Business Idea: The Reverse Record Label

Pen, Diary and Glasses

I am currently writing a business plan for one of my classes (COMM493, not really sure why this is a communications class…) and I wanted to share with you guys the basic idea my roommate (@Johnny_OKeeffe) and I are developing.

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.

teamwork

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.”

Guglielmo Ridolfo Gagliano

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 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!

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  • AL B

    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.

  • AL B

    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.

  • D. Allen

    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).

  • D. Allen

    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).

  • classicrocker415

    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!

  • classicrocker415

    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!

  • Julia

    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.

  • Julia

    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.

  • http://eleetmusic.com/ Kevin

    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!

  • http://eleetmusic.com Kevin

    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!

  • http://www.audiblehype.com/ Justin Boland

    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.

  • http://www.audiblehype.com Justin Boland

    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.

  • classicrocker415

    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!

  • classicrocker415

    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!

  • http://www.audiblehype.com/ Justin Boland

    Amen.

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

  • http://www.audiblehype.com Justin Boland

    Amen.

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

  • Paul

    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.

  • Paul

    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.

  • cybearDJM

    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

  • cybearDJM

    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

  • http://twitter.com/slainson Suzanne Lainson

    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.

  • http://twitter.com/slainson Suzanne Lainson

    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.

  • http://www.audiblehype.com/ Justin Boland

    ^^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.

  • http://www.audiblehype.com Justin Boland

    ^^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.

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  • http://futureofmusicbiz.wordpress.com/ jdoerr

    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

  • http://futureofmusicbiz.wordpress.com jdoerr

    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

    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

  • classicrocker415

    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

  • http://slashdot.org/~Londonescorts/ StephanJade

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  • http://slashdot.org/~Londonescorts/ StephanJade

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  • http://carl0sg0nzalez.wordpress.com/ Car

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

  • http://carl0sg0nzalez.wordpress.com Car

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

  • classicrocker415

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

  • classicrocker415

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