Startup and Costs
The record label business has potential for growth. Startup costs range from $200 to $500,000. To start, pick a name and business structure. An LLC provides liability protection and tax options.
Artists receive an ‘advance’ to make an album. Labels profit $10 per CD. Multiply by thousands of sales, labels easily gross millions per album.
Royalties and Earnings
Labels pay two royalties – to artists (10-15% of album price) and to composers/publishers (30%+). Advances to artists range $500,000-$2,000,000. One hit song can generate over $600 in songwriter royalties, requiring tax info.
Music has two commercial pieces – the composition and recording. Streams, downloads, sync licenses, performance royalties provide income.
Expenses and Profitability
Expenses are high before profits. Cover artists, recording, publishing come before selling. Operational expenses and taxes reduce label profits per album. But, due to the potential for high sales volumes, growth potential exists if artists are promoted fully.
What do record labels pay for?
- Start costs range $200 to $500,000.
- Pay royalties to artists and composers/publishers.
- Mixing a song costs $200-600.
- Buying songs costs thousands.
- Streams, downloads provide income.
- Advances range $500,000-$2 million.
- One song generates royalties over $600.