With the music industry becoming a battlefield of independent labels popping up, artists selling their music off their back and a vinyl comeback, I use my own experience as a label owner, DJ, producer and now magazine owner and also chat to a couple of label owners to put some information together for up and coming or experience artists and label owners to hopefully take something from.
Running a record label can be a complex task, depending on the variables; what medium the label is releasing on, promoting releases, distributing releases and artist management. The processes of label management have changed in recent years with distributing music being much easier, some would say it is harder to get music heard and promoted effectively as the market is now inundated with independent labels. This piece will look at the problems label owners face in regards to digital and physical mediums, streaming and the royalties gathered from this and perhaps how it can be combatted in the future.
A label will sign, master, promote and distribute a signees music, this has always been something which costs a varying amount of money depending on the medium the music is released on, and if the label covers artists studio time and expenses. Since the early 2000’s the MP3 format became more widely used and has changed the music industry dramatically and download stores where you can purchase music online were adopted. This affected sales of physical mediums as it was often cheaper to buy and download your music online at the time. It was also possible to choose which tracks to purchase. Streaming services have now taken the extra step by offering millions of tracks and albums to listen to for a small monthly fee.
Digital vs Physical
Digital music is easier to distribute as it is relatively cheap to produce, with only the mastering and distribution stages being accounted for. Physical music such as vinyl or CD are more expensive as there are manufacturing costs which can amount to thousands of pounds depending on quantity and end product. Vinyl records of course are the more expensive but often more preferred for DJs and purists. Even though vinyl has its downsides in cost, frequency range and also eventual wear and tear, it seems to be a growing industry with independent labels opting for a vinyl only catalogue, although these downsides may become past tense in time with something that’s being dubbed as “HD vinyl”. This is something a company called Rebeat are working towards after recently filing a patent for the technology. This technology will also make the manufacturing process cheaper, meaning more vinyl and potentially less digital or streaming royalties.
Whilst speaking to Nathan, label manager at Trojan Audio, this is what he had to say:
“Vinyl is the most physical and personal of all formats, it’s a physical medium which other platforms specifically streaming or digital files will not provide to the end user or give that sense of owning something timeless. Along with that physical format a string of costs are attached which is somewhat steep compared to the cost of providing digital mediums. Most of the time the overall costs exceed £1000, which for one release can and will affect future releases or the longevity of the label it’s self. It’s a very challenging environment to enter with the amount of competition and other labels also releasing on the medium, so everything you do has to be correct including promotion and something which does stand out from what’s out there at the moment, otherwise a large loss of production costs will be inevitable.
Another key factor to take into consideration is the length of time the production takes from start to finish, with mastering ranging from 5-14 days and production ranging from 8-14 weeks it’s very important to make sure your product is still relevant and exciting at the end of the process when it’s ready to be released rather than early announcements and promotions which eventually burn out, leaving the end product irrelevant when it comes to release.” – Nathan, Trojan Audio
Royalties and Streaming
Royalties are something decided in the contract period of a signing, most record labels take a higher percentage of the cut as the label is usually investing a lot of time and money into an artist (if fronted money for an album or studio time etc), so nowadays and definitely with independent labels the royalties can go more in favour of the artist or have an equal divide as the overheads of running a label in todays industry or even the last ten years are lower. However more recently labels and artist have taken a hit from streaming services and their low paying royalties, for example a person can pay £9.99 per month to a service such as Spotify, this entitles the user to listen as many times as they want, but also download the tracks for offline listening, in my own experience with Imperial Audio, royalties paid can be as little as £0.001 per play and it seems to be that artists and labels are continuing to remove their content from Spotify and similar services, again something decided with my own label.
More recently services like Soundcloud have allowed artists to promote and sell their music online by hosting their work on the site via a personal profile. It allows smaller artists to be recognised and for people to listen to their work without the need for a record label, something which Myspace was used for also. Although its possible to host audio on Soundcloud there is no support for actual purchasing yet, although a deal with Sony recently shows Soundcloud may be moving towards a more ‘Spotify’ service. Bandcamp allows artists to sell their music and merchandise directly and they take a very small cut of around 10%. This gives artists more freedom and allows them to sell their work for more than a label cut would grant.
I asked Aneurin, label owner at Infernal Sounds why they still sell their music on Bandcamp alongside other stores and what he thinks of the royalties;
“I choose to sell via Bandcamp as my primary outlet and try to upsell through that as it’s the best way of receiving the most amount of money back per item. Meaning that obviously we are pushed closer towards the break even with each sale. Firstly that’s obviously good for the label but more importantly it means the artist will receive more money back overall for their music.
The only downside to the Bandcamp and why we chose to also go with general stores is that people have a lack of trust in the Bandcamp and believe the postage is more than normal stores. Which is untrue on our behalf as our distributor deals with all of the postage of the sales. The other obvious reason to go with a large store for sales is that they reach a much wider audience and are amazing for spreading your product through other online stores but also stores at ground level. They are also much more beneficial for people outside of the EU as the common trend for people in the US and further is to bulk purchase and get numerous vinyls shipped at once, which you can’t do via the Bandcamp. However, the downside to the sales via general stores is that you consequently receive half of the money back per item as opposed to the Bandcamp. Costs wise, I’d say they’re quite reasonable as long as you shop around and gather quotes. It’s just the obvious pressure that if you don’t sell 2/3 of your stock when pressing 300 records, you won’t break even. So there’s certainly some pressure when it comes to the cost side of things. As for royalties, I think if you’re well set up and you ensure you’ve got the correct things in place, the royalties system is very beneficial, especially for the artist. It’s just with being in such a small scene, this is something which perhaps can’t be exploited as much as hoped.” – Aneurin, Infernal Sounds
Looking at everything I’ve talked about and from personal experiences its clear to see the music industry nowadays is a complex field to manoeuvre through. It seems a good way to ensure you earn the most money whilst getting the exposure and marketing experience from a label is to perhaps cut a deal where you can release your music after a certain time period or if your music is released on a physical format only then you take digital sales. These kind of agreements are becoming more common with labels being more lenient and understanding, perhaps as a lot of new labels are run by artists who have had these experiences first hand. In my opinion it would be wise to steer clear of Spotify and similar streaming sites, although it can bring ease of use for a listener and bring your music to a wide market, the rewards are very little compared to selling music, unless you manage to bring in millions of streams.