Starting a record label around a recording studio

Discussion in 'General Discussion' started by BoyBrown, Nov 5, 2008.

  1. BoyBrown

    BoyBrown Guest

    Hi there,
    I am starting a recording studio with a business partner, and as I was searching the forums here for input, it seemed to me that the level of expertise and willingness to lend a hand is unusually high among members. So, I figured that I might be able to find a bit of specific advice from a few who have had some experience with this stuff.
    Well, right now we are deciding the type of business to form before we start gaining a client base. We are interested in recording all sorts of music and advertising to pay the bills at first, while taking a few projects under our wings that have previously been underfunded, and integrating an independent record label as soon as possible. I've been researching articles that have come out in the last few years about recording company business models that have adapted to the new market (or lack thereof) and built a recording studio around the record company. These companies have obviously borrowed this template from the older, all-under-one-roof Motown, RCA Nashville, early jazz Prestige/Blue Note model. This way, as an 'underfunded' entity ourselves, we wouldn't have to deal with any of the clock watching and general nail biting that comes with paying another studio and engineer by the hour to 'help' a poor, but talented band flesh out their music. So, after a bit of time, this is our idealized business sketch.
    My first real questions are about the business(es) that will have to be formed from the get-go. What are some thoughts about starting as a partnership vs. a corporation in this case? Since there are two of us, splitting duties and income equally, would the automatic answer be partnership?
    I've uncovered the different types of sound related companies. In this case, it seems that we would need to register as a 'Sound Recording Studio (512240)', an 'Integrated Record Production/Distribution Establishment (512220)', a 'Record Production Company (512210)', and a 'Music Publisher (512230)'. First of all, am I on the right track? and if I am, can I lump them all under one business name? And, where should we actually go to register it/them.
    As far as the label is concerned, we already have recorded demos for a band that we believe in that has no funding, and wants to be a part of what we are doing. Does anybody have suggestions about contracts that we could use? i.e. As their 'label' we find a private investment to pay (just enough to keep our doors open for the session) for the recording, to be sent somewhere else for mastering, a few grand for promo/management/organize a tour, a couple for duplication, etc. Does anybody have any experience with or have a solid blueprint that would work for all parties within that scenario?
    OK, thats probably enough for now. I would be forever grateful for any advice that I could get. Thanks!
  2. GeckoMusic

    GeckoMusic Guest

    (Assuming you are in the US from the business codes you listed)

    Where you register your business depends on the state you are in. In some states it is not even required. (but, of course, you do have to report it on your taxes) Some state you file a DBA (Doing Business As) with the local paper. This puts it in writing that your name is associated with your business name.

    For contracts, hire a lawyer familiar with recording and copyright laws for an hour or two an go over one of your projects that you are working on or planning. Do your home work first, because you want to know your stuff so it doesn't cost too much.

    Instead you will have to watch the clock and bite your nails when you don't get paid. Cost of keeping up equipment and purchasing new to keep up with trends and other overhead like your mortgage/lease may be higher than you think.

    I've done promotion and recording for artists, and taking on both was more work that I could handle. I just want to record.

    Good luck.
  3. Thomas W. Bethel

    Thomas W. Bethel Distinguished Member

    Dec 12, 2001
    Oberlin, OH
    Home Page:

    All I can do is wish you the best of luck. Now is really is NOT a great time to start a recording studio or a record label but if that is what you want to do then go for it but be prepared for the large amont of pot holes along the way.

    Make sure you get all your ducks in order, do a very detailed business plan, get to know a really good lawyer, double all costs and halve all income expectations and you should be in the ball park. Have enough money to get through the first year or so because things NEVER work out like you expect them to and every time you turnaround someone will be there with their hand out wanting money but your clients will not be so forthcoming. If you are going to go into business with a partner I would get a good lawyer to draw up a contract that both of you will have to sign and spell out all the whats, whys, and wherefores BEFORE you do anything else. Especially when money is involved there is no such thing as a casual business relationship and when things go south or you start making a lot of money someone is NOT going to be happy with their "share" trust me on this BEEN THERE DONE THAT!

    Best of luck and I wish you only the best
  4. MadMax

    MadMax Well-Known Member

    Mar 18, 2001
    Sunny & warm NC
    Home Page:
    On another tack....

    If you haven't invested too much money at this point... STOP NOW!

    PLEASE quit while you are ahead. Your wallet and hopes of a decent retirement are gonna thank you in the long run!

    If you are already into this past the point of no hope of return (on investment), you had better be looking at a corporation. The only winning partner is the one who either owns 51% or the one who gets out from under the crushing weight of debt. The only way to find out which is the best to be... is to dissolve your friendship and partnership at the same time.
  5. BoyBrown

    BoyBrown Guest

    I feel a little like the advice I've gotten here completely neglects whether or not I have experience, expertise, or any knowledge whatsoever about the state of the industry. Maybe I approached my initial inquiry with too few details..
    That being said, it startles me a little that a studio owner or any type of music professional would advise an upstart to abandon the industry altogether (unless you knew as fact that I was either untalented or just a complete moron). It startles me, that is, unless the advice comes from a one only interested in business and not a music enthusiast.
    My point is that the business that we are in has failed, and requires a shift of paradigm for its revival. While the businessman leaves behind a failed industry for one that thrives, one dedicated to the actual product of an industry finds a way to make it function. I believe that is why most of us do this instead of selling mutual funds.
    Does anybody dig that?
  6. MadMax

    MadMax Well-Known Member

    Mar 18, 2001
    Sunny & warm NC
    Home Page:
    Yeah... I dig it... and not being too much of a smartass here... but as one who is in too deep to even contemplate backing out, I seriously fear for anyone who is inexperienced and considering your proposal on a pipe dream of making much more than a little bit of an income.

    That's essentially how I interpreted your post.

    ANYONE who is willing to invest what it takes to get much above a project level studio that is outfitted acoustically correct and a nominal level of pro gear is either as insane as I am, or has money to burn with no clear expectation of needing that investment for a good long while... if ever. You have to do this out of love... or you're a raving lunatic.

    OK, so it sounds like me, you're up to your ass in a studio and gear, and you guys are looking for a sane way to add at least some potential income from starting a label to expand your income base. GO FOR IT!

    However, I still stand by my statement that partnerships are usually disasterous when they come crushing down. I would shift my liabilities entirely to a corporation. Period.

    Whether S, LLC or standard corp is up to you, your partner and hopefully your tax advisor. But there will be some liabilities that I think would be wise to avoid at all cost... Prepayment of Royalties, Copyright registration, advance money repayment, distribution rights, duplication and distribution fees... the list goes on and on. You don't want that on your personal finances unless you are both independently wealthy and can afford the assumption of risk at that level... which I must assume you are not... (Otherwise you would have had at least 2-3 lawyers already advise you to form a corporation)

    Here's another thought... seriously... and this is one of the "things" I am trying to do down here... a pseudo co-op/consortium/I dunno what you really call it.

    Pop over to my site and look over the co-op page. Maybe there's something you can glean and use.

    The only real problem I'm finding so far is that organizing musicians is like herding damn kittens. It can be done, but it sure ain't easy to keep it all organized.

    Getting any other businesses and/or businessmen to agree and cooperate is a breeze... it's just getting other musos' to understand that you're really serious about your venture and that it can be a benefit towards actually deriving an income from their love and talent if they will actually step up and put forth a professional mindset.

    Then too... maybe that's why the field of working professional musicians is so narrow... you actually have to treat this as a career and a job with daily commitment.
  7. Thomas W. Bethel

    Thomas W. Bethel Distinguished Member

    Dec 12, 2001
    Oberlin, OH
    Home Page:
    Boy Brown,

    It sounded to me in your original post as if you were looking for suggestions and MadMax made some as did I.

    I run a mastering studio and a post production studio and we have been in business for 13 going on 14 years. During that time I have had a couple of people who wanted to partner up with me. They thought that they would be sitting in a office working 4 to 5 hours per day and the cash would be rolling in and all they would have to do is count it and deposit it in the bank. I can tell you from personal experience that IF you want to start a studio and a record label it is going to be a lot of hard work, a lot of 18 hour days and a lot of weekend work. It is also going to mean that you are on the verge of financial meltdown and that any money you make is probably going to go have to go back into the business for the first couple of years. You should go into this venture with your eyes wide open.

    One partner I had lasted about 4 weeks. He worked at the local independent music store and was a very good salesman. I thought he would work out well with me since my skill set is more in audio engineering, mastering and post production and he would bring in a skill set having to do with selling our services to potential clients. He sat around for about the first week "thinking" about how he was going to find new clients, then the next week he sat around "thinking" how he was going to make contacts with new client and finally he decided to start cold calling some clients and when he didn't get any positive replies after 10 calls he got very discouraged. Turns out that the reason he was such a good salesman at the music store was because he was selling to educators who had expressed an interest in buying something by attending a seminar or by contacting the music store for quotes. He was not a self starter but could do a good job of writing up someone who was already in the market for what he was selling. He and I finally parted company on amicable terms after a month.

    I bring this up for the simple reason that sometimes what seems like a good idea goes south when the actuality of the situation becomes a reality. This partnership seemed like a GREAT idea at the time. Me doing most of the work and he doing the sales and some of the work when needed. It did not turn out the way either of us expected. It sounded good when we discussed it over supper and we were both pumped at the ideas we generated during the meeting but the reality of the situation was not at all what we thought would happen.

    I think the idea of starting a record label is a very good one especially with a connection to a recording studio. There are lots of REAL possibilities that this could go well. There are also a lot of REAL possibilities that this could fall flat and be a real money losing operation. I just want you to do some really deep thinking about the alternatives before you decide to go into this venture. You don't have to be a nay sayer but you need to ask yourself some really important questions that are going to be hard to answer (and that of course is the whole point of making up a business plan). When you have answered all the tough questions to the best of your ability and are satisfied that you can proceed then you should go for it.

    Best of luck and I hope it works out well for you and your partner.
  8. natural

    natural Active Member

    Jul 21, 2006
    Yes, you've gotten some good advice so far.
    You basically have 2 different types of businesses.
    1- income producing
    The studio falls into this category. You're basically selling time.
    You have a small(or large) investment in tangible property. Relatively low - med risk.
    Worst case scenario is that you sell the equip, split the proceeds and call it a day.

    2- Investor
    The record label is investing funds in someone else's business. This is much more risky, there's no safety net.
    Like any stock market investment, there can be years of success or failure. It's a bit more of a gamble and generally requires having a large amt of funds to invest over many years in order to get an average of successes vs failures.
    Worst case scenario is that you lose every penny you've ever made.

    Rules vary by state. You apply for business lic from the state. each service you offer my require a separate occupational lic. from your city or county.
    I was surprised to find out that my local grocery store that not only sells food on the shelves, but also has a counter that sells deli meats, a counter that sells cakes, and bakery items, is required to have a license for each of these services that occurs under 1 roof, and 1 name.

    Adding a partner to this mix is like a carnival ride that has several motions going at the same time.
    It's exciting and can make you vomit at the same time.
    enjoy the ride.

Share This Page