Sorry, You are Way off if You Think an Independent Record Label Can't be Super Profitable!!!

by Ty Cohen

Published on this site: April 1st, 2006 - See more articles from this month

Independent records labels are usually more profitable for the owner of the label than being allied with a major label because the artist gets to keep 100% of the profit. So if money is the only measure of profitably, independence puts more money in the artist's pocket.

But if you are part of a new genre of music, you will probably need the big boys to make your genre become popular enough to command a world wide audience. Take rap music as an example. Without the backing of the big record labels, rap would still be basically a local phenomenon. The support that the major record labels gave to rap artists is the reason it has become so successful.

Riding on the tails of that success is a very profitable independent market for rapsters and because of the national market created by the major labels marketing and distribution efforts, the independents are raking in huge amounts of money.

Without the initial backing of their genre, the independent artists will still be making more money than artists working for a big label, but the total amount of profit would be less because of the much smaller market for the music.

The smart independent will leverage the money spent by the big labels to help increase the popularity of their own genre of music as the basis for making their own independent label more successful.

Other Factors

Some of the changes that can help out the independent artist make more money include:

• Home-studio systems like ProTools have dramatically reduced recording costs. A sound studio can be built in your home for around $10,000.
  
  
• Selling directly to the customer through the internet and eliminating the 70-80% that goes to the retailer. As a result they can offer the public lower prices, take the lessons taught over at http://www.SellMusicOnlineLikeCrazy.com for example.
  
  
• Sell music in MP3 format and burn CDs only when they are actually ordered. One of the biggest distribution costs is burning, labeling and shipping CDs to retail outlets with no guarantee the CDS will actually sell.

You need to understand that all of the above savings will not eliminate the need to aggressively market your music. Artists who already have a following have been very successful with their independent labels. The major benefit of signing with a major record label is the marketing they provide. Smaller media consultants can do the marketing and promotion of a CD for much less than a major record label but good marketing and promotion people will never come cheap. However, you may be able to get a smaller media company to work on a low flat rate that covers their basic costs plus a % of the profits from the sale of the music.

Piracy...Help or Hindrance?

Piracy is not necessarily hurting the artist. It does hurt the big record labels and many of the larger independent labels that produce other people's work because they only make money from the sale of the CD or from licensing fees if they own the copyright to the music.

The file sharing networks that allow the piracy of so much of today's music can raise the music's and therefore the artist's visibility. Being more visible can actually lead to increased sales for artists who don't have huge promotional budgets. By being more visible, the artist can become more popular and will be able to book more live performances. Even the most die-hard "free downloader" will shell out money to attend a live concert.

The bottom line is music piracy hurts everyone involved in the creation and distribution of the music except the performer. Historically, under the big record labels, the performer usually got the smallest piece of the profit pie. That fact is behind some performers giving away MP3 versions of their music so they can draw bigger crowds to live performances and also charge their fans for professional quality CDs.



Ty Cohen is the acclaimed author of over a dozen best-selling music industry "How to" books and courses. Grab a copy of Ty Cohen's latest book title by visiting: http://www.MusicBooksByTy.com and to learn more about starting or turning your existing record label into a world wide, profit pulling record label visit:

http://www.TheUltimateRecordLabel.com/landing_page.htm Start a Record Label Today!