Music Business Basics

Music may be art but, when it comes to the music industry, music is all about money!

In short, if your music isn’t going to make money, there won’t be any interest from anyone in the music business.

However, there are several potential revenue streams for you from your music, including:

Record sales

Songs played on the radio

Movies and television

Concerts

Songwriting

Producing

Merchandising

Advertising

Many artists like to let someone else handle the business aspects of their careers, allowing them to concentrate on the music. If you can afford it, it might be worth considering hiring one or more of the three following professionals to help you in your career:

Manager This is the most important of the three. They should have contacts in the music industry to keep an eye on all your affairs, advise you on things to do, help promote your music, look for producers to hire, work out who to sign with, advise you on when to go on tour, etc. Your manager will typically receive 15% – 20% of your gross earnings, but in return should have good contacts with record company A&R, marketing/sales, and promotion departments.

 

Music Attorney A good attorney specializing in the music industry will know how to properly negotiate and structure your deals. They should also have good contacts and be trustworthy. An attorney can be expensive – costing as much as $100-$200 an hour. Some attorneys will waive their fees and instead opt to take a percentage of your earnings.

Agent – Your agent is there to book concerts and special appearances for you. Your manager may be able to advise you on a good agent to hire.

Should you find success and start making some real money, you may also need to consider hiring an accountant to handle your taxes, check your royalty statements and other money matters.

 

Sending Music to Record Labels

If you want to get signed there isn’t much point in just sending your music to a record label. There is a very good chance nobody will listen to it, so you’ll just be wasting time and money. Instead, you should look for a contact at the label who you can address your music to.

We would advise that you speak to someone first, preferably in A&R, before sending your music. Remember to chase them up too, to make sure they have listened to your masterpiece. You should only send 3-6 tracks and make sure to put your best songs first.

 

Make Your Name

These days, record companies prefer to sign artists who have already built up a following of their own. The mixtape route and social media have made this self-promotion possible, but you will need to hustle hard to build up your buzz, performing live and gaining your own fanbase.

Record companies want to limit their liability. Once you are signed, you are considered an investment that will require money and a record label will want to see a premium return on the money they invested in you. You are more likely to get signed if you can prove you can make money for the label.

 

Selling Your First Songs

If you get signed, the next step will be to hit the studio and record songs for your record company. The record label will make copies of the master recording and send them to a distributor who sells any physical products to retailers.

The record label will also spend money on marketing and promotion for your music, but this may be recoupable against your profits. So, in effect, the record label is simply letting you borrow the money for your promotions upfront, and you will be expected to pay them back!

 

Types of Record Label

While major labels include names like Sony or Arista, there are smaller labels out there who may or may not have ties to a larger label. These include:

Major label affiliate labels – These have special agreements with the major label record companies, where the major label may fund the smaller label’s recording and operating expenses in exchange for a portion of profits.

Independent labels – These labels distribute records through major labels. Independent labels have few employees. They tend to find talent, sign the talent, get the music recorded and make contracts with major record labels to perform the promotion, marketing, and other functions.

True independent labels – These have no association with a major label and distribute their music through independent distributors.

 

Record Label Departments

Most record labels have several departments to help them operate, these include:

A&R (Artists & Repertoire)

The A&R department is the talent scout. They are the eyes and ears of the record company, tasked with finding new artists. A&R is not as big as it once was at record labels, as many now want the artist to do a lot of the work to build their own name. While some acts still get signed in the traditional A&R manner, even this doesn’t guarantee that your music will ever get released as it will be up to executives higher up in the company as to whether your music will get a release date any time soon.

 Marketing and Sales

This department is responsible for getting people excited about your music. They are responsible for promotional merchandise, advertising, in-store displays, publicity, and so forth…

Promotions

Promotions are responsible for getting your music played on the radio. The individuals in this department will visit the various radio stations to convince them to play your material. The more airtime you can get the more songs you will sell or streams you will rack up.

 

Distribution

If you are selling physical products, you need to make sure that they are as widely available for your fans to buy as possible. This may mean ensuring your CD or vinyl is in stores, but there is always the online method instead – cutting out the middle man and selling direct to your fans.

Years of consolidation means that there are only 5 major national wholesale distributors in the US who are owned by conglomerates who also own major record labels. They are:

BMG (distributes Arista, BMG, and RCA)

EMI (distributes Capital and Virg.)

Sony Music (distributes Columbia, Epic and Sony)

Universal Music Group (distributes Interscope, Island/Def Jam, and MCA)

WEA (distributes Atlantic, Elektra and Warner Bros.)

While it may seem tempting to side-step the labels and try to do it all yourself, the record labels have connections and industry experience that can’t be ignored.

 

Contracts

Record labels have long had a bad name for ripping off artists who sign to them, tying them to poor contracts for years. You need to understand what you are signing when you make a deal with a record label. Understanding your royalty payments is key, and it is here that you are well-advised to get an attorney to look over your contract.

New artists tend to have worse royalty rates than established artists, although your royalties may also change depending on how many units you sell. Don’t forget that there are often expenses to be deducted from any money you make – that expensive video you wanted? That will come out of your profits – and not those of the record label! There are lots of different things that can count against your royalties, including recording studio time, unsold units, promotions, and more.

Don’t forget you will also need to pay your manager (if you have one) and any other people on your payroll as well as paying taxes on any money you make.

 

Remember, while you might be all about the art, it is a business – and that means making money!

 

 

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