Business Idea: The Reverse Record Label

I am currently writing a business plan for one of my classes (COMM493, not really sure why this is a communications class…) and this is the basic idea my roommate and I are developing:

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[img courtesy of Ariel Hyatt’s Flickr account]

According to statistics provided by the New Music Seminar that I attended this past summer, there were only 5,945 artists able to sell over 1,000 copies of their albums in 2008. And only a mere 110 of these artists managed to sell over 250,000 albums (the majority of which are signed to major record labels). These numbers prove how rare and difficult it is these days for an artist to get their music heard by the masses, and how incredibly slim a band’s chances are of getting major label representation. The problem in this case works from the top to the bottom; the top being the corporate interests with the money and control and the bottom being the artists. Often is the case that the talent works for the talent agency – this situation should be reversed. Record labels shouldn’t have artists on their payroll; instead, the artists should have a slew of passionate, focused and talented people providing services for them based on their individual needs and desires.

Artists are becoming smarter and want to be more proactive about the business decisions surrounding their music. There are a wealth of artists out there recording great quality music for cheap in their basements, garages, bathrooms, friend’s houses, etc. Once this music is recorded, however, many of these ambitious young people don’t have a clue how to spread the word and start living their dream. Instead of sending their music to record labels in hopes of “getting signed,” artists can opt to have a team of motivated individuals work for them; all the while maintaining complete creative control over their music.

Empower

To reverse the tides and help empower artists, the business idea is an all-inclusive service team specifically geared towards unsigned and independent musicians and performers. Essentially, the business provides unsigned musicians with many of the services they’ll need in order to achieve their professional goals. These include consulting, marketing, booking, promotion, public relations, and much more.

The concept fundamentally functions as a record label “in reverse”. The business is working for the artist(s) and not the other way around. Traditionally, a label seeks out artists who can potentially sell a lot of music and solicit a large fan base. The traditional label will produce, promote, sell and distribute the artists’ music and give them a small percentage of the profit. In many cases, that percentage is less than 10%—which is a very small payout considering the effort put in by the artist to create that music. I mean, the music wouldn’t even exist if it weren’t for the artist in the first place.

The reverse record label’s primary revenue stream would come from the payment plans negotiated with each artist/band. The payments can be made upfront, in monthly/yearly installments, etc…whichever model seems to serve the relationship best. These prices would be flexible depending on the artists’ financial situations. In turn, the reverse record label provides the services (with some sort of a guarantee) and receives no further compensation. The artist collects 100% of the benefit from that point on. Most importantly, however, the artist maintains full control of the rights to their music regardless of the service(s) they seek—which is rarely the case at the typical “record label.”

[img courtesy of A.S.B.P.K.]

The reverse record label aims to serve the prevalent but struggling independent music culture. Unsigned and independent artists need organized, determined, and talented individuals to help them create and sustain long and successful careers. Any independent act can have the opportunity to receive consulting and development advice through the reverse record label at an affordable rate. The core focus of the business’ services is to increase overall exposure for its clients in their target markets, thereby providing them with future opportunities that will help to enhance and uphold their musical careers. By exposing clients to their target markets, this can also indirectly enhance the quality and diversity of local music everywhere, and help the previously unknown, but truly excellent talent rise to the top.

The reverse record label would compete alongside traditional artist public relations, marketing, management and consulting firms, as well as traditional record labels. However, what differentiates it from the rest of the pack is that it provides a customized combination of all these services, geared towards individual artists and bands, in one convenient and affordable package. These packages will be unique and tailored to each specific artist. The reverse record label would take the time to research an artist’s target market and develop a strategic plan based on the services the artist requests. And if an artist does not know what to request, the reverse record label can offer them the proper consult to guide them in the right direction and give them several options to consider. With this business, artists no longer have to spend countless hours of research to find a publicist or manager that would suit them best. They no longer have to send promotional CD’s—which cost big money and rarely make it much further than the office garbage can—to record labels in hopes of getting a dream record deal. The reverse record label’s services would provide its clients with the essential knowledge to achieve success in their independent music careers. And once again, it would not take any rights away from its clients, so the artist(s) will always be in control of their most important asset: their creativity.

This is just an idea I had a few months ago. But at this point, it is just that – an idea. I’m sure somebody has thought of the same thing/something similar at some point in time. At the end of the semester my roommate and I will have written a full-length official business plan surrounding this idea. I would love to hear any feedback/discussion arise about it. Thanks!

_chris

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23 Responses to “Business Idea: The Reverse Record Label”

  1. […] Read more here: Business Idea: The Reverse Record Label « Tight Mix – EVERYTHING … […]

  2. Is there anyone out there doing this type of thing? Is this similar to what Ariel does, but more wide-ranging? Biggest problem will be getting paid from “starving artists” if they don’t hit it big. Up front $ is a definite requirement.

  3. Originally, Record Labels existed to provide funding for artists to record. The label would then receive compensation based upon how the recordings sold.

    With recordings making less and less money, you are drawing revenue upfront from musicians without really basing it on performance.

    I think if you can provide a measurable guarantee (or your $ back) this will overcome some hesitation for artists to commit.

    Even then, it should be best to initially choose artists who are drawing a modest crowd in their home town and wish to expand to surrounding areas. These artists could be chosen based upon whether they have some experience writing and playing good songs live (drawing a crowd is a good sign of this).

    In a word, I like it. This kind of thing hasn’t been done to my knowledge and should definitely be tested by working on one or two projects at a discounted rate (or free just for the experience).

  4. classicrocker415 Says:

    David,

    i like what you said here:

    “…it should be best to initially choose artists who are drawing a modest crowd in their home town and wish to expand to surrounding areas.”

    I totally agree. Those exact kind of artists are definitely our target market….the ones that are creating a small local buzz and are looking to branch out a bit, or intensify the existing buzz they are generating in their hometowns.

    I don’t know if I will decide to implement this after I graduate (my partner is going into the Marine Core after graduation)…if I do I would have to build a team.

    Anyway, thanks for commenting!

  5. The idea is great, but the question is will this miraculous team be able to build up extensive list of contacts with venues, distribution etc. You’re saying “the team will take some time to figure things out”- well, I think it’s gonna take pretty long, especially if the team is managing many artists at the same time. At least, they should all be in the same area, so idea of “localism” comes to mind itself.

  6. Hey Chris. Great article! I followed you over here from MTT and think you are on to something. There have been agencies like you’ve just described, supporting the major labels for years. Now that the labels are deteriorating, these independent publicists, radio promoters, distributors, etc are going directly to the artist themselves. Grouping these services together into a low cost, result generating package is something that artists are looking for. Good luck on your business plan and best of luck in your new endeavor!

  7. So first of all, there are existing companies that do similar work, on a contract basis. For instance, in hip hop, if you’ve got dope product and decent money up, you turn to an outfit like Audible Treats (no relation to my blog audible hype) who have an existing network with blogs, magazines and venues. Check their Services page out:

    http://www.audibletreats.com/services/

    Is that about the speed of what you’re proposing here?

    If so, I’d say that QUALITY CONTROL is going to be crucial. Your reverse record label is building it’s relationships based on the music it’s bringing to the table…so working with quality artists is a must. (You’ll also be doing artists a favor by turning down the unprepared and unrealistic. Motherfuckers NEED that feedback because their family and friends enable them.)

    FWIW, Audible Treats emerged from a group of college-level marketing students…so they had an “incubator.” Your project will need that, too…startup capital and a safe platform to make mistakes without losing your team in the process.

  8. classicrocker415 Says:

    Justin,

    Thanks for the feedback, I always enjoy reading your comments over at MTT because you always introduce a different outlook on things.

    I had not been aware of this company Audible Treats, I’m glad you showed them to me. My boss over at Jive Records actually left a testimonial over on their page which was pretty random and unexpected, haha.

    In some aspects, they are certainly very similar to the idea I present above. However, their vision is slightly different than ours. They say that they have the goal of exposing their favorite artists to the largest audience possible. Our vision is to act as a stepping stone for artists in the early stages of their careers. We are not looking to launch artists into mainstream recognition by any means. If an artist has developed a small following in a town and is looking to expand it a bit further, we will be the people there to help give them an extra push so they can continue to focus on creating great content.

    I agree that there must be some degree of quality control. And people who suck definitely must be told that they fucking suck. Which is where the consulting section of our business comes in…another differentiator between us and Audible Treats. If a dude comes to us with shit music…we won’t turn this person away…instead we’d suggest that they consult with us for whatever payment method we decide to implement and we can help them align their goals, find instructors to get singing/instrument lessons, research potential venues for them to start gigging…stuff like that.

    I also agree that startup capital will be absolutely necessary…a big part of this class is setting up a professional presentation that would be worthy to pitch to investors/bankers….and then we actually mock present our business to former business investors and get their feedback and decision about investing if it were in real life.

    Thanks again for commenting …my roommate and I will take all of this feedback seriously as we develop the plan!

  9. Amen.

    If you haven’t already found it, I highly recommend the Guy Kawasaki book “The Art of the Start.”

  10. The concept of the reverse record label definitely makes sense. It is the artist’s music and career at stake and they should be in control of that. Just like D. Allen said, record labels started out funding records, in the last few years they have struggled recouping money from record sales because 1) they put way too much money into the record to begin with (and not just the recordings, but also creating a rock-star aesthetic for their artists which was just wasteful spending) and 2) record sales were just going down. This is when labels started leaning more towards 360 deals because they needed to generate some more income from the band. I strongly encourage bands to never sign a 360 deal unless you just don’t care about controlling your career.

    Basically every other part of the industry is having people work for you. Booking agents, managers, publicists, etc. DO work for the artists, but the catch-22 behind it all is that they won’t work for the artist unless they see that they can profit from the artist since most of their work is commissioned based. For example, my old band generated some interest from a major booking agency but we were told by an agent that he really liked our music but would like to see us tour more before he started working with us. When you look at the big picture, with so many bands out there agencies and other companies have more of a luxury to be picky about who they work for. If they see an established band who is touring 250-300 dates out of the year and building solid fan bases in different regions, they see that there is money to be made in that situation.

    Now I am not saying that your model is wrong, in fact I agree with you that band’s should surround themselves with individuals dedicated to working for them. The struggle comes when those sorts of individuals have the ability to pick and choose who they work for leaving the really talented bands and artists sort of stuck. This is why it is important for artists to take on a lot of those responsibilities up front to help jump start their career so that when they hire on people to their team they are continuing in with the growth of the band and not starting from scratch.

  11. cybearDJM Says:

    Hi, amazing… I’ve just submitted my “unLabel” project to the community… you can check it here https://www.insightcommunity.com/case.php?iid=1335
    Would definetely like to exchange with you on these matters…
    Sincerely
    DJM

  12. I think the challenge will be to provide services for talented, but currently broke bands. Either the bands will have to find fans or investors to put up the money to hire the service providers, or the providers will have to work for a percentage of future earnings. The second scenario is hard if the service providers aren’t getting the checks first and taking their cut off the top (the way managers and booking agents usually operate).

    I’m also wondering to what extent any band can gross enough to pay a team of people working for them. To generate enough income to pay the band a modest annual income requires a gross of at least $100,000 to $120,000 a year. Then if people working for them hope to make a reasonable amount of money, the band needs to be grossing at least $200,000. Most bands never get to that level.

  13. ^^I think the only solution to that will be something looking like a PR firm, at least. Since none of the artists you’d be working with have the profit levels to justify your full-time attention, you’d be working with a shifting roster on a per-project basis.

    Of course, the nature of the work and the relationship is where the “Reverse Label” would start to differ from a simple PR firm…but I think you’d need a fairly large influx of talent to keep this afloat.

  14. Your blog is so informative … ..I just bookmarked you….keep up the good work!!!! 🙂

  15. It certainly sounds like a good deal for the artists, but I am worried about the profitability of your business idea. You mention several times that you’ll just charge the artists “an affordable rate,” but you don’t make it clear what you consider to be affordable. One of the reasons that the major labels have existed over the last few decades is because they can offer big cash advances to their artists, although that tradition is going away. If an artist can’t lay down a decent amount of cash for your services, then the only way you can really support your business will be by asking for a percentage of their album sales which would make you a non-reverse label.

    Sorry to be a Debbie Downer, but those were just the problems that I thought of while reading it. I wish you the best of luck on this idea and let me know if you’ve already came up with solutions to the issues I wrote about!

    -Jordan
    http://futureofmusic.biz

    • classicrocker415 Says:

      Jordan,

      Figuring out the “affordable rates” has proved to be the biggest challenge in developing this business model. Like you said, its tough for many artists to shell out a enough money to cover all the business’ expenses and make it profitable. My roommate and I have come up with some preliminary rates that will make us profitable (but not by much .. at least within the first 1-2 years) if our projections can be reached. We we’re VERY conservative in our projections because the first few months of will be heavily focused on building a network within the area.

      We’ll see what the mock investors think! haha.

      _chris

  16. Nice post as for me. It would be great to read something more about that theme.

  17. very interesting article sounds like the future to me!! can’t wait to be a part of it!!

  18. classicrocker415 Says:

    Thanks for the kind words, Carlos. You have a pretty cool website over at car-los.com, keep it up!

  19. Rock This Love! Rock Meets Rap Meets R&B=The New Tina Turner!

  20. Ariel Hyatt’s “Blog Challenge”…

    Ariel Hyatt, CyberPR It was just about this time two years ago my father and I were working on a project as co-writers; co-producers and partners in his own album project. I was writing most of the backing tracks, especially the rhythm parts and string…

  21. reverse record label..
    would only work IF the bands/talent actually have money to invest–and after investing in recording (1000-5000 bux) websites/design (300-1000), time spent promoting (time is money), merchandise, instruments, accessories, PA & light equip (2000-10,000 bux), truck/van/trailer and maint (2000-20,000), logo design, flyers, mailing fees, press kits, bio, photos, cd duplication, other online or physical promo costs, etc, how much does the artist have to invest in further marketing and promo from someone else they have never heard of? money back guarantee makes it a little more realistic or possible, but id still be very cautious and not too quick to jump on board if its my money and career.
    and the things i listed are all of the investments that any truly dedicated musician/band must make to have any shot of gaining enough attention and exposure to actually start selling CD’s and Merch at a profit rate of around $1-$10(max) profit per item. Most bands never even make back the money they spend on recording a high quality CD.. nor do they make back the money invested on PA/Lights systems from perfoming shows–think about it– if you have 10g’s in equip, and your band makes 500 bux per show, with say 100 bux going back into the band fund, you have to play 1000 shows to recoupe that money, not to mention all of the speakers, cords, and equip that isnt going to hold up for 1000 shows..
    to make more money per show, say 1000-2000 per show, you have to have an amazing show or a great gimic, and most bands have their own ego-centric idea of “staying true” to the music or themselves (which is usually just laziness), and never develop their live show enough, or incorporate some kind of gimic to draw a ton of people, and in this business–your draw equals your income/value.
    so we end up with the same problem as major labels–the greatest talent that also has the work ethic and drive to be successful, usually already is and doesnt need much more help–if a band or artist writes songs that hold up and become hugely popular, the exposure needed for success can be gained for free on myspace and other websites. labels dont want to invest in bands that arent already selling cd’s/songs and touring like crazy and playing for packed houses, and if im a label, i can understand why–why take a chance on a risky, undeveloped songwriter who isnt already selling and touring? if you owned a business of any kind, it would not behoove you to invest in something or someone who shows they are capable and committed. and lets be honest here–the vast majority of musicians and songwriters out there end up with massive ego-complexes after 3 people (who know nothing about music) tell them they are great and then convince themselves not only that they deserve a record deal and for everyone to kiss their ass and do everything for them, but then they expect to make all of the profit even though the label may have invested $250,000 to get them produced and promoted and on tour–all things they could not have done alone, or at least to no where the same extent. even if they won the lottery, they wouldnt invest a lot of money and time into their career, so why should/would anyone else???
    sure there are a handful of hard-working and talented musicians/bands/songwriters out there who deserve some help. but money makes the world go round (unfortunately) so unless one finds a way to generate maximum income from their music, the chances of landing a good record deal (where they give you a decent cut) are slim, and closer to none. And (the catch 22) if one DOES generate max income its because they either wrote a great song (only takes one, so keep writing!) or because they have invested in all of the areas I mentioned and are indeed building a large fanbase from their efforts, then is it really worth it to sign a record deal? record companies LOSE a lot of money on a lot of artists who never recoup the money the label invests in them, and with record sales lower than they have ever been and never destined to return to where they were, record labels are becoming more and more picky about who they work with, and for good reason–no one runs a business without looking at all of the numbers and trying to turn a profit. and investing in any artist who isnt already established and selling merch and cd’s and playing tons of shows and building a fanbase is simply a foolish investment. “you play the game how you practice” in sports, and its the same in the music biz–what you accomplish on your own time with no help from anyone will translate into more success if or when someone does come along and help you. and if you sit around making excuses and feeling sorry for yourself because you beLIEve you are the next big thang, and think someone will show up on your door step or the factory or place you work to sweep you off your feet and make you a star.. well thats just plain ego-driven delusion.
    so i say, do the research. figure out what it takes to get where you want to be. ask the questions: do i want to write and publish music to sell? do i want to perform for a lot of people? do i want to make a living in the music business as an artist? no one is going to come to you and offer to all of the hard work for free, and no one is going to sign you to a deal and make you a rich rockstar unless you prove yourself first. –so record an album or demo and promote it online for free and ask for reviews and feedback, and use that to judge your own potential or find your strengths and weaknesses, and focus on developing into a great musician and songwriter or band. set goals for yourself and the band, and make sure those you are working with have the SAME vision and COMMITTMENT or you are wasting your time. put everything on paper and have everyone verbally agree and sign the paper with the goals on it -nothing legal or contractual, but a list of goals like: 1.) Write and develop 10 songs, 2.) rehearse 2 times per week, 3.) seek out quality studio and equally invest in recording a cd, 4.) equally spend time promoting the songs/cd 10 hours per week, 5.) perform 100 shows per year in region, etc etc. doesnt have to be these goals, but DOES have to be goals EVERYONE agrees on and is willing to work toward. signing the paper, and simply having the checklist of goals as a reminder everyday will instill added motivation and focus on the project, and everyone can be held accountable for not doing their share, and when that happens (because it will) offer one chance to the slacker to catch up with everyone else, and if he/she doesnt after one warning, boot em out and replace them with someone who will. why should one person hold a project back? they shouldnt, and you should let it happen–friends, family, or how talented they are doesnt matter—it is only persistence and consistent focus that makes things happen in this world, and anyone who doesnt “get that” is not going to if you let them get away with it. warn em (and they will usually quit anyway) and if they still dont want to work, boot em.
    above all–be a student of music, songwriting, and this business. the more you learn and teach yourself, the more valuable you are to the biz, and the more successful you will be.
    set goals, ask questions, devise a plan based on priorities, and start checkin shit off the list one thing at a time. if you are good enough/write great music, people will take notice and opportunities will present themselves. if you suck/write shitty music, and dont try to get better or work toward recording a quality cd and promoting the shit out of it–eat, shit, sleep, and breathe it, no one will ever want to work with you/help you (and most occasions, no one is out to help you, they are looking for a trade off of some kind–so have something to offer and negotiate an agreement that serves both parties).
    this is an ego-driven world, and unless its “cool” to know your music or go to your shows, you will fail. so write a ton of music, get feedback on it, record the ones that are well-received, and promote, promote, promote. play shows whenever possible, talk to everyone at the shows who likes your music, thank them, be nice, and ask about other venues they know of, people they know, etc. its a 24/7 job to gain exposure, and it takes a loooooong time, even if you are great–there are a lot of great artists out there, plus a ton of shitty ones who over-saturate the entire field, causing the average music lover to no even give you a chance.
    the most logical and practical approach is to write a lot of songs, record rough demos of them, perform them at open mics or opening slots, and get feedback on them–record the good ones, promote the quality recordings online sites that are free hen you have free time. if its great music, people will say so, and will share it with others, and over time you will build a fanbase (if you stay in touch with them/on the map). if this happens for you, you have potential and its THEN realistic and practical to continue investing in your music career. if not, then keep writing until you have a good product/songs while not giving u the day job until you have something that looks promising, or you will be the next of millions of starving artists..

    • and for the record–im not on a soap box trying to tell anyone what to do or what not to do–this is all from my own experience in the last 10 years. the vaule of my advice will be compared to my own accomplishments, as it should be, and to hear/see how I have attempted or experienced all of these things I mentioned, go to my website or google corey booth project. website: http://www.CoreyBooth.com or on reverbnation (great site!) at http://www.ReverbNation.com/TheCoreyBoothProject peace and good luck to all! see you at the top.

      Corey

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