September 19, 2020

5 Good Reasons Why Artists Start Their Own Labels

why artists start their own labels

The idea of starting and a running a record label sounds like a better proposition for the ambitious and savvy artist.

Before the advent of digital music, things were pretty much straightforward – get signed to a label and enjoy fame and fortune.

But the grass is not always greener on the other side. We’ve read countless stories of disgruntled artists having a fall out with their labels for various reasons.

Hey the music business is not easy and it looks nice from the outside looking in.

This blog post will go through some of the reasons why artists decide to strike out alone. Everyone’s situation will be different so please read this with a grain of salt – this only my opinion.

1. Creative freedom

When you are signed to a traditional record deal, you lose the benefit (sometimes) of being able to create the music that you really want to create. Depending on the label, they will probably want you to go with the hottest sound or follow the latest trend. It’s understandable though because the label invests a small fortune in making and marketing albums in order to make a profit (if they do even make a profit) – its business.

2. Ownership of masters

For as long as you have a typical artist deal with a label – be it major or indie – any music that you record for the duration of the contract will belong to the label. All of it!

Unless you have a clause in the contract which allows you buy back all the music copyrights, you would relinquish all rights the day you ink your deal.

When you own your own label, you will be in a position to own your master recordings. But you have to fund the recordings from start to completion. The beauty about owning your master copies is that you can piggyback on the label’s resources by licensing your music to them.

3. Earn more money

I don’t know now, but the last time I saw a standard recording contract with my own two eyes, it read the following:

  • 3% 1-5000 units sold
  • 5% 5000 to 15000 units sold
  • 6% 15 000 to 25000 units sold
  • 10% 26000 to 50000 units sold
  • 15% 51000 and above units sold

As you can see above, in order for an artist to make real money, he or she would have to sell 50 000 units and above! (In the South African Industry though)

When you start your own label, you can earn bigger gross profit margins instead of royalty points. Let’s say you decide to start your own label and partner with an Indie distributor, your numbers may look something like this:

You sell a CD to the distributor at a wholesale price of 50 ZAR. If your profit margin is 80%, then 40 ZAR is yours, and distributor keeps 10% which is 10 ZAR. It doesn’t matter how much the retailer sells the CD for because in most cases royalties paid from the wholesale price, not retail.

Now you can do the rest of the math!

This is just a hypothetical example that I’m using, not many artists have access this kind of a deal.

But this is just to show you stand to make more money when you have a direct distribution deal.

4. Create more opportunities for others

When you start a label it can also open doors for raw and young talent. Let’s take Kwesta for example. He was signed to Buttabing Entertainment in 2007 as a virtually unknown artist to a standard deal, but his debut album (Total Rekwest) was only released in 2010.

A few years later (2013 to be exact) he left Buttabing to start his own label, Urbantaiment which later became RapLyf Records.

Had Kwesta stayed in his comfort zone, we wouldn’t know the likes of Makwa Beats, K-Zaka and others. 

5. Ego

Just because you have the virtuosity of making music doesn’t necessarily mean you should start a label.

Not everyone is cut out to run a record label because it requires a different skillset and temperament.  Some artists start a label because it sounds good or because they think they can do a better job than most seasoned execs.

Sure everyone has an ego but as long as the motive is good for starting a label, then it’s worth giving it a shot.  

Conclusion

Are you an artist and do you have your own label or thinking of starting one? Let me get your thoughts on the comment box below.