The DIY Record Company

November 17, 2009
The Do It Yourself Record Company by Donald S. Passman
(And if you act right now, we'll throw in a knife that slices tomatoes paper thin).


By Donald S. Passman, author of All You Need To Know About The Music Business


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Historically, record companies held the keys to the kingdom. It took a large organization to manufacture and ship records to stores, meaning things like manufacturing plants, warehouses, sales forces, shipping people, financial controls, etc. Also, in order to really sell records, you had to get your music on the radio and MTV, which took a promotion staff and a lot of money.

In those days, the record retailers were so big that they wouldn’t bother with small players. That meant it was hard to get your product on their shelves if you didn’t come through a record company. Also, frankly, the big record companies paid retailers a lot of money to position their product prominently in the stores. So even if an artist managed to get their records into the retail bins, they’d likely get buried in the back. If, somehow, the records started selling anyway, the retailers would pay the artist late (if at all), since one little player didn’t matter to them. On top of all this, as we’ll discuss when we get to pressing and distribution deals (on page xxx), the artist had to put up the money to manufacture the records. If the stores didn’t sell them, they’d be returned to the artist, who’d lose the manufacturing costs, plus the freight costs in both directions. So it took a big player to absorb those kinds of risks.
Today, things have really changed:
1. While it’s still difficult to get your product into stores (now it’s because they carry so few titles), physical retailers are becoming less significant as CD sales decline. Conversely, digital is on the rise, and anyone can get their music distributed digitally.
2. Radio is still very important for mainstream artists, but it’s become a very narrow channel, meaning it plays only a limited range of music genres, and not a lot of different titles. Because of this, alternative ways for people to discover music are becoming more important, and the Internet (which anyone can access) is one of the keys.
3. A direct relationship with fans is the next generation of marketing, and young artists are proving more savvy in this area than a lot of established companies.

On top of all that, when you make a deal with a record company, you give up control of your recordings (as well as other aspects of your life, such as the ability to do music for films, commercials, concert videos, etc.), and you also give up a chunk of your income from both record and non-record areas (as we’ll discuss in a bit).
So, why would you want a record company? Well, if you’re a niche artist (for example, a jam band, backpacker, or indie rock band), and you’re happy staying in your niche and selling to a small group of fans, you may not need or want a record deal. It’s possible (through outfits like Tunecore) to get your music to iTunes, Amazon, and other digital retailers, and you can make a living doing gigs, promoting yourself directly to your fans, and selling your tracks. Because your genre limits your potential audience, you’ll often make more money by doing it yourself than you will with a record company. For a record deal to make sense, the company has to generate more money for you (after they take their piece) than you would get by selling less product on your own. With niche artists, that’s often questionable.
If you’re more mainstream, such as pop, rock, or country, this is a much tougher question. You can of course set up a killer MySpace page, build a fanbase, and sell directly to them. Since your music has a wide appeal, if you break through, you’ll make far more money by keeping the record company’s share of the pie, not to mention keeping all of your non-record income. But here’s the problem: The same way that it’s easy for you to set all this up, it’s easy for everybody to set this up. There are over four million bands on MySpace, and that number is growing. How’s anyone going to find your music?
There are some “virtual” record companies who can help. These companies, who were started by talented people who lost record company jobs when the industry melted down, will do everything from sales, marketing, promotion, etc., yet let you keep control of your destiny. However, they charge pretty heavily for these services, which most new artists can’t afford. Thus, they’ve mostly been successful with artists who’ve already released a few albums (and therefore have a fan base), but are out of their record deals. For this reason, a lot (maybe even most) mainstream artists are still looking for record deals.
Having said all that, young artists today are working the Internet and new media far better than the established record industry. The future of music marketing is to know who your fans are and to contact them directly. In the past, no one had any idea who went into record stores and bought the multi-million sellers, or who was listening to the radio when they were played millions of times. Today, between the Internet and cell phones, it’s possible to know exactly who likes your music.
Young artists have gotten very sophisticated about building a database of their fans. For example, at their shows, many artists give away something (pins, stickers, hundred dollar bills, etc) to everyone who signs their mailing list. The artists then promote their shows, recordings, and merchandise through email and mobile phone text messaging. Some artists even do lifecasting, where they’re communicating with fans a number of times each day. For example, they might iChat on the way to a gig; blast out backstage updates through Twitter or Kyte; send pictures of themselves on stage; forward videos of themselves in the bathtub with rubber duckies; etc. Even if they only build their fan list with a few more people at each gig, if they keep at it, they can get enough to generate a buzz on MySpace and similar sites.
So these days, more than ever before, it’s possible to build a career on your own. Or if not a career, at least a solid base from which to launch yourself and get the attention of a record company, if you decide to go with a record company.
Now get out there and do it!