Independent Record Labels: The Essential Steps to Successful Entrepreneurialism (7)
© 2001 Music Business Journal (by JoJo Gould)
The Following then is a summary overview of some of the key elements to be considered by those who wish to pursue the setting up of their own independent record label:
(Continued from previous article)
With regard to retailing, there are several routes to sell records: at gigs, over the web and at retail outlets. The first two can be organized by the label, however to get product into many retail points a distributor will be required. Distribution companies take a percentage from each sale, and in return do all the logistical work in getting recorded product into the correct record shops. Independent distributors are usually listed in industry directories (such as the UK's Music Week Directory). Some specialize in particular styles of music. All will look for the label to have done some basic promotion on the record first. This could take the form of reviews from local newspapers, and airplay on the relevant radio shows.
The implications of copyright are significant for any record label. Records which take the form of cover versions, or contain samples, will therefore require full approval from the relevant bodies. The local mechanical rights body can provide much help for this activity as they act as clearing house. Hoever, they will invoice the record label for songwriters' mechanical royalties if the recordings include songs written by registered or affiliate members. To ease the administration of this, a standard formula is usually used. In the UK, this royalty level was agreed with the Copyright Tribunal and is currently set at 8.5% of the dealer price of the record. Most new UK labels can expect to be allocated an AP2 code by MCPS. This means that royalties to songwriters must be paid in advance to the MCPS - regardless of whether or not the products will actually sell at retail. Over time, if the label has developed a credible trading profile, it may be possible to achieve MCPS AP1 status - meaning effectively that mechanical royalties will only be due forrecords sold - as opposed to manufactured. Note that US mechanical royalties are currently setat 7.55 cents per track. This will be raised to 8 cents per track from 1 January 2002. Various caveats exist through for US mechanical royalty rates - depending on the precise length of the track, the total number of tracks and the initial year of release.
Starting a record label then is a great way to promote new music, and gain experience within the music industry. A belief in the merit of the music being released is desirable of course - before investing in its potential commercial exploitation in the market.
The recording industry depends on new entrepreneurs with a passion for new music and a clear head for business. Entrepreneurial flair, some start up capital resources, and an inside knowledge of the workings of the music industry are key building blocks for seeking to achieve this. No-one has a complete knowledge of all factors pertaining to the music industry. You will soon find then that, along with many others, you will be on a steep learning curve. If you have the enthusiasm and some capital (even a few thousand pounds or dollars), who knows, you could perhaps set in motion a chain of events which may set you up with copyright income for the rest of your life.**
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