Top 11 Ways To Make Money As A Record Label

My New Microphone Top 11 Ways To Make Money As A Record Label

There are many ways to turn a profit as a record label, though it's not necessarily easy. Whether your goal with the label is to go full-time or to produce some extra money on the side, there are certainly opportunities for you to do so.

The types and viability of the income streams available to record labels have changed and shifted over the years (mass adoption of the internet, streaming and decreased physical record sales, Telecommunications Act of 1996, etc.). If you're looking to make money with a record label today, you've come to the right place.

Though it's not easy, a record label business can make good money if we understand how the various income streams work.

In this article, I'll share a variety of methods that record labels can use to make money. The lines between certain income streams may become blurry, though I'll do my best to stay on topic.

Before we get started, I should mention the 360 deal. 360 deals are exclusive recording contracts artists sign to labels that entitle the record label to a percentage of earnings from the entirety of the artist's revenue streams. This includes performance royalties, artist merchandise, appearances, and everything else.

In this sense, the 360 deal is perhaps the best way to make money (for a record label). Although 360 deals are becoming more common, there are more specific ways that record labels make money.

With that written, let's get to the income streams:

The Top 11 Ways To Make Money As A Record Label Are:

  1. Sales and streaming
  2. Publishing and licensing
  3. Performance royalties
  4. Promoting events
  5. Ticket sales
  6. Artist management
  7. Putting on festivals
  8. Owning a venue
  9. Social media marketing
  10. Merchandising
  11. Government grants

1. Sales & Streaming

The first and probably most obvious answer on how to make money as a record label is through sales and streaming. The music is the product, and the listener is the consumer of the product.

Artists and labels make revenue from people buying and listening to their music on various streaming platforms.

Apple Music and Spotify are the two music giants generally used as reference points.

Generally, the label will keep 60%-70% of the money earned from every iTunes download.

On Spotify, the label typically gets an average of $0.005 for every stream. If a song gets 1,000 streams on Spotify, the record label gets roughly $5.

That isn't much money, and the label then has to split the profits with the artist and the others involved in recording the music. Record labels have to spend some of their profits advertising the music they are recording to ensure they get a lot of streams when the music is released.

It's not a great deal for the label or the artist (the artist nearly always gets paid less per stream). However, that's the music economy today, and it's still the top way to make money. The goal, then, becomes to get as many streams as possible (legitimately).

2. Publishing & Licensing

Record labels traditionally earn income by investing in the release cycle of music they publish for their artists.

In a traditional record deal, the label invests in the recording process and marketing. If the label has a licensing deal with the recording artist, which is common, it will be paid a portion of the profits from the album. This goal is to recoup investments first and make a profit afterward.

This income stream depends entirely on the artist's success, as many people (engineers, producers, studio owners, etc.) still need to be paid for their work on the album. The more work that goes into merchandising, advertising, and promoting shows, the more money will come through publishing and licensing.

3. Royalties

As the rightsholder of recording copyright, a record label earns money from royalties every time one of its recordings is played.

Recording royalties are earned from the use or digital reproduction of the sound recording of the music. When music is streamed, downloaded, or sold in a physical format, the rightsholder of the recording copyright recording is due royalties. 

So the record label earns royalties any time their recordings are played. Note that independent artists (those without a record deal in place) will likely own their own recording copyrights.

The record label will then pay a portion of the recording royalties to the recording artists (performers) on the recording.

4. Promoting Events

Promoting shows is part of investing in the cycle. If your artist performs in shows or concerts and those shows make money, some of that money will be paid to you, the label. Ensuring an artist has well-promoted shows is a clear way to ensure a label keeps making an income.

Shows also come with bonus income from ticket sales and merchandise sales (which a label may also own some portion of). This might help recoup some of the cost from the “spend money to earn money” aspect of promoting shows, where a label needs to purchase advertisements, posters, venues, and all the other components of putting on a show.

This isn't an area for a label to be overly cautious in investing. No ticket sales, merchandise sales, music purchases, or live streams will happen if nobody knows about the show.

5. Ticket Sales

Audience at a live music performance.

Many labels make no income from ticket sales (unless they got their artist to sign some form of a 360 deal). If your label wants to make an income without having such a deal in place, it also needs to be the promoter for the show and not go through a third party.

The label needs to support the artist through promotions, making bookings, and covering many of the associated costs. The better the show does, the more income the record label will earn in the end.

Much of the income will also be going to the artist. Ticket sales are a top way for the artist to make money, and they will likely be relying on that. A label should plan between 75%-90% of the final profit from ticket sales going to the artist. The rest goes to either the promoter and/or the record label.

6 Artist Management

Booking tours/shows for the artist is something that does not have an immediate profit from itself, but will show a profit in the forms of ticket sales, music purchases, streams, royalties later, and merchandise sales.

Becoming an artist's booker/promoter ensures that the record label or promoter will earn money from ticket sales and royalties in the future. For a very small indie label, that is an ideal situation.

Booking tours and shows can seem daunting, especially in the beginning. The artists will probably need to start as the opening act for bigger bands, play at smaller venues, or play in local celebrations and festivals until they become more popular.

The good news is that you won't have to pay to book large venues, so the money spent will be appropriate for the expected revenue later on.

7. Putting On Festivals

A festival can be a great way to get attention for a label and its artists, but it's also a gamble.

A label that tried this would need to use connections in the music industry and the community to make this a success. They might try partnering with the city to make the festival a local tourism event, drawing in local vendors and food trucks, and advertising within their music community so they can get everyone's attention.

Festivals are both advertisements and a potential way to make money. Even if a record label doesn't make money directly from the festival, it will give exposure to artists. This exposure will lead to more streams and album purchases, so the record label will earn more money in the future because of the festival.

Music festivals like the Interstellar Rodeo, Treefort Music Fest, and the Mission Creek Festival help record labels make money.

8. Owning A Venue

Owning a venue is high-risk but leads to high rewards. Artists who are beloved locally can run into the issue of having nowhere to perform. A record label owning a venue, small or large, can alleviate this issue.

The label would need to consider concerns like taxes, noise ordinances, parking, travel time, zoning, liquor licenses, and local interest. A venue can't make money without visitors, and it can't keep money without the correct paperwork.

Popular small venues include cafes, spaces in bars, warehouse-style spaces that can be rented for parties or weddings, and casual restaurants. People love supporting local artists while relaxing with friends, and labels who use this approach can take advantage of this, promoting other artists and merchandise as they go.

9. Social Media Marketing

Everyone who uses social media apps like TikTok, Instagram, Facebook, or Tumblr has seen artists performing, and many of these apps reward the content creators who make them so popular!

Record labels can take advantage of this by running their own social media pages, particularly through Instagram and TikTok. Besides the advertising benefits, which only get better as the artists make more money and songs get more listens, record labels and artists can make money directly from these apps.

Get Views, Cet Clicks, Get Income

Social media is a great place to advertise a label and artists.

Once a label's social media manager gets comfortable in their role, they could advertise each individual artist with their own page, share snippets of new music, get sponsorships, promote concerts or festivals, and sell products.

Engaging with followers and gaining new, real, interested followers is key to making money from apps and social media.

Shops/Selling On Instagram

If a record label is already producing merchandise for artists, songs, or the label itself, they can take advantage of the great ways to sell products on Instagram!

Instagram has a shop, but many influencers and content creators will share affiliate links, accept sponsorships, or promote their favourite artists after receiving a gift or a shoutout.

Badges On Instagram

Instagram Badges are a way for followers/viewers to express appreciation and get noticed by their favourite creators by buying “badges,” which will give money directly to the creator and mark the follower's name with hearts.

A label can have an artist do a meet-and-greet over social media, answer questions from fans, sing, or do anything else that would help them interact. The label can do the same, answering questions or telling stories.

This is a great scenario for the artist, the label, and the fans! The artist and label can make money and advertise the artist and products, while the fans/followers get to interact and directly support their favourite artists.

Use TikTok

TikTok has some money-making capabilities, like the Creator Fund, but a label is more likely to succeed using the app for marketing.

A Trending Sound, for example, can be used across thousands of videos and promoted by popular creators for free, and users of the app will search for the full sound on music streaming apps later!

Linking an Instagram account to the TikTok profile bio will bring users back to the label or artist's website, Instagram, or Spotify, giving another opportunity to earn revenue and interest new fans.

10. Merchandising

A musical artist designing T-shirts.

Like it or not, this is the way the music industry is moving with 360-type deals.

Selling merchandise at live events, online, and through social media is a classic way for record labels to earn extra income. People love supporting their favourite artists by wearing band shirts, pins, posters, bags, and hoodies. Concert tour memorabilia creates nostalgia that lasts a lifetime when done right.

Who hasn't known someone with a t-shirt so full of holes it's barely wearable, but who refuses to throw it away because of the memories it is associated with?

A label can market that, and fans love it. Signed posters are a great item for giveaways, discounted t-shirts are a perfect holiday promotional item, and collectors still seek CDs/Vinyls if the artist appeals to that niche.

A label needs to make more money than what they have spent on the merchandise. This means sourcing materials affordably, watching the budget for manufacturing, and selling the product already in stock before filling up with too much more. If a product isn't selling well, they can offer it on sale as a promotion to fans or include it in giveaways to get social media attention.

Few things are more annoying than getting to the front of a long concert line and finding out they only take cash. A credit/debit card reader for a cell phone is a strong investment in this high-tech age. Small labels or artists can even use Venmo or similar apps to make it easier for fans to pay for their merchandise. Merchandise can also be sold online.

11. Government Grants

Getting grants as a record label is tricky, and the results will vary dramatically from country to country. Private grants could theoretically be obtained anywhere in the world, but some countries have funds set aside for artists and labels!

Many of the small indie labels in my home country of Canada exist almost solely because of government grants (either for ongoing support or for monetary help when launching).

Some countries that have specific funds set aside for music are France, England, Spain, Norway, Canada, Iceland, Ireland, Taiwan, Sweden, South Korea, and, to a more limited extent, the USA. These countries, among others, recognize music production as a good thing for local cultures and economies.

To apply for these grants, search for your country's music and culture department and follow the procedures outlined. This can also vary wildly from country to country, but it's still worth a shot! The worst that can happen is you don't get the grant.

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