A record label is a company that hires on artists to produce music for sale. Like any business, a record label must lay out an initial investment to get things rolling. If you're seriously thinking of starting up a record label, start raising money now to pay for a number of items that are important to a successful start-up.
A record label usually needs to either own or rent a recording studio where it can produce music. A recording studio is designed with acoustics in mind and for the comfort of both artists and producers. The ideal situation is to get a pre-existing recording studio from another party. Keep in mind that if you purchase or lease an empty space, you must also pay the cost of converting the location to a professional studio, including designers, builders and materials.
Artist Upfront Payments
Like major publishing companies, some record labels offer new artists upfront cash advances so that they can promote themselves and purchase the items they need to be successful. That might include instruments, clothing for performances, airline tickets and vehicles (like tour bus rentals). Artists also commonly work with special producers, other artists and writers, who also require payment for helping them create the music. The artist pays you back later when the music sells, and you'll have to work out an arrangement for paying a percentage of royalties on the profits.
A record label must buy expensive equipment, including audio mixers, digital recorders, speakers, microphones and sound amplifiers to fill up the recording studio. The company must also purchase professional recording software, such as ProTOOLS or Cakewalk Sonar, to record, edit and save audio files. All of this equipment is for the benefit of its artists and eventually the company's profit. The quality of equipment affects the quality of the music and determines whether the artists will be taken seriously by radio stations and the buying public.
One major start-up cost for a record label is the expense of promoting new artists. Record labels commonly hire street teams, flyer passers, party planners and promoters to get the word out about new artists and recording projects at the company. These promotion efforts help get the music in the hands of radio stations, disc jockeys and the general population.
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