artists will start making their share of the revenue only when $1000 worth of recording is sold/streamed. 

Depending on the deal type and the contract itself, various costs can be established as either recoupable or non-recoupable. Under a traditional recording deal, only recording costs are recoupable (and even that is not always the case). Under the net profit deal, marketing, promotion, tour support, recording costs, and corporate costs are all recoupable. Sometimes, the label will also include “overhead fees” (calculated as a percentage of the label’s gross revenue) as recoupable expenses. Don't worry, we'll get into it a bit further down the road.

Release commitment is a fixed sum investment into recording, promotion, and marketing, that the label is contractually obligated to put forward throughout the release cycle. Commitment only sets the lower band of the actual investment, which means that the label’s actual spend will often surpass the initial obligations. 

To account for that in our model, we also apply a flexible cost rate. Generally speaking, that is something that most labels will do when building cycle projections. Those rates are usually calculated as a percentage of the label’s gross revenue — based on our industry experience, we use a 14% rate for marketing and a 10% rate for promotion costs. These variables apply only if the resulting sum exceeds initial commitment.

With that out of the way, let’s dissect the recording cycle P&L, and take a look at some of the most common scenarios in the music business.

Record labels make money on recordings by investing in the release cycle — whether it’s the entire cycle, from recording to marketing (as in a traditional record deal), or only a specific portion of it (as in a licensing deal) — and then taking a stake of the revenue generated by that album to recoup their investments and turn a profit. 

In the following section, we lay out common types of deals in the record business, showcase how exactly those deals work, and how the recording dollar gets split between labels and artists. We’ll start with the standard (or, not-so-stardard-anymore) record deal.

Deal Type: Standard Deal Songs Released: 16 Cycle Length: 36 months Distributor/Label Split: 10/90 Artist/Label Split, Streaming: 15/85 Artist/Label Split: Sync Licensing: 33,33/66,66  Artist Advance: $150 000 Marketing Investment: $150 000 commitment, 14% reinvestment rate Promotion Investment: $80 000 commitment, 10% reinvestment rate  Recording/Mixing/Mastering Costs per Track: $8 000 Production Costs per Music Video: $50 000 (One Video per 6 Songs on Average) Cover Art Costs per Track: $1 000 Recoupable costs: Recording

Standard Deal P&L Simulation

Standard Deal P&L Simulation

First, let’s take a look at the standard deal (the funny thing about it is that it’s not so standard anymore, at least in the US). In any case, the nature of the deal is pretty straightforward. The label commits a sizable budget towards marketing and promotion, taking a massive stake in the cycle’s revenues. When it comes to the traditional deals, the label’s share will rarely go below 80% — in the simulation above, we use 15/85 splits for record sales and streaming and 33/66 for sync revenue. 

The label will also put forward a hefty advance against the projected royalties, and (sometimes) establish recording costs as recoupable expenses. That means that first, the label will make back the entirety of recording investment. Then, the artist will start earning their share, which will go to making up the artist advance. Only once the advance is made full, the artist will see the first recording royalties come in. 

The scenario above is roughly based on the budget breakdown provided by IFPA for the average major label’s investment into a newly signed artist. Of course, the actual real-life contracts will fluctuate from this averaged simulation — yet, it can give us a pretty good idea of how the label system makes a profit (when it comes to newly signed talent). 

Now, let’s consider the splits at some of the key points of the release success: 

music label business model

*RIAA Gold Status is reached when the album sells 500,000 copies in the US, with 1,500 streams = 1 album sale ratio applied. Thus, under our model, a record would receive a Gold status at about 700,000,000 streams (+ physical sales, modeled based on the stream count). However, the RIAA only counts the US-based sales, which means that the global stream count will be higher than that. So, for the purposes of this simulation, we’ve used 1,500,000,000 streams for gold status

It’s hard to find an estimate for how many streams an average debut album generates — but be sure that a rare LP reaches Certified Gold status. Throughout 2019, there were only 198 releases (counting both albums and singles) that got Gold Certified by RIAA . That is, of course, a very US-centric view on things — the record might generate billions of streams around the world without ever reaching the RIAA Gold. But even if this figure is an understatement, the point is that major labels have a shallow success rate with new signings. While there are no official statistics to back up our words, trust me, it’s safe to assume that for every successful debut album, there are five releases that stay in the red. 

Even with a modest (by major label standards) release commitment, the label needs around 174 million streams just to break even — and well, a lot of releases won’t reach that mark. And mind you, we’re talking about label getting 85% of the royalties here. 

If you follow the music industry publications, you’ve likely seen more and more parallels drawn between the recording industry and the startup economy. This is precisely why — just like VC funds, labels have to make a lot of risky bets, likely to lose money on most of their newly signed projects. 

However, their extensive catalog allows the labels to keep on investing in finding those few artists that do break out. The back catalog is the single most valuable resource in the hands of the major labels. I mean, the Beatles discography will keep on making money (until the copyright runs out) regardless of Universal’s investment.

To follow through with our metaphor, the label’s back catalog is like a mature section of VC's investment portfolio, startups going through IPOs and guaranteeing returns to their early investors. This cash printing machine is one of the main reasons labels can afford to take these risky bets on new talents.  

The “lose small to win big” pattern is not unique to the major labels — it's true for independent record labels as well. The same logic, though on a much lesser scale, can be applied to most indies out there. The release commitments are lower in the indie deals, so are the advances and recording costs. Accordingly, an independent label will break-even much earlier — but the average stream counts will also be lower. The entire label system has to operate on this financial model — lose $1 ten times to make $11 once. But what’s in it for the artist? 

Well, let’s take a look at the alternative: what if the artist doesn’t sign with a label? What if they break away from the label system and go “distribution-only”? Let’s compare the artist’s P&L in both scenarios. Of course, 99,99% of the time, the artist going DIY way won’t be able to pull the same promotion, marketing and recording budget — but for clarity’s sake, let’s imagine a DIY artist who invests just like label did in our previous example:

Artist's Share: Standard Deal vs. Distribution-Only

Artist's Share: Standard Deal vs. Distribution-Only

Since there’s no artist advance in the mix, the independent artist breaks even a much earlier than a label would, at around 125 million. But strictly speaking, distribution-only deal only makes economic sense once the return is higher than 250k of artist advance — or at 174 million streams.

Basically, a fully-independent artist has to take the same chances as a label would . That is the risk vs. reward formula typical to the music business. By going “no label”, the artist takes all the risks of the release cycle upon themselves, betting that they can go independent and match the would-be label’s break-even point. Of course, the returns in a case of success are huge — but should artists bet their livelihood on the monetary success of their art?

There are initial investments to consider — in the independent scenario, there won’t be any advance, ensuring that the artist can sustain themselves throughout the release cycle (which is the whole point of artist advance by the way). Then, the artist will have to produce a lump sum to finance costly release marketing and promotion, a lot of which has to be committed way before the first payments start coming — and a rare aspiring act will be able to match the label’s investment here. 

Besides, it’s not only about the budget. It’s also about the know-how that the label brings to the table. Pulling a talented, internationally connected team together is no small feat. On paper, it can be done by the artist’s management team, but the fact is that the label’s expertise and network are often as important as the budget that comes with the record deal.

But that is, of course, the whole point of DIY. You don’t need to invest. You don’t need the team. You can do it yourself — at least until you can make enough to become “your own label”. But let’s face it — this is hardly the path that can become an industry standard on the wide, mainstream scale. While the label system is not without its flaws, the fact is that most artists will always need a partner that would act as a “music bank”, financing the marketing efforts that allow artists to stand out in a crowded industry. 

It doesn’t necessarily have to be called a label — it can be a distributor , a music management agency , a streaming platform , or even the artist’s fan community. But as long as music marketing means investment, artists (or, at least, most of the artists) will need someone to bear these costs (given they have no troubles assembling the team). 

That is the very reason why viral success stories of 2019, from Old Town Road to Stupid and La La La turned the heads across the industry. Viral marketing channels — TikTok being the prime example — allow artists to grab the audience’s attention with next to no marketing budget, thus bypassing the label system. Don’t get me wrong — there’s a huge difference between a viral hit and a long-term, sustainable career. That said, the viral marketing techniques question the very idea of “you need to invest to make it big”, challenging the established order of things. Then, of course, the same viral hits got licensed to (read: brought up by) the majors, feeding back into the label system — but those dynamics are a topic for a separate discussion. 

The point is, labels were, are, and probably always will be an integral component of the music ecosystem, providing artists with financial safety of the up-front advance and taking upon themselves the risks (and rewards) of the release cycle. However, as we’ve said before, the standard deal is not the only option on the table. In fact, in recent years, there’s a good chance that the artist will be offered a “net profit” deal instead.

Put simply, the point of the net profit deal is to allow record labels to break-even quickly while making sure that the artist gets a better split if the album is a success. Under the net profit deal, both the recording costs AND and the promotion/marketing costs are recoupable. In other words, the label will keep 100% of the royalties until the net of the cycle is zero, and the contractual splits will only apply to the net profits of the release — hence the name. In return, once the cycle breaks even, the artist will get a significantly higher share of royalties, compared to the traditional deal — usually, the label and artist will split the profits 50/50 in such agreements.

Let’s use the same inputs to simulate the P&L of the net profit deal:

Deal Type: Net Profit Songs Released: 16 Cycle Length: 36 months Distributor/Label Split: 10/90 Artist/Label Split, Streaming: 50/50 Artist/Label Split: Sync Licensing: 50/50 Artist Advance: $250 000 Marketing Investment: $150 000 commitment, 14% reinvestment rate Promotion Investment: $80 000 commitment, 10% reinvestment rate Recording/Mixing/Mastering Costs per Track: $8 000 Production Costs per Video: $50 000 Cover Art Costs per Track: $1 000 Recoupable costs: Recording, Promotion and Marketing

music label business model

Net Profit Deal P&L Simulation

In its core, the net profit deal is a response of the label’s system to the growing power of the artist — and a way to offer a better revenue split, given the label makes up for its initial investment. The section of the P&L up until the label break-even point will exactly mirror the standard deal, even though the artist now makes 50% of the revenue instead of 15%. From that point on, however, the artist recoups much faster — and as soon as the label makes its $250,000 (the artist advance), the artist’s 50% starts flowing in. 

music label business model

Comparing the three scenarios from the artist’s standpoint, you can clearly see the difference for yourself. The net profit deal seems like a perfect solution — providing the artist with the safety of advance, allowing the label to recoup the investments quickly, and ensuring that, if the album is a success, the artist gets a fair share of the pipe. Sign me up, right?

Artist's Share: Standard Deal vs. Distribution-Only vs. Net Profit Deal

Artist's Share: Standard Deal vs. Distribution-Only vs. Net Profit Deal

Well, the reality is not that simple. There are a few downsides to the net profit deals every artist should be aware of. First and foremost, some of the net profit contracts include additional clauses that tend to skew the actual revenue splits in the label’s favor. Such contractual nuances are the very reason why even the established artists sometimes don’t see a single penny of their royalties, even though their label is long in the black. 

Primarily, this got to do with overhead fees. Overhead fees are often included in the net profit contracts as additional recoupable expenses, designed to compensate the label’s administrative and corporate costs — from office rent to salaries and logistics. Calculated as a percentage of the record sales, overhead fees can range from 3% to 10% cycle’s gross.

Essentially, overhead fees are treated the same way as the marketing expenses — until the costs are recouped, the label makes 100% of the royalties. However, since overhead fees are a function of the gross sales, a 10% fee means that the artist has to deduct one-tenth of their royalties and pass it over to the label. So, 10% in overhead fees effectively turn a 50/50 deal into a 40/60 deal.

To showcase how the overhead fees impact the effective splits, let’s take a bit more exciting scenario, and look at a triple-A release. When it comes to the powers that be and top-tier, international releases, all the initial label costs can skyrocket. According to the industry sources, Drake can easily secure up to $20 million in advance — which means that the release needs to generate close to 3 billion streams just to make up for the advance. The skates are huge — and obviously, the label will have to bring major release commitments to support the cycle.

However, let’s not go to the extremes, and review a more modest scenario with a $3,5 million advance, $2,5 million in marketing and $1 million in promotion commitments:

Deal Type: Net Profit Songs Released: 16 Cycle Length: 36 months Distributor/Label Split: 10/90 Artist/Label Split, Streaming: 50/50 Artist/Label Split: Sync Licensing: 50/50 Artist Advance: $3 500 000 Marketing Investment: $2 500 000 commitment, 14% reinvestment rate Promotion Investment: $1 000 000 commitment, 10% reinvestment rate  Recording/Mixing/Mastering Costs per Track: $100 000 Production Costs per Video: $250 000 Cover Art Costs per Track: $5 000 Recoupable costs: Recording, Promotion and Marketing Overhead fees: 10%

Impact of Overhead Fees on Artist/Label Splits under Net Profit Deal

Impact of Overhead Fees on Artist/Label Splits under Net Profit Deal

Outside of swinging the effective royalty split in the label’s favor, the overhead fees also have a secondary effect on the artist’s position. Since overheads are recoupable costs, they also tend to inflate the artist’s recoupment deficit — the amount of money the artist has yet to recoup (highlighted purple on the graph above).

Now, if we’re talking a one-album deal, the recoupment deficit doesn’t really matter that much. Even if the artist never recoups, the deficit won’t turn into debt — the whole point of recoupment is that they can only be deducted from contractual cash flows. So, if the deal has run out, the recoupment deficit will simply go away with it. 

However, that’s not always the case. If we’re talking multi-album, subsequent deals, there’s cross-collateralization to consider.

Cross-collateralization is a clause that is often included in multi-rights recording deals that allows the label to recoup the outstanding deficit with the revenues that are not necessarily connected to the release cycle in question. Let’s imagine that the album in the simulation above ends up with mediocre sales (by triple-A standards), and only gets up to 1,5 billion streams. In that case, the artist never recoups, but still gets their $3,5 million of advance. The label breaks even and makes around $500k on top — so, everyone is still happy, right? 

Now, due to the exposure to overhead fees, the artist has $2 million to recoup at that point. Well, if we’re talking cross-collateralization multi-album deal, those $2 million will transition to the next cycle as extra recoupable costs — kinda like an additional artist advance that the artist never actually receives.

Accordingly, in the next release cycle, the revenue gap between the artist and the label will grow even further. If we repeat the “1,5 billion streams” calculation, the recoupment deficit will increase to $4 million, and so forth.

Impact of Recoupment Deficit on Artist/Label Splits Under Multi-Album Net Profit Deal

Impact of Recoupment Deficit on Artist/Label Splits Under Multi-Album Net Profit Deal

That is how the artist can often find themselves in a paradoxical situation: the net profit split is (technically) 50/50, the label is making $10 million NET, and the artist has yet to see the first royalties flow in (outside of the advance). 

That said, there are no good or bad deal types in the music business. Every career is unique, and different setups work well for different artists. For some artists, streaming is the primary revenue stream, which means that a favorable recording split is key to monetizing their music. Others have to consider the value of their release outside of the recording revenues, which means that the worst (in terms of revenue splits) deal with one label can be better than the best deal with another — it’s all about the impact of the label’s involvement on the artist’s career as a whole. 

A vast majority of artists can’t make a living out of record sales, having to rely on other sources of revenue — and so the album is often not the end-goal, but a means to an end. That is neither good nor bad. That is just where things are right now. It’s up to music professionals to try and extract better value out of recordings, but until $9,99/month is a cost of the entire recording industry, most of the artists will have to look elsewhere for revenue.

But what about the labels? The music industry will always need someone to fill their VC-like role, but there’s only so many releases a label can get behind — all while the sheer volume of music produced continues to grow exponentially. The shift from artist deals to licensing has allowed labels to optimize their investment portfolio, and bet on an existing album instead of getting behind an artist who has yet to make their commercial debut. But even that shift hasn’t changed the 10% success rate nature of the recording business.

Ultimately, the only way for labels to break away from the “lose ten times, win once” operation is to increase the average cycle value — but there is still a limited number of streams to go around. Sure, the streaming revenues are on the rise, but let's get real — that growth won’t last forever. 

So, how do record labels make money in the future as their scope becomes more limited? Will the labels find new monetization techniques that would allow them to build a more sustainable recording ecosystem? Or, will the new type of VC-like bodies, better aligned with the “promote the recording, monetize elsewhere” mentality take their place? We’ve already seen all sorts of composite music companies making a move into the recording space and offer their take on what the label of the future looks like — from music funds to integrated artist services companies and distribution-first marketing solutions . 

For now, there’s no defined answer to those questions. Considering how fast things have changed in the last couple of years, it’s anyone’s bet as for how the recording industry will look like 36 months (or one recording cycle) from now. But one thing we know is that an understanding of how the label system works and how it turns in a profit is crucial to anyone — artists and music professionals alike — who want to position themselves for the coming shift. 

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Dmitry Pastukhov

Content creator for Soundcharts. Deciphering the music business so you don't have to.

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How Do Record Labels Make Money

Business-model

Record labels have been around since the late 1800s, and the business model has changed over time. But, one thing has remained constant: record labels make money by selling music via drafting a effective music production business plan . In this article, we’ll look at how record labels make money in the modern era, including sales and streaming, licensing, merchandising, and more.

What Is The Record Label Business Model?

First, let’s discuss the typical record label business model. Record labels are businesses that invest in musical artists, help them create their music, and then promote and sell that music to the public. In return for their investment, record labels typically take a percentage of the profits from sales of the music (usually between 15-25%).

Record labels have multiple kinds of deals with artists, but the most common is called an “artist contract.” This is a legally binding agreement between the artist and the label that outlines how the label will support the artist and how the profits from the artist’s music will be shared. There are different ways that the profits can be shared, but the most common is for the label to take a percentage of the sales (as mentioned above).

How Do Record Labels Make Money?

So, how do record labels make money in the modern world? There are a few different ways. Let’s look at some of the most common:

Music Sales and Streaming

This may seem obvious, but the primary way that record labels make money is by selling music. This can be done in a few different ways. The most common is through digital downloads and streaming services like iTunes, Amazon Music, and Spotify. Labels also sell physical copies of CDs and vinyl records, but these sales have decreased over time.

When a customer buys or streams a song, the label gets a cut of the sale. The artist also gets a cut, which is typically much smaller (usually between 10-15%). The rest of the money goes to the retailer (like iTunes) or the streaming service (like Spotify).

Another way that record labels make money is by licensing their artists’ music for use in other media,  like movies, TV shows, and video games. This is usually done through a third-party company that specializes in music licensing. When a label licenses a song, they typically get a one-time payment for the use of the song. The artist may also get a small cut of the licensing fee.

Merchandising

Record labels also make money by selling merchandise featuring their artists’ names and faces. This can include things like t-shirts, hats, posters, and more. Fans of an artist are usually willing to buy this type of merchandise, which generates revenue for both the label and the artist.

Promoting Shows

In addition to selling music, record labels also promote and produce live shows for their artists. This includes booking venues, hiring staff, and promoting the show through advertising and PR. The label will typically take a percentage of the ticket sales, and the artist will keep the rest.

Booking Tours

Another way that record labels make money is by booking tours for their artists. This includes arranging transportation, booking venues, and hiring staff. The label will typically take a percentage of the ticket sales, and the artist will keep the rest.

As you can see, there are a few different ways that record labels make money. But, it all comes down to one thing: selling music. Whether it’s through digital downloads,  streaming, licensing, or merchandising, selling music is how record labels make the majority of their money. Hopefully, this article has given you a better understanding of the record label business model and how it works.

music label business model

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8 Essentials for a Record Label Business Plan

Business-Plan-Essentials

In this article we look at the eight elements that make up a record label business plan, and work through the template providing examples you can edit for your own record label .

Writing a business plan

Running a successful record label is like running any other successful business, first and foremost you need a plan.

Every business I have started has begun with a plan. It doesn't need to be fifty pages worth of the minutiae account details but it is important to write down what your goals are for the first 12 months.

It's not just the final result that is important, the  process of creating a business plan is equally important as it forces you to make realistic decisions on how you are going to move forward and make the label a success . 

music label business model

“If you fail to plan, you are planning to fail“

- Benjamin Franklin -

We can keep things simple and the whole document can be no longer than 6 brief pages. The main goal of the plan is to help clearly define what your brand will look like, which areas of music you want to focus on, and create a short summary that you can use to explain the label to new industry contacts.

In some countries you need a business plan if you are opening a business bank account. Some distributors also require a business plan before considering working with you, and you will definitely need one if you are an electronic record label and want a Beatport label account.

The good thing is that we have created The Label Machine business plan template that you can follow, which includes plenty of examples you can edit and customize yourself which will result in a comprehensive business plan for your label!

I would suggest before starting a label that you have at least three releases planned, with the first one ready to go.  By ready to go, I mean you have a finished single or EP of music that is fully mixed down, mastered and ready to go out to the public without any more changes. The business plan will focus on these first three releases.

As you progress at The Label Machine, your business plan will change too, and it should. It is meant as a reference document that you can use to show others that you have a plan and well thought out goals.

music label business model

Essential Record Label Business Plan Template

Download the full record label template to follow along with this article, including examples to edit for your own record label.

Download the template and open in your document editor and then we’ll go through each of the sections.

Below is a brief description of each section. Follow along and edit each section as we go along.

This is the title section and front page of your business plan. This simply states your 

  • Record label name
  • Business address
  • Email address
  • Phone number

This is the section that will summarise the main objectives of your label. This section will actually be written last. After you have completed the rest of the document, you need to come back and s ummarise it into a short paragraph here.

Zonderling Records is an electronic record label based out of Seattle, that aims to represent a genre of music heavy influenced by early rave, garage, jungle, and grime. We will produce limited edition runs of vinyl via vinylised.com, use interesting marketing ideas such as cassette mixtapes alongside traditional press and marketing channels.

2. Business overview

Introduction:  In this section you want to introduce the key people who are involved in the label and what experience, qualifications and training they might have, along with where you will be based and the future goals of the record label.

Joe and Rich have been involved with dance music for a long time and have over 4 years experience in music production and running small music related businesses. After releasing on various record labels in the past, the next logical step, to take their careers in the music business to the next level is to start a record label. The label will be Seattle based to begin with, but has the potential to be based out in LA within a few years of trading. Music will be the only product sold to begin with, but eventually the record label will be transformed into a brand big enough to sell clothing and other non-music related products .

Current position:  This is a summary of where you are right now with your music plans .

So far, Zondiling Records has the first release signed which is a Remix EP of Joe and Rich’s previous releases. ‘Juke da Luke’ and 'Pressure Fresh' have been singled out as potential first outside signings amongst other potentials such as ‘Idle Kids’ and ‘Origins of 90’

Growth plan:  This is a summary explaining how you aim to grow your record label with your financial goals

After releasing our first three EP’s we will expand into more releases from other artists, pulling remix favours to associate as many established acts to validate the label as possible. Using Joe and Rich’s releases will help to attract an established audience to the label initially. After a year, we aim to be signing artists exclusively under 360 deals and pulling in profit from the labels merchandise as well.

3. Strengths, Opportunities and Core Values

Strengths and Opportunities: This is where you will list your strengths and opportunities as a record label. It gives you an opportunity to create a USP and critical success factors . If you have something unique that will ensure success, such as a link to a key industry contact, or opportunity, this is where you should list it.

Strengths: -Understanding of the current music landscape via our current DJing bookings -Links to multiple artists with established fan bases -Advise and industry support via The Label Machine

Opportunities: -Access to industry database, press and music industry contacts -Access to other artists in local area

Core values:  What is important to you as a label? Are you going to be pushing underground music , or are you pushing experimental music? Is this to release your own album to support a tour, or are you interested in working with more mainstream music and artists?

-To build a brand that people can trust and turn to for good quality music -To have the confidence to push new music as opposed to just following recent trends -To build on personal relationships within the music industry in order to create a successful brand that people trust and want to be associated with

4. Business strategy

Outline your business strategy for the first five years. These are your tangible goals . How many releases do you aim to have? Do you want to sign new artists? When do you aim to break even on the revenue? 

As a bare minimum your goals should aim to release at least 3 singles or EP’s in your first year if you are a DJ or band, and 6-8 records of you aim to sign artists to your label. I would also aim to be breaking even from 12 months of your first release so the label is supporting itself financially .

The 3-5 year goals are what you will be doing should you achieve your first 1-2 years goals. These goals that are more flexible, and are likely to change but ensure you do write goals of where you intend to go.

1-2 Years -To have a steady flow of quality releases, building the labels reputation. -To have discovered and signed at least 2 exclusive acts to the label. -To have broken even on all costings

3-5 Years -To have a full roster of exclusive artists releasing under Zonderling Records. -To have had at least 3 overall Beatport number ones within their relative categories. -To be hosting smaller stages at festivals worldwide. -To have office space in either London, Bristol or LA with 3 or more staff members.

5. Distribution and Label Products

List your distributor and any other label products you aim to offer at the label such as merchandise or running events. 

Distribution channels:  Who will you distribute your music through?

Music distribution to all major stores of iTunes, Spotify, Apple Music, Deezer, Amazon, and Google Play via the DistroKid distribution platform.

Find the best distributor now

Use this handy tool to find your ideal distribution partner

Events (optional) If you are doing events, who will run the events and how will they be promoted ?

Label events will be arranged with our contact ‘Zeal Promotions’ throughout North America, with our focus being on our home state Washington. Events will be promoted through local and national media coverage via ‘3rd Eye PR’

Merchandising (optional) If you are doing merchandising, who will be responsible? Where will you sell and manufacture your merchandise? What prices will you use?

Abbie Street will organise and implement the merchandise for the label. It will be hosted on Shopify website, and manufacturing will be carried out by a print-to-order manufacturer based in Seattle.

6. Label Management and Operations

This is where you list who will be managing the label and any other team members you will have. You can also list here any key partners you will use, such as The Label Machine, merchandise companies, or management companies.

Label Management Team

Joe Stone – Label Manager

  • Responsible for A&R, signing and managing new artists
  • Managing the music distribution and royalties
  • Administrating and registering the catalogue

Rich Fever – Marketing Manager

  • Responsible for online marketing and PR activities for releases
  • Overseeing the artwork and marketing asset creations

Abbie Street – Merchandise Manager

  • Organise and implementing the merchandise for the label.
  • Maintaining the Shopify website
  • Fulfilling the manufacturing and shipping

7. Marketing

What are your marketing goals, objectives, targets and promotional activities for the label? You will want to answer these questions in the sections below.

Goals and objectives Describe your goals and objectives around the marketing; list the campaigns and plans that you have in place and your strategies for the future.

-Research blogs and press publications that support your genre of music to create label brand recognition -Develop innovative marketing plans that utilise chatbots and other cutting edge technologies to build an audience -Increase sales through social media campaigns and PR strategies -Increase awareness of artists and label with 3rd party revenue streams such film, TV and game sync deals

Target Market Here is where you can clearly define your target market . Important to put the genre of music you will be releasing, locations and age group as a minimum.

We aim to sell to all audiences, but with a more biased approach by making sure we appeal to the up and coming bass music markets such as the U.S.A. and a core demographic of end users between the age of 14 and 30

Advertising and promotion activities Describe what advertising platforms you will use to promote the label and the releases. You might want to list any  creative ideas to get the brand out there, any PR companies you might use for your first release, and which social media platforms you will promote on. Click here to learn how to build your own music PR machine in a day.

-Using physical assets such as vinyl and cassette mixtapes we will create a rich online experience based on real life products, which we believe is missing from a lot of digital labels today. -We will use a DJ promotion service ‘The 6th Degree’ to garner maximum DJ support from the industry. -We will run Instagram promoted stories and sponsored Facebook posts to create awareness of new releases to fans of similar genres.

8. Financial budget and forecasts

This is the section where you can provide financial budget and forecasts, such as:

  • Startup Label Expenses
  • Release Expenses
  • Optional Expenses
  • Cashflow Forecast
  • Optional Revenue Streams
  • Profit and Loss Projection

There is a  budget template and course on how to create your budget that will go into more detail. Once you have completed this and have your budget you can copy and paste the summary page into this section of the business plan.

music label business model

Writing a business plan isn't easy, but with the downloadable template (which includes extra examples not here in the blog) you should be armed with enough information to put a great record label business plan together. 

And don't put off starting! Start today, and spend just 15 mins working on your plan, you'll be surprised how much you will get done and you'll be in a much better place to start your record label. 

Prefer to watch a video? Check out Nick's business plan walkthrough below.

  • How it works

7 steps to start and grow your record label: Define your business model and brand identity

Starting a record label has always been quite an adventure, but the digital ecosystem has made the journey smoother.

Nowadays, it’s easier than ever to start and manage your own digital music distribution business, being a record label.

From creating your digital brand and understanding all the legal bits and bobs behind music licensing to virtually delivering your catalog to the most important DSPs, managing your artists’ royalties, and creating a solid PR & Comms strategy to promote your artists’ music on different online and offline channels.

If your goal is to run an independent label online and easily make your artists’ content accessible to anyone in the world, you’ve come to the right place.

The purpose of this guide is to show you how to set up your own record label step-by-step and make your online music distribution business grow.

In the first episode of this how-to guide, we want to give you some valuable information about setting up and structuring your record label, creating your brand identity, and learning how to deal with legal affairs.

Define your record label's business model and branding

Define your business model

When entering the music industry as a record label, the first thing to think about is to plan what type of label you want to be.

The idea is to set some objectives and structure your music business considering what you want to achieve under a specific time frame, always keeping in mind the markets you’re going to sell your artists’ music as well as the creative, financial, and legal aspects that may arise during the process.

What type of artists do you want to sign? Where do you want to release your artists’ music ? Will you be running the record label as a sole trader, standalone business, or will include other partners? How are you going to distribute your artists’ music catalog? What is your marketing strategy going to be?

These are the questions that you should be asking yourself when creating your business plan.

Following are the business models you can establish when creating your record label:

  • Sole trader / sole proprietorship
  • Partnerships
  • Limited Liability Company (LLC)
  • Corporations (S & C)

Sole proprietorship

Starting your record label as a sole proprietorship, which means that you are running the business on your own as a unique proprietor, may be the simplest and cheapest thing to do, but you have to consider that all legal and financial issues, including earnings and losses, will be tied to you.

It’s like running your record label from the perspective of a business person rather than an entity.

You’re responsible for income taxes and paying any other contributions under your name. Bank accounts and loans would also be tied to you personally.

Define your record label's business model

Define your record label’s business model

Partnership

If you want to start your independent record label with other people, you’d need to consider having a Partnership Agreement where each part clearly knows what the rights and responsibilities are for everyone.

That means setting up the percentage of ownership, profit shares, salaries, and tax payments from the start.

It’s also about the idea of involving all parts when it comes to decision-making, from who runs each department, what artists to sign, where to distribute, or how to split the work to decide on what to do if anyone leaves the business earlier than expected.

Limited Liability Company

If you want to run your record label as a business entity, then the best is to go for a limited liability company or a corporation.

LLCs have the same legal protection as corporations, but fewer formalities to fulfill when it comes to administrative requirements.

In a record label that is a limited liability company, all members aren’t personally liable for the company’s obligations.

Corporation

If you decide to base your label as a corporation, then all administrative, legal, and financial paperwork will be attached to the company.

Another aspect to consider when starting your record label is to join the trade associations corresponding to your music business , from a royalty collection society to music publishers associations.

Your record label branding

“How to find a record label to release my music?” This is what most independent artists type on search engine boxes when looking for a label to build up their career by distributing their work on all major digital platforms but also whenever they want to get more exposure on social media and traditional PR channels (magazines, billboards, physical stores…) and expand their fan base worldwide.

If you want your company to appear on the first results, then it’s vital to work on your brand identity and your online presence to make sure your record label is widely known in the independent music scene.

Create your record label's branding

Create your record label’s branding

Your brand is the representation of what your record label is and what makes you unique. Your “x-factor” to distinguish yourself from competitors.

It’s a way to visually express your business personality, core message, and values, letting current and potential clients know what type of artists and music genres are under your umbrella.

All the elements of your brand – your logo, fonts, colors, name, tone of voice, and tagline – should remain the same across all digital channels and marketing materials to keep consistency and make it recognizable for users.

Your brand identity should be present every time you release any music from your artists, but also whenever you share a message on your social media channels, you launch new merchandise for your record label or create ads and banners to promote your catalog.

You can develop your label’s identity on social media, for example, by creating a branded message to connect with your audience, making your company recognizable everywhere.

You can also expand your brand’s reputation and credibility by adding new services to your existing offering.

To do so, you can use a white-label solution, which allows you to grow your business offer while reinforcing and consolidating your brand identity.

You can manage your record label’s music distribution in one single place and customize the platform by using your brand name, logo, background image, and domain, and present it to your clients and artists as your own.

This is a great way to build and strengthen your brand identity as you can use the tools integrated with the white-label platform to expand your service offering to your current clients and use it to attract new ones for distribution.

A good idea is to use a white-label solution like the one SonoSuite offers, as it gives you the option to create and boost your digital distribution service considering your business needs.

Do you want to expand your record label’s services with SonoSuite’s white-label solution?

Let’s do it!

Don’t forget to keep visiting our blog to read the following episodes from our “7 steps to start and grow your record label” guide.

The next chapter, “Select your record label’s artists and repertoire”, will be available very soon!

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Record Label Business Plan Template

Written by Dave Lavinsky

vinyl record

Over the past 20+ years, we have helped over 1,000 entrepreneurs and business owners create business plans to start and grow their record labels. On this page, we will first give you some background information with regards to the importance of business planning. We will then go through a record label business plan template step-by-step so you can create your plan today.

Download our Ultimate Record Label Business Plan Template here >

What Is a Record Label?

A record label is a small or large company that manufactures, sells, promotes and distributes recordings of associated music artists.

A record deal is actually an artist giving up his or her rights to their music and some profit in exchange for professional services that will advance the artist’s career. The main goal of your record label is to increase the artist’s profitability, which in turn increases your sales and profitability.

What Is a Record Label Business Plan?

mixing-board

Creating a business plan is one of the first and perhaps most important steps in starting a record label.

Why You Need a Record Label Business Plan?

If you’re looking to start a record label or grow a successful record label, you need a business plan. A business plan will help you raise funding, if needed, and plan out the growth of your record label in order to improve your chances of success. Your business plan is a living document that should be updated annually as your company grows and changes.

Source of Funding for Record Labels

With regards to funding, the main sources of funding for a record label are bank loans and angel investors. With regards to bank loans, banks will want to review your business plan and gain confidence that you will be able to repay your loan and interest. To acquire this confidence, the loan officer will not only want to confirm that your financials are reasonable. But they will want to see a professional plan. Such a plan will give them the confidence that you can successfully and professionally operate a business.

The second most common form of funding for a record label is angel investors. Angel investors are wealthy individuals who will write you a check. They will either take equity in return for their funding, or, like a bank, they will give you a loan. Venture capitalists will not fund a record label.

What Should a Record Label Business Plan include?

The record label business plan should include the following 10 sections as follows:   1. Executive Summary 2. Company Analysis 3. Industry Analysis 4. Customer Analysis 5. Competitive Analysis 6. Marketing Plan 7. Operations Plan 8. Management Team 9. Financial Plan 10. Appendix

How to Finish Your Record Label Business Plan in 1 Day!

Don’t you wish there was a faster, easier way to finish your business plan?

With Growthink’s Ultimate Record Label Business Plan Template you can finish your plan in just 8 hours or less!

Click here to finish your business plan today.

How to Write a Business Plan for a Successful Record Label

Your business plan should include 10 sections as follows:

1. Executive Summary

record-player

The goal of your Executive Summary is to quickly engage the reader. Explain to them the type of record label you are operating and the status; for example, are you a startup or do you have a record label that you would like to grow.

Next, provide an overview of each of the subsequent sections of your plan. For example, give a brief overview of the music ndustry. Discuss the type of record label you are operating. Detail your direct competitors. Give an overview of your target customers. Provide a snapshot of your marketing plan. Identify the key members of your team. And offer an overview of your financial plan.

2. Company Analysis

In your company analysis, you will detail the type of record label you are operating.

There are three types of record labels. These are major labels, their subsidiaries (major label subsidiaries) and indie or independent labels. Major labels include Universal Music Group, Sony Music Entertainment, and Warner Music Group. These are regarded as the “big three”.

Each of these three major labels has several subsidiary companies under their banner. If you’re considering starting your own record label, then it would fall under the independent label.

In addition to explaining the type of record label you operate, the Company Analysis section of your business plan needs to provide background on the business.

Include answers to question such as:

  • When and why did you start the business?
  • What milestones have you achieved to date? Milestones could include sales goals you’ve reached, new store openings, etc.
  • Your legal structure. Are you incorporated as an S-Corp? An LLC? A sole proprietorship? Explain your legal structure here.

3. Industry Analysis

rock-band

While this may seem unnecessary, it serves multiple purposes.

First, researching the music industry educates you. It helps you understand the market in which you are operating.

Secondly, market research can improve your strategy particularly if your research identifies market trends. For example, if there was a trend towards decaffeinated record label consumption, it would be helpful to ensure your plan calls for plenty of decaffeinated options.

The third reason for market research is to prove to readers that you are an expert in the music industry. By conducting the research and presenting it in your plan, you achieve just that.

The following questions should be answered in the industry analysis section:

  • How big is the music industry (in dollars)?
  • Is the market declining or increasing?
  • Who are the key competitors in the market?
  • Who are the key suppliers in the market?
  • What trends are affecting the music industry?
  • What is the music industry’s growth forecast over the next 5 – 10 years?
  • What is the relevant market size? That is, how big is the potential market for your record label. You can extrapolate such as figure by assessing the size of the market and then applying that figure to the music genre(s) you will be serving.

4. Customer Analysis

The customer analysis section must detail the customers you serve and/or expect to serve.

Record labels serve two types of customers: music artists and their fans.

In this section of your plan, start by detailing the music artists you represent or hope to represent.

With regards to the music artists’ fans, you should then detail the customer segments they include. Sample segments are college students, sports enthusiasts, soccer moms, techies, teens, baby boomers, etc.

If the artists you represent are in the same music genre, the fans of each should share similar demographic profiles.

Finish Your Record Label Business Plan in 1 Day!

5. competitive analysis.

microphone

Direct competitors are other labels serving artists similar to the ones you want to serve. In your business plan, provide an overview of these competitors and document their strengths and weaknesses. Unless you once worked at your competitors’ businesses, it will be impossible to know everything about them. But you should be able to find out key things about them such as:

  • What types of customers do they serve?
  • What is their pricing (premium, low, etc.)?
  • What are they good at?
  • What are their weaknesses?

With regards to the last two questions, think about your answers from the customers’ perspective (the music artists). And don’t be afraid to ask your competitors’ artists what they like most and least about them.

The final part of your competitive analysis section is to document your areas of competitive advantage. For example:

  • Will you provide superior record label services?
  • Will you provide services that your competitors don’t offer?
  • Will you provide better customer service?
  • Will you offer better contract splits?

Think about ways you will outperform your competition and document them in this section of your plan.

6. Marketing Plan

record-store

Product : in the product section you should reiterate the type of music artists you serve/hope to serve and the services you offer.

Price : Document the general contract pricing (revenue and profit splits) you will offer clients.

Place : Place refers to the location of your record label. Document your location and mention how the location will impact your success. For example, is your record label located in an urban area with access to lots of musicians?

Promotions : the final part of your record label marketing plan is the promotions section, which details how you will get new clients and customers.

As a record label you need to market your company in order to get more clients, and you have to market your clients so they succeed and you both make money. Fortunately, when you do a great job marketing your clients, other artists hear of you and thus little additional marketing to them is needed.

As such, below are the most common and effective ways to market your record label’s clients:

  • Collecting Email and Text Addresses : Developing an email and/or text list of music listeners who enjoy the bands your label represents may take time, but eventually offer a built-in base of potential buyers for each new album release or set a new tour date. It is important to make it easy to sign-up to the label’s email list at multiple points of contact – at concerts, via social media, and on the websites of the label and music artist.
  • Building Release Schedules : It’s important to release songs in wanes. This helps to retain the audience’s interests. Whenever a new song is released, it will draw the most attention before tapering off. As interest begins to wane, release a new track. This keeps the momentum going and keeps people going.
  • Concerts and Tours : The most immediate, direct way to get consumers to appreciate the music of your artists is for them to hear the artists live. This may become a bit of a “chicken and the egg” problem for you: concertgoers have to know of the artists, and have heard their music before, to want to attend their concerts, but concerts are a key way to market the artists. This is why newer artists are often sent out as opening acts for more established artists. As long as your label is skilled at successfully pairing your artists on concert tickets, you can benefit both groups of artists through this strategy.
  • Public Relations : The release of a new album is newsworthy and, even if it does not seem newsworthy, it is the job of your company’s public relations director or firm to make it so. By encouraging new articles about the release and feature articles about the artists, PR people can create what amounts to free advertising in magazines and newspapers. Press releases must be tailored to the media outlet as much as possible, spoon-feeding them the “story” that should interest their readers.
  • Offering Free Downloads : Releasing free tracks is an excellent way to attract interest because people are always in search of new songs. Consider placing these behind a download gate to ensure you get their email address and other contact information in return. If you prefer not to offer free songs, consider cover songs or demos.
  • Creating Music Videos : Most fans search for songs on YouTube. Their video-sharing platform is an integral aspect of a record label’s marketing strategy. You may opt for an abstract video to a performance-based shoot. Lyric videos are also an excellent option.
  • Hosting Contests : The relationship your label builds with the fans is a powerful step in building a brand. Each you include them in the project, you’re strengthening the relationship. Encourage fan involvement by inviting them to share ideas for t-shirt designs, videos, etc. Incentivize these tasks and offer prizes.
  • Social Media Marketing : Conducting social media marketing will connect artists with existing and new fans. It not only builds brand loyalty and awareness, but can generate significant sales of concert tickets and merchandise.
  • Partnerships : Partnering with other companies (such as sports companies, apparel companies, and consumer goods companies) that appeal to your artists’ fans could be mutually beneficial to you and your partners.

Finish Your Business Plan Today!

7. operations plan.

While the earlier sections of your business plan explained your goals, your operations plan describes how you will meet them. Your operations plan should have two distinct sections as follows.

Everyday short-term processes include all of the tasks involved in running your record label. These tasks include marketing, publicity, sales and distributions, promotions, production, and creative services among others.

Long-term goals are the milestones you hope to achieve. These could include the dates when you expect to serve your 10,000th customer, or when you hope to reach $X in sales. It could also be when you expect to hire your Xth employee or launch a new location.

8. Management Team

headphones

Ideally you and/or your team members have direct experience in the music production business. If so, highlight this experience and expertise. But also highlight any experience that you think will help your business succeed.

If your team is lacking, consider assembling an advisory board. An advisory board would include 2 to 8 individuals who would act like mentors to your business. They would help answer questions and provide strategic guidance. If needed, look for advisory board members with experience in the music industry, industry contacts, and/or successfully running retail and small businesses.

9. Financial Plan

Your financial plan should include your 5-year financial statement broken out both monthly or quarterly for the first year and then annually. Your financial statements include your income statement, balance sheet and cash flow statements.

Income Statement : an income statement is more commonly called a Profit and Loss statement or P&L. It shows your revenues and then subtracts your costs to show whether you turned a profit or not.

When an artist signs up with your record label, your company will receive a percentage of the royalties. In return, the artist will receive a myriad of services, professional connections, and specialized campaigns.

In developing your income statement to forecast these revenues and expenses, you need to devise assumptions. For example, will you serve 1 client per year or 20? And will per-client sales grow by 2% or 10% per year? As you can imagine, your choice of assumptions will greatly impact the financial forecasts for your business. As much as possible, conduct research to try to root your assumptions in reality.

Balance Sheets : While balance sheets include much information, to simplify them to the key items you need to know about, balance sheets show your assets and liabilities. For instance, if you spend $100,000 on building out your record label, that will not give you immediate profits. Rather it is an asset that will hopefully help you generate profits for years to come. Likewise, if a bank writes you a check for $100.000, you don’t need to pay it back immediately. Rather, that is a liability you will pay back over time.

Cash Flow Statement : Your cash flow statement will help determine how much money you need to start or grow your business, and make sure you never run out of money. What most entrepreneurs and business owners don’t realize is that you can turn a profit but run out of money and go bankrupt. For example, let’s say a company approached you with a $100,000 performance contract, that would cost you $50,000 to fulfill. Well, in most cases, you would have to pay that $50,000 now for supplies, equipment rentals, employee salaries, etc. But let’s say the company didn’t pay you for 180 days. During that 180 day period, you could run out of money.

In developing your Income Statement and Balance Sheets be sure to include several of the key costs needed in starting or growing a record label:

  • Recording: Depending upon where the record will be produced, you can expect the recording costs to range from $0 to $15,000. If you’re an audio engineer or have partnered with a music producer, then they might have their own at-home studio.
  • Manufacturing: Most labels release digital music, but if you’re opting for vinyl or CDs, the cost can range from $1.2 to $6 per unit.
  • Networking and Entertaining: This includes items such as travel, tickets, drinks, recruitment, attending shows, etc.
  • Graphic Design: Developing the label’s logo, product design, cover design, etc.
  • Legal Services: This can range in price greatly.. There are artist contract templates online but it’s always best to seek professional guidance with the first contract.
  • Promotion: This can cost thousands of dollars because you’re going to be working with booking agents, music promoters, publicists, etc. to increase the artist’s awareness. It also helps spur ticket sales and record sales.
  • Office lease and office supplies expenses
  • Administrative salary expenses

10. Appendix

guitar

Putting together a business plan for your record label is a worthwhile endeavor. If you follow the template above, by the time you are done, you will truly be an expert. You will really understand the music business, your competition and your customers. You will have developed a marketing plan and will really understand what it takes to launch and grow a successful record label.

Don’t you wish there was a faster, easier way to finish your Record Label business plan?

OR, Let Us Develop Your Plan For You

Since 1999, Growthink has developed business plans for thousands of companies who have gone on to achieve tremendous success.  

Record Label Business Plan FAQs

What is the easiest way to complete my record label business plan.

record label business plan template

Where Can I Download a Record Label Business Plan PDF?

You can download our record label business plan PDF template here . This is a business plan template you can use in PDF format.

Other Helpful Business Plan Articles & Templates

Business Plan Template & Guide for Small Businesses

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Record Label Business Plan

Written by Dave Lavinsky

Record Label Business Plan Template

You’ve come to the right place to create your record label business plan.

We have helped over 100,000 entrepreneurs and business owners create business plans and many have used them to start or grow their record label companies.

Below is a template to help you create each section of your Record Label business plan.

Executive Summary

Business overview.

Broadbase Records is a startup record label located in Nashville, Tennessee. Broadbase Record’s mission is to sign and promote local aspiring musicians and talent to establish or further their career in the music industry. Based in Nashville, Broadbase Records will work with various country musicians because of the proximity to its local talent, but will also be open to working with various artists across a range of music genres. Broadbase Records will sign, promote album sales, and book their signed artists to various concerts and festivals around the country. Broadbase Records is made up of a team of two seasoned music executives, Marty Cole and Sasha Gray, with decades of experience in the music industry.

Service Offering

The following are the services that Broadbase Records will provide:

  • Artist Recruitment & Development (A&R)
  • Record Contract
  • Marketing & Promotion
  • Collecting & Distributing Royalties
  • Music Distribution
  • Licensing Deals

Customer Focus

Broadbase Records will target new and existing musicians in Nashville, Tennessee that are looking to either establish or expand their music presence in the industry as potential clients. They will also target music venues to partner with, music distribution channels such as Google Music, YouTube Music, Apple Music, Spotify, etc. The other target market is recording studios that have produced local talent and need a record label to represent them.

Management Team

Marty and Sasha will be in charge of scouting talent and working one-one-one with music venues, concert promoters, and music distribution channels. While Marty and Sasha will be operating the business at the higher level, they will also employ a CFO to handle all financial forecasts, tax, and licensing obligations of running a profitable record label. A CMO will also be hired to manage and promote not only each signed talent, but the marketing of Broadbase Records as well.

Success Factors

Broadbase Records will be able to achieve success by offering the following competitive advantages:

  • Friendly, knowledgeable, and highly qualified team of music producers and executives that come with a long list of industry contacts.
  • Dedicated team that will be able to provide its full attention and focus to its signed artists.
  • Broadbase Records already come with a long list of partners for artists to choose how they want their music to be distributed and which music venues they want to perform at.
  • Clients before profit – Broadbase Records will ensure the artists’ satisfaction with every aspect of the process before taking account profitability. Broadbase Records is about supporting the success of its artists, not just about making money.

Financial Highlights

Broadbase Records is seeking $500,000 in debt financing to begin operations of the business. The funding will be dedicated towards securing the office space and the office build-out. Capital will be required for the upfront costs needed for the first three music artists Broadbase Records signs. Funding will also be dedicated towards three months of overhead costs to include payroll of the staff, rent, and working capital. The breakout of the funding is below:

  • Securing office space, build-out, and design: $100,000
  • Three months of overhead expenses (payroll, rent, utilities): $75,000
  • Marketing & advertising: $25,000
  • Capital required in order to promote new signed artists: $300,000

music label business model

Company Overview

Who is broadbase records.

Broadbase Records is a startup record label located in Nashville, Tennessee. Broadbase Record’s mission is to sign and promote local aspiring musicians and talent to establish or further their career in the music world. Based in Nashville, Broadbase Records will work with various country musicians because of the proximity to its local talent, but will also be open to working with various artists across a range of music genres. Broadbase Records will sign, promote album sales, and book their signed artists to various concerts and festivals around the country. Broadbase Records is made up of a team of seasoned music executives with decades of experience in the music industry. Owners Marty Cole and Sasha Gray have had immense success in the world of music working with other large record labels in the United States. They both have represented numerous Grammy award-winning musicians and have lifted their success due to their industry knowledge and relationships. Marty and Sasha have been wanting to begin their own record label so they can operate based on their own values and have the chance to sign emerging talent that would otherwise be overlooked by larger-scale record labels.

Broadbase Records History

Broadbase Records is owned by Marty Cole and Sasha Gray, both seasoned music executives that have worked for two major record labels in the United States. Through their tenure, Marty and Sasha have compiled numerous contacts and networks to further musicians’ careers and sustainability. Both Marty and Sasha have signed, promoted, and achieved success in the millions for various artists they have signed over the years.

Recently, Marty and Sasha have found that there are not enough record labels that exist to promote untapped talent in the market. Through their extensive research, they have learned that hundreds and even thousands of musicians with promising potential are not receiving any attention because there are not enough record labels to give them the opportunity. With Nashville being the country music capital of the world, Marty and Sasha found that thousands of aspiring artists and musicians flock to the city at the chance of one day being signed by a label. There are just not enough record labels in Nashville that can accommodate or even have the time and energy into seeking out new, fresh talent.

Since incorporation, Broadbase Records has achieved the following milestones:

  • Found office space for lease that is located in Nashville, Tennessee.
  • Registered Broadbase Records, LLC to do business in the State of Tennessee.
  • Began networking with local music venues and recording studios in hopes of finding local talent.
  • Began the branding image, logo, website, and social media accounts for the label.

Broadbase Records Services

The following will be the services Broadbase Records will provide:

Industry Analysis

The music business and record label industry are expected to grow over the next five years to over $11 billion. The industry’s performance will be bolstered by the following factors:

Number of broadband connections: Keeping abreast of new systems and technology can provide producers with stronger distribution models and revenue streams while reducing costs of production. Online music has fundamentally changed how consumers enjoy their favorite artists.

Per capita disposable income: An increase in disposable income is likely to increase consumers’ purchases of new music, whether via digital or physical outlets. Although physical album sales have continually dropped for over a decade, sales of streaming music subscriptions increase as consumer purchasing power rises, benefiting the industry as a whole.

Median age of population: All age demographics consume different types of music and discover music through different platforms. Conversely, older individuals are more likely to reduce their total spending on new music. As labels shift toward online distribution, the industry benefits most from a lower median age of the US population.

Customer Analysis

Demographic profile of target market.

Broadbase Records will target new and existing musicians in Nashville, Tennessee that are looking to either establish or expand their music industry presence in the industry as potential clients. They will also target music venues to partner with, music distribution channels such as Google Music, YouTube Music, Apple Music, Spotify, etc. The other target market are recording studios that have produced local talent and need a label to represent them.

Customer Segmentation

Broadbase Records will primarily target the following customer profiles:

  • Aspiring and existing musicians looking for an independent label
  • Local music venues who showcase new and emerging talent
  • Music distribution channels
  • Recording studios

Competitive Analysis

Direct and indirect competitors.

Broadbase Records will face competition from other record label companies. A description of each competitor company is below.

Capitol Records Nashville

Capitol Records Nashville is a major United States-based record label located in Nashville, Tennessee operating as part of the Capitol Music Group. Capitol Nashville was formerly known as Liberty Records from 1991 until 1995 when it was changed back to Capitol. In 1993, Liberty opened a sister label, Patriot Records, but it was closed in 1995. In 1999, EMI launched Virgin Records Nashville but by 2001 Capitol absorbed the short-lived label. Capitol Nashville remained a stand-alone label until 2010 when it launched EMI Nashville.

Thirty Tigers

Thirty Tigers is a Nashville-based entertainment company, founded in 2001 by Grammy Award-winning producer David Macias and Deb Markland. In just over a decade, Thirty Tigers has gone from two employees working out of David’s guest bedroom to thirty employees, most of whom now work out of their Wedgewood-Houston office in Nashville, Tennessee. Thirty Tigers also has offices in Los Angeles, New York, North Carolina, and London. Their collective experience in the music industry ranges from record retail to the film industry to major labels.

Third Man Records

Third Man Records is an independent record label founded by Jack White in Detroit, Michigan in 2001. Third Man established its first physical location – a combination of a record store, performance venue, and headquarters for the label in Nashville, Tennessee in 2009. The label opened a Detroit branch location in 2015, which added a pressing plant (Third Man Pressing) in 2017.

Competitive Advantage

Broadbase Records will be able to offer the following advantages over their competition:

Marketing Plan

Brand & value proposition.

Broadbase Records will offer a unique value proposition to its clientele:

  • Experienced team of music professionals that come with a long list of contacts and connections.
  • Focused and individualized attention to each client it signs.
  • Broadbase Records doesn’t need to knock on any doors. The doors are already open due to their reputation and industry knowledge.
  • They put their artists’ satisfaction before profitability.

Promotions Strategy

The promotions strategy for Broadbase Records is as follows:

Social Media

Broadbase Records will invest in advertising their record label on social media platforms Facebook, Instagram, Snapchat, TikTok, and Twitter. By using targeted social media marketing, Broadbase Records will be able to reach the local music talent of Nashville.

Music Venues & Networking

Marty and Sasha will frequent music venues around Nashville that hold amateur nights where local aspiring musicians get a chance to take the stage. By scoping out the talent, they will approach those musicians that they see potential in and let them know their record label might be interested in working with them. By networking around the local scene, people will also recommend Broadbase Records to their associates.

Website/SEO Marketing

Broadbase Records will invest in a strong SEO presence so that when someone enters “Nashville record label” or “record label near me” in their Google or Bing search bar, Broadbase Records is at the top of the list. Their website will list all of Marty and Sasha’s accomplishments with the clients they have worked with in the past to showcase all of their experience and ability to take musical artists to the next level.

The pricing of Broadbase Records will be moderate and on par with competitors so customers feel they receive value when purchasing their services.

Operations Plan

The following will be the operations plan for Broadbase Records.

Operation Functions:

  • Marty and Sasha will jointly own and manage the record label. They will be in charge of scouting local talent, networking with recording studios, music venues, concert promoters and music distributors, and be the point of contact for all signed musicians.
  • Chief Financial Officer to handle all financial aspects of the business to include but not limited to accounts payable and receivable, billing, royalty payouts, tax obligations, licensing and permitting, budgeting, and cash forecasting. As the record label grows and profits are stabilized, more accountants will be added to support the CFO.
  • Chief Marketing Officer will be in charge of all marketing and promoting of each signed music artist or band. The CMO will be responsible for increasing the awareness and popularity of each artist. The CMO will also handle the social media and website for Broadbase Records as well.
  • Administrative Assistant will be employed to manage all administrative assistant tasks of the record label on an everyday basis. This will include being the personal assistant for Marty and Sasha.

Milestones:

Broadbase Records will have the following milestones completed in the next six months.

7/1/202X – Finalize contract to lease record label office space.

7/15/202X – Begin build-out and design of record label office.

8/1/202X – Begin reaching out to their list of contacts in the industry to inform them of the new Broadbase Records.

8/15/202X – Begin social media and website advertising campaign.

8/30/202X – Start scouting out local music venues for local aspiring talent.

9/1/202X – Final walk through of completed office space.

9/5/202X – Hire CFO, CMO, and Assistant.

10/1/202X – Grand Opening of Broadbase Records.

Broadbase Records will be jointly owned by Marty Cole and Sasha Gray.

Marty Cole is a former Capitol Music executive with over 15 years of experience. He helped find, produce, and book dozens of music artists and bands that have amassed huge success due to his diligence and industry knowledge. Marty has a strong reputation in the industry as he has always been known to put his clients first without sacrificing their happiness for profit. Many artists respect and recommend Marty to other emerging talent due to his impressive resume and respect for the artist.

Sasha Gray has worked at Virgin Records and Capitol Music over her 10 year career as a music industry executive. She has traveled all over the world and her client list encompasses not only the United States, but five other countries as well. Sasha is known for her creativity and diligence when working with her clients. She usually has creative solutions for marketing and promotions and is not afraid to step outside the box when representing a client. Sasha’s reputation has garnered her a long list of successful clients and she is known as the record label executive that is willing to do anything to ensure the happiness and success of her clients.

Marty and Sasha will be in charge of scouting talent and working one-one-one with music venues, concert promoters, and music distribution channels. While Marty and Sasha will be operating the business at the higher level, they will also employ a CFO to handle all financial, tax, and licensing obligations of running a profitable record label. A CMO will also be hired to manage and promote not only each signed talent, but the marketing of Broadbase Records as well.

Financial Plan

Key revenue & costs.

The revenue drivers for Broadbase Records are the royalty fees and commissions earned when booking one of their signed musicians. Broadbase Records will earn a commission as a percentage of total ticket sales for live music shows and concerts. They will also earn royalties for music that is streamed on music streaming services and albums sold.

The cost drivers will be the capital required upfront to support the artist, such as upfront marketing and promotion and costs for getting their album produced. Broadbase Records will be reimbursed for all expenses made upfront by the commissions and royalties earned once the album begins selling and people pay for their live music appearances. Other cost drivers are the payroll for the staff, rent and utilities for the office space and working capital.

Funding Requirements and Use of Funds

  • Securing record label office space, build-out, and design: $100,000

Key Assumptions

The following outlines the key assumptions required in order to achieve the revenue and cost numbers in the financials and in order to pay off the startup business loan.

  • Initial Number of Clients per Month: 5
  • Annual Lease: $150,000

Financial Projections

Income statement, balance sheet, cash flow statement, record label business plan faqs, what is a record label business plan.

A record label business plan is a plan to start and/or grow your record label business. Among other things, it outlines your business concept, identifies your target customers, presents your marketing plan and details your financial projections.

What Are the Main Types of Record Label Companies?

There are many types of record label companies. Most of the time, record label companies concentrate on a particular music genre. There are also three major types of record label companies - major record labels, major label subsidiaries, and independent labels. There are also some record labels that have a recording studio subsidiary attached to it. 

What Are the Main Sources of Revenue and Expenses for a Record Label Business?

The primary source of revenue for record label companies are the royalties and commissions they earn when booking a client for a concert or live performance. They also earn royalties based on album sales their client produces.

The key expenses for a record label business are the costs of upfront marketing and promotion of their client before they earn album sales or perform live music events. Other costs associated with a record label business are leasing an office space, employee costs and marketing/advertising costs.

How Do You Get Funding for Your Record Label Business?

Record label businesses are most likely to receive funding from banks. Typically you will find a local bank and present your business plan to them. Angel investors and other types of capital-raising such as crowdfunding, credit cards and personal savings  are other common funding sources.

What are the Steps To Start a Record Label Business?

Starting a record label business can be an exciting endeavor. Having a clear roadmap of the steps to start a business will help you stay focused on your goals and get started faster.

1. Develop A Record Label Business Plan - The first step in starting a business is to create a detailed music label business plan that outlines all aspects of the venture. This should include market research on the music industry and potential target market size, information on the services you will offer, marketing strategy, pricing strategies and a detailed financial forecast.  

2. Choose Your Legal Structure - It's important to select an appropriate legal entity for your record label business. This could be a limited liability company (LLC), corporation, partnership, or sole proprietorship. Each type has its own benefits and drawbacks so it’s important to do research and choose wisely so that your record label business is in compliance with local laws.

3. Register Your Record Label Business - Once you have chosen a legal structure, the next step is to register your record label business with the government or state where you’re operating from. This includes obtaining licenses and permits as required by federal, state, and local laws. 

4. Identify Financing Options - It’s likely that you’ll need some capital to start your record label business, so take some time to identify what financing options are available such as bank loans, investor funding, grants, or crowdfunding platforms. 

5. Choose a Location - Whether you plan on operating out of a physical location or not, you should always have an idea of where you’ll be based should it become necessary in the future as well as what kind of space would be suitable for your operations. 

6. Hire Employees - There are several ways to find qualified employees including job boards like LinkedIn or Indeed as well as hiring agencies if needed – depending on what type of employees you need it might also be more effective to reach out directly through networking events. 

7. Acquire Necessary Record Label Equipment & Supplies - In order to start your record label business, you'll need to purchase all of the necessary equipment and supplies to run a successful operation. 

8. Market & Promote Your Business - Once you have all the necessary pieces in place, it’s time to start promoting and marketing your record label business. Marketing efforts includes creating a website, utilizing social media platforms like Facebook or Twitter, and having an effective Search Engine Optimization (SEO) strategy. You should also consider traditional marketing techniques such as radio or print advertising to reach your target audience.

Learn more about how to start a successful record label business and how to create a record label business plan:

  • How to Start a Record Label Business

Where Can I Get a Record Label Business Plan PDF?

You can download our free record label business plan template PDF here. This is a sample record label business plan template you can use in PDF format.

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Record Label Business Plan

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The record label is a business where music artists share their rights to music with a company to earn profit and advance their careers. Many famous record labels include American Record Corporation, Warner Music Group, Universal Music Group, Sony Music, and many more.

If you are planning to start a new record label business, the first thing you will need is a business plan. Use our sample record label business plan created using Upmetrics business plan software to start writing your business plan in no time.

Before you start writing your business plan for your new record label company, spend as much time as you can reading through some examples of  entertainment and music-related business plans .

Reading sample business plans will give you a good idea of what you’re aiming for, and also it will show you the different sections that different entrepreneurs include and the language they use to write about themselves and their business plans.

We have created this sample record label business plan for you to get a good idea about how perfect a record label business plan should look and what details you will need to include in your stunning business plan.

Record Label Business Plan Outline

This is the standard record label business plan outline, which will cover all the important sections that you should include in your business plan.

  • Introduction
  • Keys to Success
  • 3 Year profit forecast
  • Startup cost
  • Funding Required
  • Products and Services
  • Market Analysis
  • Target Market Segment Strategy
  • Competition and Buying Patterns
  • Sales Forecast
  • Sales Yearly
  • Detailed Sales Forecast
  • Marketing Strategy
  • Competitive Edge
  • Website Marketing Strategy
  • Development Requirements
  • Personnel Plan
  • Important Assumptions
  • Brake-even Analysis
  • Profit Yearly
  • Gross Margin Yearly
  • Projected Cash Flow
  • Projected Balance Sheet
  • Business Ratios

After getting started with Upmetrics , you can copy this sample business plan into your business plan and modify the required information and download your record label business plan pdf or doc file. It’s the fastest and easiest way to start writing your business plan.

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music label business model

Download a sample record label business plan

Need help writing your business plan from scratch? Here you go;  download our free record label business plan pdf  to start.

It’s a modern business plan template specifically designed for your record label business. Use the example business plan as a guide for writing your own.

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Strategies to open our own Music label, Business model case study

by mr.deepakhack | Mar 16, 2023 | Business

The music industry has witnessed a dramatic transformation over the past decade, primarily due to the rapid advancements in digital technology and the widespread adoption of streaming platforms. These changes have brought about both opportunities and challenges for music labels, forcing them to adapt their business models to survive and thrive in an increasingly competitive market. In this comprehensive guide, we will explore the different business models employed by music labels, delve into the key challenges they face, and provide you with a detailed roadmap to help you start your very own music label.

Music Label Business Models: A Multitude of Choices

Music labels play a crucial role in the music ecosystem. They are responsible for signing talented artists to record contracts, promoting their music, and distributing it to the public. To generate revenue, music labels have adopted several business models, each with its unique characteristics. Let’s explore some of the most prominent ones:

Traditional Record Label Model

The traditional record label model has long been the cornerstone of the music industry. Under this model, labels sign artists into recording contracts, provide them with financial support for music creation and distribution, and take charge of marketing and promotion efforts. Revenue is typically generated through record sales and royalties. While this model has seen significant modifications in recent years, it remains a prevalent approach for many established music labels.

360-Degree Label Model

With the 360-degree label model, labels extend their services beyond the traditional scope. In addition to music production and marketing, they offer a comprehensive range of support to artists, including tour management, merchandise creation, and endorsement deals. In exchange for their expanded services, the label takes a percentage of all revenue streams generated by the artist. This model has gained popularity as labels seek to diversify their revenue streams and provide artists with a full suite of resources.

Independent Label Model

The independent label model revolves around operating as a small, independent entity that caters to niche markets. These labels are often founded by passionate music enthusiasts who have an intimate knowledge of a particular genre or style of music. Independent labels offer a more personalized and hands-on approach, allowing them to foster close relationships with their artists. They leverage their expertise and niche focus to carve out a dedicated fan base and compete in a highly specialized market segment.

Challenges Faced by Music Labels: Navigating Stormy Waters

While the music industry presents vast opportunities, music labels encounter numerous challenges that demand strategic navigation. Let’s explore some of the most pressing issues faced by music labels today:

Declining Music Sales

The rise of streaming platforms has revolutionized the way people consume music, leading to a significant decline in physical music sales. Historically, physical album sales were a primary revenue source for music labels. However, the convenience and accessibility of streaming services have shifted consumer preferences toward digital formats. To adapt, labels must explore alternative revenue streams and leverage digital platforms to their advantage.

Piracy and Intellectual Property Protection

The digital age has also ushered in an era of rampant piracy, making it increasingly challenging for music labels to protect their intellectual property and combat the unauthorized sharing of copyrighted content. Piracy not only undermines revenue streams but also erodes the perceived value of music. Labels must employ robust digital rights management systems, partner with anti-piracy organizations, and educate consumers about the importance of supporting artists by accessing music through legitimate channels.

Competition from Independent Artists

The advent of the internet and digital distribution platforms has empowered independent artists to reach global audiences without the need for traditional label support. This newfound accessibility has disrupted the music industry by intensifying competition for talent. Music labels must differentiate themselves by offering unique value propositions, fostering strong artist relationships, and providing comprehensive services that independent artists may struggle to achieve on their own.

Starting Your Music Label: A Roadmap to Success

Embarking on the journey of starting your own music label can be both exciting and daunting. To set yourself up for success, follow this roadmap that will guide you through the essential steps:

Identify Your Niche and Market

Define your target audience and identify the specific music genre or niche you want to focus on. Conduct thorough market research to determine if there is sufficient demand and potential profitability in your chosen segment. Understanding your niche will enable you to tailor your label’s offerings and effectively connect with your target audience.

Build Your Expert Team

Assemble a team of professionals who possess the necessary expertise and industry knowledge to support your label’s operations. This team should include lawyers specializing in entertainment law, accountants familiar with music industry finances, and experienced music industry consultants who can provide strategic guidance. Collaborating with seasoned professionals will help you navigate the complex legal and financial aspects of running a music label.

Scout and Sign Talented Artists

Identify emerging artists with exceptional talent and potential commercial viability. Attend local performances, listen to music submissions, and network within the music community to find artists who align with your label’s vision. Develop relationships with artists and offer them enticing recording contracts that include financial support, marketing assistance, and promotion services. Remember, your artists are the lifeblood of your label, so nurture these relationships to ensure their long-term success.

Develop a Comprehensive Business Plan

Create a detailed business plan that outlines your label’s vision, mission, and core values. Define your revenue streams, expense projections, and marketing strategies. A comprehensive business plan will serve as a roadmap for your label’s growth and development, helping you navigate potential challenges and capitalize on emerging opportunities.

Register Your Music Label

Register your music label as a legal entity, ensuring compliance with all applicable laws and regulations. Consult with legal professionals to determine the most suitable legal structure for your label, whether it be a sole proprietorship, partnership, or limited liability company (LLC). Obtain any necessary licenses or permits to ensure your operations are fully authorized.

Embrace Digital Distribution Channels

Leverage digital distribution platforms to make your music readily accessible to a global audience. Partner with streaming services, such as Spotify, Apple Music, and Amazon Music, to distribute your artists’ music widely. Explore opportunities for playlist placements and engage with influencers and music bloggers to amplify your label’s reach.

Cultivate Your Label’s Brand

Building a strong brand is crucial for your label’s long-term success. Develop a unique visual identity that resonates with your target audience and reflects your label’s values and aesthetics. Create compelling marketing campaigns, engage with fans on social media platforms, and forge strategic partnerships within the music industry to raise awareness about your label and its artists.

Conclusion: Nurturing Success in the Music Industry

Starting a music label is undoubtedly a challenging endeavor, but with careful planning, strategic decision-making, and a deep passion for music, it can also be a highly rewarding venture. Music labels can generate revenue through various business models, including the traditional record label model, the 360-degree label model, and the independent label model. However, they must also confront the challenges of declining music sales, piracy, and competition from independent artists.

By following the roadmap outlined in this article, aspiring music label owners can navigate these challenges and build a successful music label that nurtures talented artists, captivates audiences, and contributes to the vibrant tapestry of the music industry. Embrace the evolving landscape, remain adaptable, and let your love for music guide you on this exhilarating journey.

ALSO-READ: Finance Management & Income Sources of Singers

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Exploring Successful Music Business Models: A Comprehensive Analysis

  • Published: August 25, 2023
  • By: Yellowbrick

1. Record Label Model

2. independent model, 3. licensing and sync model, 4. live performance model, 5. merchandising model, 6. direct-to-consumer model, 7. subscription and streaming model, key takeaways:.

  • The music industry offers a variety of business models, including record label, independent, licensing and sync, live performance, merchandising, direct-to-consumer, and subscription and streaming models.
  • Record labels provide financial support and wider exposure but may have profit-sharing practices.
  • Independent artists have autonomy but must handle multiple roles and responsibilities.
  • Licensing and sync deals can generate significant revenue by placing music in various media.
  • Live performances and merchandising are important revenue streams for artists.
  • Direct-to-consumer models allow artists to sell music directly to fans, fostering a closer relationship and higher earnings.
  • Streaming services dominate the industry, providing global exposure but varying royalty rates.

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Chanel Benjamin Founder, They Love My Splash LLC and Communications & PR Director, G.R.A.C.E. Inc. I am most proud of being named the Community Hero at Yankee Stadium because it was to highlight the iSmileForAngele Scholarship I created in honor of my late grandmother. It also highlighted my iniative #KickBackAgainstBullying Sneaker Drive and the proceeds go to local shelters.

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Casey Butler Creative Activation Manager, Roku The industry is constantly changing and evolving. This is part of the excitement of the job, but it can also be very difficult to navigate. Persistence and dedication are some of the most important traits for success in this industry - you need to want to be there and willing to put in the work.

music label business model

Daniel Bouwhuis Marketing/Brand Manager, Warner Music I believe that my success is not just about achieving a high-status job title, but rather it's about the impact I can make in the lives of others through music. I want to... continue to contribute to creative projects that raise awareness for important issues such as mental health and women's and LGBTQ+ rights.

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Wendy Xie Producer - CN Ad Studio, Conde Nast As a Producer, I aspire to produce slice of life ads to increase visibility for ubiquitous or unsung brands founded by people of color and further overcome the bamboo ceiling that so many Asians continue to face in the creative industry. When there is a day where my original ad ideas are broadcasted in the real world, this is when I believe my voice is heard, my impact is valued and appreciated by peers, and that our society is progressively evolving the advertising, media and tech industry to be a more inclusive space for rising creatives of color.

Wendy Xie

Mehruba Haque Junior Research Fellow, Estonian Business School Women's insecurities have been used for decades to sell beauty products, which have been linked to eating disorders, anxiety, and depression... I would like to come up with a new way to market beauty products that emphasizes that feeling beautiful doesn't come from comparing yourself to other women. I want to be a key player in making these positive changes happen and making the world a better place for women.

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Timothy Clarke Mixshow DJ/Personality, Radio One/Urban One, Sirius XM I want to be able to help upcoming artists be heard and seen on a global level, and be known as one of the biggest DJs turned A&R in hip-hop culture.

Tiana brown director of broadcasting & production, university of pennsylvania game day broadcast staff, philadelphia eagles my biggest advice is that if no one wants to open the door for you, kick it off the hinges. most of the opportunities that i have been afforded thus far have come from creating my own and giving opportunities to other people. creating your own opportunities can take a lot of sacrifice, a lot of lost sleep, a lot of fun missed, but in the end it will all be worth it when you wake up every morning living out your dreams..

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Stefani Marie Clare Janelli Founder, The MIC & Artist Development Specialist (13 Seconds Music) Have tough skin, but be open to learning and adapting! This industry is constantly changing overnight, and adapting to however the wind blows is vital. It's also essential to have the willingness to learn. Being open to learning a new way to do something, or to listen to a new idea, even when it's not your own, is advice anyone at any age could benefit from!

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Shelby Gussman Senior Director, Social Fisch I define success as achieving my goals, assisting my team with achieving theirs, and then setting the bar higher and accomplishing more than before all while being able to enjoy life! I hope to have the opportunity to work in different global markets, travel, collaborate with new people, and continue to be challenged and learn.

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Sharrod Williams Actor, Writer, Producer - Neighbors, Hamilton, Moulin Rouge! The Musical There are no small parts. None. I have been fortunate enough to wear many different hats, big and small, on different projects. But like any machine, organization, or even the human body - each role I take on is in service of the one greater purpose, to tell a story. The hat i've worn the most is "actor". In this role, I am the vessel that conveys the humanity and experience of what each character I play is going through in the story being told. My goal is make the audience feel, relate, and or think about the aspect of life that is being reflected or challenged in the story.

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Shady Elsayed Guest Services, ASM Barclays Center Whether it’s through celebrity appearances, brand and apparel collaborations, sponsorships, in-arena entertainment, or business partnerships, being a part of this industry is a rewarding experience. With it’s fast paced nature, and event based daily routine tasks, the sports and entertainment industry is built on networking and creating long lasting relationships.

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Sabrina Assistant Project Manager, Dirt Rock Empire For me, success means continuing to learn and grow everyday. Next, I hope to become an even bigger voice in the industry and help encourage positive change.

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Natalie Turturro Mettouchi Costume Designer, IATSE Local 829 I am most proud of designing the costumes for a short film that premiered at the Tribeca Film Festival in 2021, called "Esther in Wonderland." I had a shoestring budget and was working on two other pretty huge projects simultaneously, but still managed to design creative outfits that allowed the dancers to move freely and help develop their characters.

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Matt Popper Music Touring/Business Affairs, United Talent Agency Be relentless - the most difficult part of the job is getting your foot in the door. Once you're in, your good work will speak for itself. Of course, there will be some days where you will feel defeated and want to give up, but if this is what you're meant to do, you'll find a way to make it happen.

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Forbs West Associate Music Curator, SiriusXM/Pandora I think one of the biggest challenges that I've faced in my journey is patience. I think especially being in Generation Z, it is important to slow down and appreciate what we have accomplished so far. I think when you least expect things, it is a surprise yet it is also very rewarding.

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Book cover

Augmented Corporate Valuation pp 583–628 Cite as

Music Recording Labels: Business Models and Valuation (with Andrea Cesaretti)

  • Roberto Moro-Visconti 2  
  • First Online: 24 April 2022

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Record labels are companies, large or small, that manufacture, distribute, and promote the recordings of affiliated musicians. Essentially, record labels work to sell the brand of the artist and the products they create. While the internet and digital technology have made it easier for artists to succeed without record labels, they still play major roles in the industry. This chapter shows which are the business models of record labels and how they can bring to market valuation.

  • Concert industry
  • Moral rights
  • Compensation
  • Business-to-artist

This chapter is co-written with Andrea Cesaretti

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https://en.wikipedia.org/wiki/Record_label .

See: Luciano Daffarra, C-Lex Studio Legale, “Diritto d’autore: cosa stabilisce la direttiva DSM sull’equo compenso” ( Copyright: what the DSM directive on fair compensation establishes ), 18 February 2021 in https://www.agendadigitale.eu/mercati-digitali/direttiva-dsm/ .

For the various issues related to copyright, see: https://www.altalex.com/documents/news/2021/05/24/boom-nft-tra-arte-proprieta-intellettuale-e-diritti-asta .

About the doubts of the undersigned on the future of the Blockchain, I refer to my article: http://www.andreacesaretti.net/empowerment/2020/10/29/leffetto-distruttivo-delleuro-digitale/ ).

Selected References

Gilbert, K. A. (2009). The valuation of copyright-related intangible assets . Intellectual Property Valuation Insights, Autumn.

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Koster, A. (2008). The emerging music business model: Back to the future? Journal of Business Case Studies , 4 (10).

Lennard, A. (2018). Intangibles: First thoughts . Paper presented at IFASS meeting, Mumbai. Available at https://www.efrag.org/Assets/Download?assetUrl=%2Fsites%2Fwebpublishing%2FMeeting%20Documents%2F1709060811163678%2F05-02%20FRC%20presentation%20on%20Intangibles%20TEG%2018-04-06.pdf&AspxAutoDetectCookieSupport=1 .

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Styvén, M. (2007). Exploring the online music market: Consumer characteristics and value perceptions . Available at http://urn.kb.se/resolve?urn=urn:nbn:se:ltu:diva-26440 .

Waldfogel, J. (2017). How digitization has created a golden age of music, movies, books, and television total value of annual US music shipments. Journal of Economic Perspectives, 31 (3), 195–214.

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Moro-Visconti, R. (2022). Music Recording Labels: Business Models and Valuation (with Andrea Cesaretti). In: Augmented Corporate Valuation. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-97117-5_18

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music label business model

How Independent Record Labels Make Money in 2024

How Independent Record Labels Make Money

A recent global industry report reveals the year on year, increasing proportion of music industry’s revenue that comes from the independent sector. With independent labels now accounting for over 40% of music industry revenue, it's never been a better time to get involved with independent music and establish an indie label.

It’s important for label owners to understand where their cash flow will come from in order to sustain their label as a business, and identify the main potential revenue streams available to independent record labels and artists.

Record Label Revenue Streams & Sources of Income

Sales & streaming.

Artists and labels earning sales and streaming royalties is hardly surprising, but exactly how much they stand to earn from the major online music stores is not common knowledge.

When it comes to streaming and download royalties from iTunes and Spotify, generally, you’ll keep around 60-70% of the price of every iTunes download, and receive about £0.003/$0.005 for every stream on Spotify.

How Independent Record Labels Make Money in 2023 - streaming services

While payouts from other stores will vary, these figures offer a good ballpark average which – if you have worked out your target and projected sales and streams – you can use to calculate your potential revenue from the stores.

Label owners can also use the financial planning spreadsheet on this record label business plan template to work out their potential sales earnings, as well as other revenue streams. Just make a copy, and enter your own projections.

Publishing & Licensing

Music publishing and licensing is an increasingly important revenue stream for independent labels and artists. Publishing refers to the ownership of songs and compositions, while licensing makes your music available for sync deals with visual media, including adverts, games, TV shows and movies.

You’ll need to register your tracks with a Performing Rights Organisation (PRO) to collect all the mechanical royalties you’re owed. Your PRO will depend on where you are based; PRS and PPL in the UK, BMI or ASCAP in the USA, or APRA and/or AMCOS in Australia.

How Independent Record Labels Make Money in 2023 - publishing companies

Unless you plan on doing all the legwork and administration yourself, it’s worth signing up with a music publishing company. Music publishers can help you find potential sync opportunities and make sure you and your artists receive royalties whenever your music is used commercially.

While publishers offer an easier way to secure synchronisation deals and get your music into a range of high-profile media, they will also take a cut of any royalties you earn. Check out this article for a more detailed overview of exactly what music publishers do and whether you should sign up to one.

Remember, when you distribute with Ditto Music, you can get started with our own in-house music publishing service. Learn more about what Ditto Music Publishing can do for you & your music.

Performance Royalties

Registering your music with Performing Right Organisations is not only for sync deals, but for public performances and radio airplay royalties too.

Make sure your songs are properly registered with PROs, as performance royalties can be an easy earner. You'll need be recording all your gigs your Performing Rights Organisation to get hold of the royalties you're owed.

Whether you’re heading out on a massive arena tour or playing a small open mic night in a local pub, you can earn royalties.

Here are some of the average UK performance royalty earnings for gigs:

Pubs & Clubs: £5 - £6

02 Academy: £32

Small Festivals: £74

Medium Festivals: £309

Major Festivals: £1,500

If your music is played on the radio you should be receiving royalty payments too. Here are the average rates for BBC radio stations in the UK:

Radio Station // PRS average payment per minute // PPL average payment

BBC Radio 1 // £14.91 // £37.76

BBC Radio 2 // £21.77 // £82.07

BBC 6 Music // £4.55 // £8.06

BBC Introducing // £0.74 // £0.92

Performance royalties are an often untapped source of income for independent artists and record labels, so get your tracks registered with a PRO and don't miss out on the money that's rightfully yours.

Merchandising

Artists and labels can always earn some extra cash by selling music merch at live events and online. The key to selling enough merchandise to make a profit doesn’t simply lie with how good the music behind the merch is, but how cool your branding looks. So make sure to focus on quality and design.

Merch stand essentials include:

- CDs/Vinyls

The idea behind selling merchandise is to make a profit of course, so think carefully about your ROI (return on investment) and profit margins. Take the time to compare the prices of different merchandising companies, and perhaps buy in bulk to cut costs. Once you know how much you’ll be paying to order your products, you can set your prices accordingly.

If you want to make sure you maximise your merch sales at gigs, you can use one of many ways to accept credit and debit cards. All you really need is a smart phone or iPad. You’ll also want to make sure all your merchandise is available to buy online too, and advertise it via social media and other channels.

If you’d like some more expert advice on merchandising, read these tips on music merchandise ideas for some extra inspiration.

Ticket sales

Putting on a live event or label showcase is a great way to raise awareness for independent artists and win over new fans in the process. While making a big profit from your very first showcase can be tricky; as time goes on, you’ll want to start turning a profit from tickets sales and increasing demand among potential punters.

Easy ways to increase ticket sales:

- Add the event to Facebook and Eventbrite

- Run a competition

- Offer ticket discounts

- Create eye-catching branding

- Make posters & flyers

- Recruit a street team

It worth considering going through a booking agent to secure shows that pay. They may take around 20% of your fee as commission, but they’ll always get you paid gigs.

Whether you travel the world or play a series of local venues, taking your artist’s music on tour can be a great experience, and help to make a name for themselves in new locations. Look at these tips on how to plan a tour if you’d like some more advice on organising a series of sell-out gigs.

Focussing on these revenue streams as potential sources of income for your independent label, and making a detailed plan and financial forecast for your first few years, means you’ll stand a better chance of running your label as a successful business long term.

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Do you have any questions or advice for other record label owners? Or any stories to share on making money as an indie label? Let us know in the comments below.

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Related posts, top music side hustles for struggling artists, apply for music funding: artist grants & support in 2024, how to become a music photographer in 2024, ai for musicians: 12 tools to help you make music, ++ comments.

HOW DO RECORD LABELS TURN A PROFIT?

music label business model

In an age when music can be downloaded online, music videos can be seen for free on YouTube, and social media serves up content from anyone to anyone, saying big labels have had to adjust is the understatement of the century. Record labels have had to get creative in how to market to this ever-evolving industry. Considering over 90% of released recordings fail to make a profit, this is a high-risk business for labels and artists.

Independent record labels as well as major labels are now very careful in where they put their money and what artists or bands they sign to a record deal. That being said, independent artists and labels are able to promote their recordings for far less than the major labels, allowing them to turn a profit much easier.

This is the reason that there are so many start-up indie labels surfacing and major labels are signing fewer and fewer unknowns. Smaller budgets mean less risk, but they also translate to smaller profits and rewards. We understand there are those who do it just for the music – but it’s nice to pay the rent, too.

Hear What the Pros Say

Many of our mentors have worked with major recording labels and companies and have an insider’s view of how much it costs to produce a record and what the labels recoup. In some cases, it has nothing to do with the music at all. In an industry where the image is everything, those images sell. Of course, the catchiest, chart-topping hit will rake in the bucks for the labels and the artist.

Rick Camp, RC1 Productions & Master Mix Live, Las Vegas, NV Credits: Jennifer Lopez, Beyoncé, Mary J. Blige, Kelly Clarkson, Usher, Dr. Dre, Earth Wind & Fire

“Record labels make their money off of selling records, but there are all kinds of royalties that the record company collects when a record is played, and that’s how they make their money. Every time a record is played on the radio or sold in a record shop, or sold online now, they get a percentage of it, the artist gets a percentage of it, and the writer gets a percentage of it.”

Cameell Hanna, Serenity West Recording, Los Angeles, CA Credits: Justin Timberlake, Adele, Florence & the Machine, Eva Simons, Wiz Khalifa, Snoop Dogg

“They make money the way they have for years… off of the exploitation of the recordings themselves. And there are a million ways that it is exploited. So, now they make money off of every aspect of an artist’s career. There’s a deal type that’s been around for a while called the 360 deal, which means that they participate in all aspects of an artist’s career, like touring, merchandising, etc.

“So, you, as a label, are now making money off of pretty much every action an artist takes that involves getting income. A 360 deal is sort of the standard operating understanding in most labels when you’re talking about a major label. You are going over to Interscope, and you’re signing a deal, and you’re like, ‘I’m going to be the next Justin Bieber.’

“You’re going to be signing a deal like that, where they participate in everything, including every T-shirt you sell. They’re going to have their own piece of that. It’s a giant markup on merchandise. A lot of people have made more off of the things surrounding the music than the music itself. The labels have always figured out ways to get a piece and keep it moving.”

Mike Johnson, Clear Track Recording Studios, Clearwater, FL Credits: John Legend, Jeff Berlin, Boyz II Men, The Roots, Alice Cooper, U2, Madonna

“Record labels make their money on sales, touring, merchandise, anything they could sell that has the bands’ or artist’s name on it.”

Zach Phillips, Freq Lab Recording, San Francisco, CA Credits: The Kooks, Talib Kweli, Dnae Beats, Jayleez, J-Banks, The Game, Alice Russell, Comedy Central

“Here is an oversimplified answer to a complicated question. Record labels make money when their music is purchased or licensed for use. When an artist gets signed to a label they get money, called an ‘advance,’ to make a record. When the record is released, the label keeps all the money until they have recouped their expenses, which includes the advance, recording costs, promotion, and legal fees.

After these costs have been covered, the label then keeps a percentage of record sale profits. The increasingly popular 360 deal works quite a bit differently. In the 360 deal, the signed artist and the label become “business partners” in all endeavors, meaning that the label gets a cut of any profits the artists make, even those not related to records sales.”

Recording Connection offers a Music Business Program that covers what it takes to be successful as a recording studio owner, label, or audio engineer/music producer. Learn how to get clients, manage your books, hire staff, and other administrative aspects needed to successfully run a studio.

Get your music production certification and build your music production and audio engineering skills by learning with an industry professional near you.

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Major Record Labels: Business Model Evolution

Former chairman and ceo, sony music, uk, inpractise.com/articles/ major-record-labels-business-models, why is this interview interesting.

  • Evolution of the music industry and parallels between MTV, Apple and Spotify
  • How A&R executives scout and sign artists
  • How the commercial terms between major labels and artists are changing
  • How to think about the risk of a major record label moving from rights owner to pure distributor
  • Why artists now have more power and options to come to market
  • The competitive moat around record labels in the old physical world
  • Spotify’s two-sided marketplace and its role in the ecosystem
  • How major record labels need to evolve to serve artists

Major Record Labels: Business Model Evolution ( October 8, 2020 )

Nick gatfield.

Nick is a British music industry executive with over 34 years of experience scouting, signing, and working with global artists such as Amy Winehouse. Nick started his career as a musician in the band ‘Dexys Midnight Runners’ before moving into recorded music. At the age of 26, he was made Director at EMI Records, the youngest in the company’s history. Over the next 20 years, he went on to lead global labels such as PolyGram and Island Records and has worked at three of the four major record labels. More recently, as the Former Chairman of Sony Music, he was leading negotiations with Spotify and both new and old artists in the repertoire. Nick currently runs Twin Music, an incubator for new talent, which funds and services new artists coming to market.

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Record Label Business Business Model Canvas

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Resources On Record Label Business

  • Financial Model
  • Business Plan
  • Value Proposition
  • One-Page Business Plan
  • SWOT Analysis
  • Description
  • 1. Key Partnerships
  • 2. Key Activities
  • 3. Key Resources
  • 4. Value Propositions
  • 5. Customer Relationships
  • 6. Channels
  • 7. Customer Segments
  • 8. Cost Structure
  • 9. Revenue Streams

Introduction

The music industry is one of the fastest-growing industries in the world — generating a staggering $43 billion in 2020. Every day, new and talented artists are on a quest to make their mark on the industry, producing unique and innovative music. A good record label can help them do just that — providing guidance, resources, and a pathway to success. A recordlabelbusiness.com provides those resources and more, helping new and up-and-coming artists propel their careers to new heights.

A record label offers valuable services for artists looking to break into the music industry. These services can include advice and guidance for creating music, helping to book live performances and make music videos, as well as developing merchandising to support their music. Additionally, the label can help to promote the artists’ music, connecting them with audiences both locally and internationally.

At recordlabelbusiness.com we are dedicated to helping new and talented artists showcase their music with the world by providing the resources they need to propel their careers forward — making them world renown stars. We strive to provide the very best advice and guidance for our artists, as well as helping to develop merchandising and promote their music.

Business Plan

Record Label Business Plan

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Key Partnerships

Key partnerships to build a successful record label business include:

  • Music Producers to produce the music released by the record label.
  • Music Venues to host live performances.
  • Marketing Firms to promote the label and its artists.
  • Record Pressers to manufacture and distribute physical copies of the label's releases.

Key Activities

The record label's key activities span from the initial artist search and signing process to the ongoing artist promotion. In order to create a successful and lucrative business, record labels should focus on the following activities:

  • Networking with Potential Artists: It is essential for a record label to develop a network of potential artists for the purpose of signing and nurturing talent. Labels should research and attend industry events to meet artists and establish relationships.
  • Signing Contracts: As an independent record label, contracts serve as a representation of their commitment to the artist's career development and growth. Labels should get to know their artists and the creative vision behind their music projects before entering any contractual agreements.
  • Providing Resources & Guidance: Record labels should offer resources and guidance to their artists helping them reach their full potential. This could include providing access to recording studios, helping their artists to create music videos, or assisting them with developing a personal brand.
  • Promoting Recordings: It is essential for labels to ensure that their recordings are being effectively promoted. Labels should develop comprehensive marketing strategies that will ensure maximal reach and impact.
  • Booking Live Performances: Record labels should book live performances for their artists —ranging from small club shows to large-scale festivals— and ensure their events are successful. Live performances enable fans to connect and engage with the artist.
  • Creating Music Videos: Music videos are an important promotional tool. Labels should create music videos that represent the artist and the sounds they are trying to communicate.
  • Creating Merchandise: Merchandise is a great way for labels to connect and engage with their fan base. Labels should consider introducing merchandise with their artist's logo and artwork to further extend their brand.

Key Resources

As a record label, the resources needed are key for a successful business model. These resources include but are not limited to:

  • Recording Equipment : From microphones to mixing desk, recording equipment is necessary to create the recordings that are released by the record label.
  • Studio Space : A dedicated space is needed to create and mix recordings, studio space enables creative control and superior sound quality.
  • Marketing Materials : From digital and physical advertisements to press releases, marketing materials are essential to getting the music out to potential listeners.
  • Production Budget : Whether it be paying for studio time, marketing campaigns, or promotional costs, these must all be covered by a production budget.
  • Physical Space for Live Performances : Venues are needed to host and perform music to potential fans; these spaces must be booked in order to feature performers from the record label.

Value Propositions

As a record label, our value proposition is to provide new and talented artists with the resources, guidance, and advice to help them further develop and promote their music. This includes helping them create music videos, book performances, and create merchandise to help bring their work to life. We aim to be a bridge connecting artists with opportunities to further engage with their fan base and to ensure their music is heard.

  • Provide new and talented artists with resources and guidance to help them further develop and promote their music
  • Help artists create music videos, book performances, and create merchandising
  • Provide advice to budding musical talent

Customer Relationships

The record label will provide the personal level of relationship required to nurture new and established talent. The team will help guide the artists through their success, providing valuable feedback and advice.

  • Provide personalized support from a dedicated team assigned to each new artist.
  • Regular check-ins and feedback for each artist.
  • Develop relationships with their fan base, including social media campaigns, website design, and interactive content.
  • Marketing strategies tailored to each artist, including industry contacts, press, and radio.
  • Data analysis of each artist’s performance and progress to ensure optimal returns.

Record label businesses must have a presence on multiple channels to reach their target audiences and deliver their products. These include:

  • Online Distribution Platforms – platforms that allow customers to access their music and merchandise directly over the internet, such as iTunes and Amazon Music.
  • Live Performance Venues – from small, local venues to larger, national and international arenas and open-air festivals.
  • Music Television Platforms – streaming services such as YouTube and Vevo, as well as traditional music television channels, provide a powerful platform for music promotion.
  • Radio Stations – digital and traditional radio stations, including online streaming platforms, can be key for driving sales for the relevent genre.
  • Social Network Platforms – Facebook, Twitter, Instagram, and more are invaluable tools for boosting word of mouth and promotions, as well as overall engagement with fans.
  • Merchandise Outlets – both physical and digital stores are essential for merchandising, such as t-shirts, hats, and other collectables.

Customer Segments

The record label business will target four distinct customer segments:

  • Budding Musical Talent – specifically, artists who seek to enter the music industry and need a label to act as a go-between with audiences, venues, and streaming services.
  • Music Lovers – these are people who are passionate about music and seek out specific labels or artists. They would be willing to buy CDs, stream music, attend concerts and festivals, and purchase merchandise.
  • Casual Listener – this type of customer would be more likely to stream music, but not necessarily connected to the artist or a specific label.
  • Seasoned Musicians – this segment would encompass experienced artists and producers who have been in the business for years and have the knowledge needed for producing quality music and getting the attention of a large audience.

Cost Structure

The cost structure of a record label business involves multiple aspects, including:

  • Location Rental and Utilities : renting studio space and equipment, insurance, utilities and other related expenses.
  • Recording Studio Equipment : audio interfaces, microphones, mixing consoles, speakers, software and other related tech gear.
  • Recording Fees : compensating the engineers, producers and other staff who help to create music.
  • Advertising and Marketing : managing campaigns, digital content, PR, radio and other promotion expenses.
  • Live Performance Bookings : compensating the agents and venues, production costs, and crew.
  • Staffing Cost : salaries, payroll taxes, benefits and other associated overhead costs.
  • Video Production Cost : music videos, lyric videos, artist interviews and other video-related content.
  • Merchandising Cost : t-shirts, hats, posters, stickers and other merchandise.

Revenue Streams

A record label can generate revenue through a range of channels:

  • Album and Single Downloads: Payments from digital download services, such as iTunes, Apple Music and Spotify.
  • Streaming Revenue: Royalties generated by streams of audio and video content.
  • Live Performance Revenue: Ticket sales, merchandise sales, and other sales generated at live performances.
  • Merchandise Sales: Sales of branded merchandise, such as t-shirts, mugs, and hats.
  • Music Video Revenue: Revenue generated from the sales and rentals of music videos.

Having outlined the components of the Record Label Business Model Canvas above, it can be concluded that there are numerous levers that entrepreneurs in this domain can pull in order to create a successful business. From setting a pricing strategy to leveraging relationships with other industry professionals, there is a range of options that could be utilized to further a fledgling business. The key to success is in understanding how the Canvas fits together and what levers should be pulled in order to create the most successful brand possible. By thoroughly evaluating the situation and taking bold steps in a well-considered plan, any entrepreneur can succeed in the record label business.

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  1. How Do Record Labels Make Money? Inside the Release Cycle

    Published December 31, 2019 Jump to How Does Our Model Work? Key Record Deal Terms Artist Advance Recoupable Costs Release Commitment How do Record Labels Make Money? 4 Different Types of Deals Exhibit A: Standard or Traditional Record Deal Exhibit B: Distribution-Only, Indie Record Deal Exhibit C: Net Profit Record Deal

  2. Record Label Business Model: How Record Labels Make Money

    First, let's discuss the typical record label business model. Record labels are businesses that invest in musical artists, help them create their music, and then promote and sell that music to the public. In return for their investment, record labels typically take a percentage of the profits from sales of the music (usually between 15-25%).

  3. Essential Record Label Business Plan

    Essential Record Label Business Plan | The Label Machine In this article we look at the eight elements that make up a record label business plan, and work through the template providing examples you can edit for your own record label. Writing a business plan

  4. 7 steps to start and grow your record label: Define your business model

    7 steps to start and grow your record label: Define your business model and brand identity Starting a record label has always been quite an adventure, but the digital ecosystem has made the journey smoother. Nowadays, it's easier than ever to start and manage your own digital music distribution business, being a record label.

  5. Record Label Business Plan Template & Guide [Updated 2024]

    Written by Dave Lavinsky Over the past 20+ years, we have helped over 1,000 entrepreneurs and business owners create business plans to start and grow their record labels. On this page, we will first give you some background information with regards to the importance of business planning.

  6. How to Write a Record Label Business Plan (Free Template)

    ‍ ‍ Free record label business plan template How to start a record label What should a record label business plan include? History and experience What is your music industry experience? Do you have a track record of discovering and breaking new bands, or a string of successful previous releases?

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    Music Distribution Licensing Deals Customer Focus Broadbase Records will target new and existing musicians in Nashville, Tennessee that are looking to either establish or expand their music presence in the industry as potential clients.

  9. Craft Your Music Label Business Plan in 9 Simple Steps: Get Started Now!

    The first step in writing a business plan for your music label is to identify your target market. Who are the audience that you want to reach and what kind of music do they prefer? Next, you'll need to conduct thorough market research. This will help you understand the current trends, consumer preferences, and potential competitors in the industry.

  10. Record Label Business Plan: Guide & Template (2024)

    The record label is a business where music artists share their rights to music with a company to earn profit and advance their careers. Many famous record labels include American Record Corporation, Warner Music Group, Universal Music Group, Sony Music, and many more.

  11. Strategies to open our own Music label, Business model case study

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  12. Exploring Successful Music Business Models: A Comprehensive Analysis

    1. Record Label Model The record label model is one of the oldest and most traditional music business models. Record labels sign artists, fund their projects, and handle the production, marketing, and distribution of their music. In return, they take a percentage of the artist's earnings.

  13. Music Recording Labels: Business Models and Valuation (with ...

    According to Bloomberg, thanks to the collaboration with Gap and Adidas, Yeezy is worth between 3.2 and 4.7 billion dollars and it is 100% property of the artist. The value of Kanye West's brand is the equivalent of 1/5 of Warner Music Group's market cap, one of the biggest labels publicly listed on the market.

  14. How Independent Record Labels Make Money in 2024

    Here are some of the average UK performance royalty earnings for gigs: Pubs & Clubs: £5 - £6. 02 Academy: £32. Small Festivals: £74. Medium Festivals: £309. Major Festivals: £1,500. If your music is played on the radio you should be receiving royalty payments too. Here are the average rates for BBC radio stations in the UK:

  15. Label Business Model: From Owning to Licensing Rights

    Over the next 20 years, he went on to lead global labels such as PolyGram and Island Records and has worked at three of the four major record labels. More recently, as the Former Chairman of Sony Music, he was leading negotiations with Spotify and both new and old artists in the repertoire.

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  17. What Is Record Label? Deals, Examples, and More

    What Is Record Label Business Model Like? A record label is a company that takes up deals with artists to produce, promote, and distribute music. By investing in this release cycle, the label stays profitable while helping artists push their art into the market and make money off of it. How Does a Record Label Operate?

  18. HOW DO RECORD LABELS TURN A PROFIT?

    Record labels make money when their music is purchased or licensed for use. When an artist gets signed to a label they get money, called an 'advance,' to make a record. When the record is released, the label keeps all the money until they have recouped their expenses, which includes the advance, recording costs, promotion, and legal fees.

  19. Major Record Labels: Business Model Evolution

    Major Record Labels: Business Model Evolution Former Chairman and CEO, Sony Music, UK IP Interview Published on October 14, 2020 Why is this interview interesting? Evolution of the music industry and parallels between MTV, Apple and Spotify How A&R executives scout and sign artists

  20. Real Value Of Record Labels

    Production And Recording: Labels provide access to resources and expertise that can help artists create high-quality recordings. They have relationships with top producers, engineers and studios ...

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    For Apple Music, it's $7.35 for every 1,000. With over a billion users, Youtube is counted as a streaming platform for music as well. The downside is for every 1,000 streams on Youtube, you would only net $0.69. Most artists I know would be lucky to get 10,000 streams, let alone 1,000,000.