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How many people have started their own record label? Loads. Well is it a good idea, or is a chocolate teapot a better idea?

I have seen countless people stating that they want to make a record label. Surely many artists have done it and made tons of cash. P.Diddy is worth $500 million, alot to do with his label. So it pays. But, is this a good idea?

One answer = no. Why?

Why one earth would I say that it is a bad idea when I just said you can make pots of cash out of it?

Well, I wanted to go down that route, and I thought it would be quite simple. Get a really funky record label name, then advertise. Promote some similar artists then cruise on down easy street with enough money on me to buy a small country.

How wrong could I be. I bought a book - Start and Run Your Own Record Label. Can't go wrong can I? At the start it shows you some great examples of people who have made it. However once over, Daylle (the author) gets down to business, and that is what it actually is. A business.

And that is the most important yet most forgotten fact that hits anyone that goes down this route. So as a company what do you need initially?

  • You need to set up a company,
  • You need a business plan,
  • You need an accountant...and even worse than that...you need to submit taxes.
  • You need an advertising fund
  • You need to be proven
  • You need funds to press CDs/ flyers,
  • You need contracts (and when money is involved, you need them water tight, so a qualified music solicitor to write them up is wise- none of these "bought Internet contracts",

  • You need some extra back up cash.

Now, why do you need some extra, back up cash? I thought...why? Well, if the artist is hot, then you could get a influx of CD buying, now if you have used up your Cd stock and shops are telling you they want more, and you can't fullfil because you have run out of cash, then your reputation as someone who "gets the job done" will be tarnished.

Now I don't know about you but those few sentences just made me stop and re-evaluate my plan. I especially noticed the contract part. Anyone that does it any different is not a real label. Be careful if you sign anything, if you make music, try to keep all the rights for yourself. That is how Ozzy Osbourne made his money. He kept the rights to his music and made a fortune. If you get someone else involved then you will probably end up signing over the rights to your songs.

Now you may be thinking "hey Dom, thats the real world, we are the Internet generation and CDs don't mean anything!"

Well you would be right. But the Internet is just another selling medium like any other. Don't be fooled that it will bring you excess riches just by being on it. For example, how many marketing sites are there? By their sales copy everyone should be earning $10,000 every week by doing nothing. But they are not. And hard as it may sound. Many people are not earning vast sums on the Internet. The Internet therefore has opened up excess problems. For example, can you answer these following questions?

  • Why should people go with you when they can do it easily themselves?
  • What will you offer that they won't get with any other service?
  • Why on earth should they trust you?
  • What is your experience?
  • Where have you got?
  • Why do you have a free hosting package...aren't you that successful?

See these are simple but obvious situations that you will be in. If you have a closer look at the Internet label sites out there, they aren't really what they seem. I see alot of directories of MP3s. I see lists of music by artists coming under one roof. I went onto a site the other day www.m*n***c*r*s.com (took 40 seconds to load...you naughty people) and it was nicely presented but did they sell their own stuff? No...they sold through 3rd party music sites- like an Amazon site just for dance music. So they weren't through a proper label. So one main label site down, 70 million more to go (yep that is how many sites are dedicated to record labels = competition).

Another example. I typed record+label into Google and one of the top 5 was another "dedicated" record label site. In Alexa it had a rating of 6 million...very poor- no traffic, no sales...no point ;)

If you really do want to go down this route, make sure that you are doing it for the right reasons. If at any stage you say "To have famous artists under your belt" stop now. You should be wanting to have a label for reasons that you can strive for. For example "to get unsigned artists out there", "to bypass major record labels", "to be in control of what you do, when you do it", "want to attract major labels"...etc.

So make sure that you are either becoming a website for people to showcase their music- nice idea but not that profitable. Or are you going to become a true record label and go down a hard path that could lead to money or might not- depends how focused and determined you are.

Click for more music marketing techniques without the record label budget.