|the "how to start a label and avoid dying quickly" cheat sheet|
|See the Hypnos FAQ/Information page for an explanation of the purpose of this document|
This document was started in early 2002 to answer a Frequently Asked Question received
here at Hypnos HQ -- actually to answer two questions simultaneously. The first question
is "How did you start Hypnos and build it up?" and the second is "How do you recommend
that I start my own label and build it up?" It should come as no surprise that the
advice I would give to a prospective label manager would be based upon my own experience,
thus I answer both of these questions simultaneously (with a few caveats thrown in,
examples where I did certain things in the history of Hypnos that I would not
recommend to those starting their own label).
The Early History of Hypnos
The early history of Hypnos, the how and why, has been explained and described several times in interviews ("how did you get started?" seems a compulsory question in every interview), so I will copy & paste one of these responses of mine, given in an interview by Phil Derby for Dreams Word magazine (in 1998), to get things started.
Phil Derby: How did you end up starting your own record label? And how do you like it, compared to making music yourself? I think it's interesting, because a lot of artists hate the business end, and just want to make music.
MG: The original idea was to start a label to release only my own music, as so many people are doing now. I honestly don't remember when or how the idea changed, but I really think it's a lot more exciting and interesting to run a multi-artist label than to just release one's own music. The label's output necessarily becomes more diverse, and so there is the added challenge of keeping everything unified to some degree, so people have some idea what the label is all about.
I've always admired labels like ECM and early 4AD, in that they had strong identities not just visually, but also in terms of musical direction. From the very start I have wanted Hypnos to have a focus, and to be "about" something, rather than just being a company that releases a bunch of CDs. The full scope of what that focus is all about hasn't really been expressed yet, as only five CDs have been released, but perhaps in the next few years, when I've had the opportunity to issue a lot more material, the essence of Hypnos will be more clear.
As for the business side of things, I'm probably more comfortable with that stuff than most artists because my "day job" involves running the administrative end of a fairly big and complicated heavy industrial business. So selling a few CDs here and there, and keeping track of a very limited range of expenses and revenues, is pretty simple in comparison. So I'm able to enjoy the creative and visionary end of running a label without stressing out too much about the business stuff. Of course, the time I spend on promotions and mailing and design and mastering for other people's CDs is time I don't get to spend on my own music, which is a trade-off. I'd like to have a little more time for my own music, but everything's getting done so far.
That's a bit of the how and why the label was started, though it doesn't really explain anything about the mechanics of making a label survive. But the third part of my response says something about an issue that I think is a key to understanding what's necessary to not just start your own record label, but also avoid dying quickly. It seems to be seen as a badge of artistic integrity, or "doing it for only the right reasons," to be ignorant (perhaps willfully so) of the business side of running a label. But unless your goal is to flush ten thousand dollars down the drain as quickly as possible, going out of business in a pathetic burst of flaming insolvency before anybody even knew you existed, I think such ignorance, willful or otherwise, is fatal.
An important early point to recognize, before you even get started...
It does not mean you are a greedy sell-out to recognize and accept that a label is not only a creative enterprise, but also a business.
Think of it this way -- an artist is not only a creative entity, but also a mundane living human being who must eat, breathe, and sleep. The artist may be a lot more interested in just painting/writing/whatever, but if he neglects eating, breathing and sleeping, he won't be around long. These neglected needs will hamper and eventually cut short one's ability to make art. Thus the artist who recognizes his/her dual nature, and takes care of those basic non-art needs, will be able to devote his/her energies to creating art more freely and with greater longevity, unhampered in the mean time by pesky things like starvation, arrest, sickness or insanity. The same thing goes for a running record label as far as acknowledging the presence of other necessities. On the other hand you don't want to be "all business" and worry about nothing but profit and growth. Find a balance, a comfortable place where you can develop a plan to keep the record label financially solvent, while keeping the creative element interesting and fresh. For me, the balance is to tilt the scale in favor of the fun and creative aspect of music, with just enough emphasis on business to keep the "company" comfortable and stable.
So you say, "But I'm not a businessman. I'm a musician. Surely the music is what matters, and if I release really great CDs by fantastic artists, the money will come rolling in and I won't need to think about business. I'll just hire an accountant sort out all my money and file my taxes, and I'll concentrate on putting out such great music that the whole thing will just snowball." To that I say "Yeah, you're the first guy to think if you just handle the music part, the business part will fall into place." Go around to labels that have been around for more than 2-3 years, to the labels that pay their bills (especially royalties -- one of the unfortunate secrets of the music business is that the majority of small labels go out of business before they ever pay any royalties to anybody) and ask the people in charge "Do you think it's necessary to think about the business stuff, or do you just worry about the music and let the rest take care of itself?" Go ahead, ask them since you don't believe me, and I assume you'll come back to this page convinced that you need to be willing to acknowledge the fact that a record label isn't JUST a creative enterprise, nor is it JUST a business -- it's both. Labels that only acknowledge one or the other will fail 99% of the time. We'll address the creative elements last because you probably already know what you want to do in that direction anyway.
Now that we've established, in the abstract, the need to consider "business elements" when planning our label, what does this mean in practical terms? Where does "business" intersect with the "music" part, and what are the specific points to look at as a label owner, to gauge whether the business part is working? The answer is that any business, not just those in creative or music-related areas, needs to understand and think about a few key issues, and these are easily translated into terms a label owner should understand. Some of the issues are more important up front, when conceptualizing a planned label, and some of the issues are more important in the longer term.
Starting Out When starting out, you need to think about things like:
How much money is available to invest from the start? (If you're not sure about the answer to this, then you're not ready to start. Come back in 6 months, try to answer it again, and don't proceed until you have an answer.)
How long am I comfortable sinking my personal money into the business before I expect the business to break even? (If you're not comfortable losing thousands or even tens of thousands of dollars before the money coming in each month starts to equal the money going out, then you're not being realistic. All the small, independent "startup" labels you admire, who seem so stable and successful now, went through a long period of shoveling cash into the money pit before things started to even out.)
What are my start-up costs? (Add up everything, from the cost of a business license to letterhead, business cards -- I don't really think you need business cards unless you plan to attend trade shows and do lots of personal meetings, but people will tell you that you need business cards... come to think of it, I have a 99% full box of business cards and I'll sell 'em to you cheap if you want -- and anything else you think you'll need, plus the costs of having at least your first CD project mastered, artwork created, and CDs manufactured.)
Assuming that I have enough to start up, how long can I continue after startup before I need to start bringing in money through sales? (Assuming you won't be able to get to break-even status on the strength of your first CD, you need a plan to save up money for subsequent CD projects, plus maybe a little advertising and other promotional expense, until the sales momentum starts to grow.)
Is it worth doing if I only ever break even, and never make a profit? (Be honest with yourself here -- there's a lot of hard work and unglamorous effort involved, and if you're going to be staying up late at night working on this stuff, for years and years, sometimes the motivation gets tough when it's not earning you an income from it. Maybe you're OK with just breaking even, and if so, that will save you a lot of stress and worry later, and free you up to just enjoy the process without fretting the money so much.)
How and where will I promote my artists and CDs so people know they exist? (People who want to buy good music do not just automatically know that it exists. There exists a significant gap between the creation of the CD, and the purchase of the CD by the listener. There is no single "right" way to let people know about the music, so people will know they want it, and seek it out. The most common means are promotion by radio and promotion by print review. In other words, you mail free copies to radio DJs hoping that they play it on the radio, and you mail free copies to magazine (and lately, web-zine and e-zine) writers and editors, hoping that they will review your CD in print. It may seem counter-intuitive to give away lots and lots of CDs when you're trying so hard to sell them, but believe me... the process of people finding out who you are does not happen automatically. It is only the extremely rare label that can rely on word-of-mouth between listeners to spread the news about the label. I wouldn't count on being one of those rare few, if I were you, because they are massively outnumbered by labels who neglected to promote themselve adequately, and vanished. If you're not sending out at least 80-100 promo CDs, then you're simply not doing enough to promote your label and its releases. Probably you should be sending out at least 200, if you're pressing 1,000 initially. Many mid-sized labels send out thousands of promos, and while that's definitely outside the range of possibility for the small startup label, it should be a lesson that even successful labels cannot afford to be cheap about sending out promos. Send them. At first, it's better to send out a few too many, than too few. Later on you can refine your promo list and remove a few DJs that only play world music or new age or techno, or to remove defunct webzines, and so on. You'll also eventually get soliciations from DJs or reviewers saying "Please send me a promo copy of your CD." My advice would be that you really should welcome this kind of interest, and send the CD, unless it's not really interest (i.e. you're getting a mass-mailed general request for freebies). Interest from somebody you haven't heard of, is better than non-interest from a more established DJ or reviewer.)
Where will I sell my products, and for how much? ("I'm sure I'll find people who'll want good music" is not an answer. You need to line up specific places, whether wholesale sales to mail order shops, or lining up a wholesale-to-retail distributor, or selling the CDs yourself via mail order, or whatever. You need to know how much each of those kinds of sales will earn you -- selling a CD one place might get you twice as much as selling it another place -- and it would be a good idea to talk to some of the specific people who might potentially buy CDs from you and find out what they look for, how they decide which CDs to add to their catalogs, and what quantities they might hypothetically take. They will probably be reluctant to promise anything, but it would help you to know whether you can realistically hope to sell 10 CDs a month, or 100, or 1000.)
How many CDs can I realistically expect to sell when my label is mostly unknown? (This is almost always one of the places where new labels stumble. They read that a bigger and more established label sells 2,000 copies of each release, and they figure "I'll just sell half that many and that will be easy." That's where you're wrong. A brand new label will not sell half as many as an established label with lots of distribution options and lots of name recogntion. The brand new label will not sell one third as many, or one fourth as many. The brand new label will be very, very lucky to sell one tenth as many CDs, in its first year, as a more established label in the same genre sells now. If the brand new label expects to sell more than five copies here and a dozen there, then the prospective label owner had better have some unusually strong distribution lined up.)
Given my answer to the last two questions, how much money will be coming in versus money going out? (This may seem like an obvious point, but many label owners have no idea what to expect in this regard. They may grant an advance to an artist, or agree to certain royalties, or plan on a certain release schedule, without really knowing how much money will be coming into, and going out of, the label's checking account next month and next year. If you don't know what to expect, and you make plans anyway, you're asking for the kind of trouble that kills small businesses.)
How will I generate cash flow? (An important thing to know: Most businesses that die didn't start with a "bad idea" (ice cream parlor in the Yukon). Most businesses that die have a market for their products, and sell plenty of them, and generate a profit. Most businesses that die, die because they can't keep a steady flow of cash coming in. They can't meet their obligations, pay their bills, because of this cash flow problem. They're driven out of business by this inability (often a short-term inability) to pay the bills. This is why so many small indie labels end up not paying their royaltiesm, even though they honestly planned and intended to -- they don't plan ahead, and then they find themselves in a cash crunch that threatens their busienss. Things get to the point where they realize that their label is in jeopardy because they can't pay their bills, so in desperation they steal from their "friends" the artists, in order to pay more threatening creditors like CD pressing plants, landlords, and utilities. The labels that survive long-term are able to meet their obligations without having to screw people over. Unfortunately, many businesses see a few thousand bucks in the bank account and think "Hey, that's profit!" without stopping to think about obligations coming up, and whether enough money will be available to meet those obligations. Unless you plan to invest a steady stream of your own personal money into the business (the old "keeping a day job to subsidize the money-losing label" routine), your business plan MUST involve not only selling CDs to people, but receiving cash for the CDs sold on a steady, reliable basis. A CD that's "sold" but never paid for is money lost, not gained.)
What will I do with extra inventory? (It may not have occurred to you, but if your label survives past its third or fifth or tenth release, you will soon need to figure out what to do with a frighteningly large stack of CD boxes. Even if you're selling them steadily, you will always have unsold copies sitting around, since it's not possible to get them manufactured in only the quantities you need to sell each month. While it may not be a problem for a few years, your long-term plan should include an ever-increasing need for storage space. It may be an unused bedroom, it may be your garage or basement or attic, or a commercial storage space, but I'd figure on an additional 20 square feet of storage space minimum for each year you stay in business, though double that amount is probably more realistic. And this doesn't count the space needed to house your business office, mail order shop and/or recording studio. If you start a label while living in a small apartment, just figure that in a few years you'll have to quit making CDs, or move to a bigger place, or rent storage.)
How often should I release new CDs? (The benefit of releasing CDs more often is that your label generates more of a "buzz" with all the activity of releases. The downside is that this costs money, for pressing each CD, and obviously takes time to prepare, manufacture and promote each release. You need to find the right balance, bearing in mind that a label whose release schedule drops off to virtually nil, will be seen by the general public as a "dead" label. Listener interest will drop off after a few months with no releases. You may think your label is still alive, but if everybody else thinks it's dead, it will just be a matter of time until it really will die. There are people who consider themselves label owners, but whose labels haven't released anything in years. You can be sure those label owners are the only ones who know their own label is still a label. You have to keep things moving, or you'll have a dead shark on your hands.)
How many CDs should I press at a time? (Pressing 1,000 CDs at a time is the most standard way to do things, because CD manufacturers are geared toward batches of 1,000 minimum. If you press 500, most likely it will cost you almost exactly the same as doing 1,000. I don't mean that it will cost you the same per CD, I mean it will cost you the same total. You know, press 1,000 for $2000 or press 500 CDs for $1900, that sort of thing. If you do batches of 1,000 and start to sell all of them regularly, congrats to you -- now start thinking about doing batches of 2,000, versus just doing 1,000 and re-pressing when needed. But if you're selling that many, then probably you don't need to take advice from me, and you've progressed beyond needing to read this document.)
Should I do non-standard packaging? (It can be tempting and attractive to utilize some kind of unusual packaging, like digi-packs, slim-line jewel cases, cardboard folders, vinyl sleeves, larger folders, and even unusual materials like metal, wood, and so on. Choices like this certainly will set your releases apart from the rest, and give your label a sort of "identity" right off the bat. They will also probably make your CDs more expensive to manufacture, and may also add a lot of manual labor to the process of making a batch of CDs. What may seem like an acceptable level of hands-on work at first, will very quickly get realllllly old. Saul Stokes released a couple of special edition CDRs in hand-made balsa wood cases. They were nice, distinctive packages, very attractive and collectible. But after building a couple hundred of those, Saul was sick of it and didn't want to continue. Steve Roach and Manifold made a special edition of EARLY MAN packaged in two thick, heavy slabs of slate. The world's first 6 pound (that's about 3 kilos for you foreigners) CD... an interesting and different idea, but so outlandishly difficult to package and mail as to make overseas sales impossible. Do you really want to package your CD in materials that will convince some people not to buy it? In this case I applaud the efforts of Manifold & Roach, and it was a package distinct from any other, but since Steve sells so many CDs, this became a bit difficult to handle in many respects and I was frankly a bit relieved to see it replaced by a standard jewel case edition released on Projekt. You don't want your distributors reluctant to handle your CD, and you don't want your customers unsure what to do with your CD if it can't fit on the shelf with the rest of their collection. The same goes for any package with a "hand made" element -- it's fine for a lark, or a one-off project, but you'll get sick of it faster than you think. I think you ought to plan for a "look" or a style that's still distinctive and different, that conveys your label's identity, without being an albatross that you can't get rid of. In other words, mass-production is your friend -- utilize today's factory machinery to do the grunt work, and save your efforts for designing distinctive and appealing graphics for your packaging. You can also do slightly different things, such as the way Hypnos uses heavier paper than usual, without going away from the mass-produced CD idea. Of course, if your label concept is just to release one or two CDs per year and sell them as unusual objets d'art in small quantities, then by all means have fun exploring the boundaries of the unusual.)
What can I do to convince people they should care about my label? (To start with, you need to have a strong concept in your own mind as to what your label is about. To give your label a personality and a focus, you'll first need to know what you're striving for. Go back up to my comments at the top of this page, the second part of that interview where I talk about what appealed to me about ECM and 4AD. That's what I'm talking about -- thinking about the boundaries of one label and how it's distinct from another. Many labels blend together, trying so hard to cross boundaries, and to address diverse interests, that they end up seeking to be all things to all people. Unfortunately, trying to be all things to all people usually ends up making the label's identity indistinct, confused and confusing. Narrow it down, and once you understand for yourself what your label is all about -- Hypnos started out as a label for dark, minimal ambient, though that has evolved a bit -- then it will be easier to convey to other people. Then, work on conveying that not only through the music you release, but through your package design, your advertising, and even by the way the label talks about itself in press releases and interviews. You'll do a lot better by being fairly narrowly focused and deciding not to go after every style of music, because people will know what to expect from you. When people get to the point where they feel confident that they'll enjoy everything new that comes from your label, then you've succeeded in creating a label identity!)
Now we're getting into the fun part... the creative stuff. In fact, the last two questions above are really getting into the part I enjoy most, which is the decisions involved in getting music out there and presenting it to the public. I've also introduced the idea of the "label identity," the importance of which cannot possibly be overstated as a concept central to the creation of a new label. So then....
The Creative Stuff Is The Fun Part
As mentioned at the beginning, this is probably the part you've already given the most thought and consideration, so it will receive the least detailed attention here. If you decided to start a small, independent niche label, probably your goal was not to get rich or just to start a business for the sheer adminstrative, management thrill of it -- probably your desire was to get involved with music you love. Maybe your primary goal is to release your own music, maybe you don't make your own music and just want to work with other artists, or maybe both. I know in my own case, I started out (refer again to the interview blurb at the top of this page) planning to release my own music only, and the more I thought about it, the more I liked the idea of releasing other people music too. I have a few comments to make about all three kinds of labels:
The Artist/Owner Label (aka Vanity Project) The idea here is that you're primarily creating a vehicle for the release of your own music. In other words, the label exists to serve the artist (who also happens to be the owner). There's nothing wrong with doing this, in fact this was my own idea for Hypnos originally. The only stumbling block you'll encounter, which may or may not prove insurmountable, is that people tend to view such labels as vanity projects. They tend to think "This label would not exist if not for the artist's own need to have their music released, and their music would not have been released if the artist didn't release it themselves." In other words, the label is discounted as being an empty construct for the artist's ego, and the artist is dismissed as having music that nobody else would want to release. It doesn't matter whether this is true.... the perception is there. Many distributors, especially large distributors, have rules (formal or informal) against picking up labels of this type. To them, it's not a real label, and not likely to stick around, so they don't bother with it. Even smaller distribs will have an attitude about this stuff. Such CDs and such labels are seen as a glorified demo release, a stop-gap attempt to get a deal with a "real" label. So the assumption is that you'll release a CD or two... if the music sucks, you'll go away, and if the music is good, you'll get a label deal. Either way the label will vanish, or at least that's the generalization (based, I might add, upon many observations of this exact scenario happening over and over). It doesn't mean your label can't succeed despite this bias, it just means you'll have to work harder, and your music will have to be better, to overcome it. Even if your CD is better than demo-quality, people will assume the CDs are just tarted-up, mass produced demos, possibly of low quality since obviously the label owner lacks the perspective on their own work to weed out the bad stuff and release only the best. If all the above sounds harsh, I'm not really conveying my own opinion of such labels -- Zero Music and The Foundry are two such labels, built on this model, of which I hold a high opinion -- but giving an idea of the kind of obstacles you'll face if you don't legitimize the label by releasing music other than (or in addition to) your own.
The Non-Artist-Owner Label (aka Impressario Project) There's nothing wrong with this either, though it's much less common among the labels I know of (i.e. in the nebulous group of labels and genres of which Hypnos is a part). It just seems that because most of these labels are not big money-producers, the only people willing to take the financial risk are the people releasing their own music, at least in part. There's no drawback to being this kind of label, so if you're a non-artist who wants to start a label, I wouldn't try to talk you out of this kind of arrangement. You're a braver soul than most, willing to wade into the lake of insolvency, straining to keep your chin above the water, all in the name of somebody else's music! The first label like this that comes to mind and that would be familiar to readers of this page, is Soleilmoon. In that case, the label evolved out of a retail and mail order music operation. There's also Manifold, another label that arose out of a mail order operation.
The Part-Time-Artist-Owner Label (aka "Good Luck Finding Time For Your Own Music" Project) It should be no surprise that I find this to be the "best" arrangement, since it's what I did myself. It's also the most common model for the niche-genre indie label. The owner's motivation to start out is that he/she is an artist, and the label's credibility is strengthened by the presence of outside artists, preferably more established ones. Also, the label can release the music of less-known artists (the label owner is probably in this group) and have attention drawn to those release by the work of better-known artists. For instance, more people notice the music of Viridian Sun, Saul Stokes, M. Griffin and David Tollefson, due to the presence on the Hypnos label of Jeff Greinke, Richard Bone, Jeff Pearce, Robert Rich, A Produce, etc. The last sentence basically sums up the reasons for the growth of Hypnos between 1997 and 1999. One would hope, of course, that the owner chose to release the music of these other individuals not for purely mercenary reasons ("It will help raise my label's profile"), but also because they enjoyed the music and enjoyed releasing it. I know that was the case with me. It was so fun and satisfying, as the owner of a new, small label, to release on Hypnos the music of some of the guys like Jeff Greinke and Robert Rich, whose music I had listened to when I was "just a fan." It's that sort of involvement, becoming a part of the music genre you love, that's most rewarding about starting your own label. The drawback to this sort sort of "part time artist" label owner arrangement, is that you become so busy dealing with the logistics of other people's music and CD releases, that you have little time left for your own music. As your label grows, assuming you're lucky and it does survive, you'll get busier. Trust me. I remember when I was just starting Hypnos, and I exchanged a few emails with Darren Verhagen, who is not only a very talented experimental music artist in his own right, but also the owner/operator of the Dorobo label in Australia. To my declaration that I was planning to start my own label, Darren said "Are you crazy? Why would you want to do that? You'll never have any time for your own music." He was only half-kidding, and now I understand what he meant. But the rewards are there, for the label owner who's also an artist, as long as he/she has a sense of patience and perspective about sometimes delaying their own work. Other labels that fit this model include Projekt (releasing Sam Rosenthal's music as part of Black Tape For a Blue Girl), 12k (featuring the excellent solo and collaborative electronic music of Taylor Deupree), and Groove (with plenty of releases by co-owner Ron Boots), as well as Hypnos.
After deciding where the owner (you) will fit in as an artist on the label, if at all, and where other artists will fit in, if at all, you'll need to address the not-insignificant question of music. It's beyond my abilities to tell you anything about what kind of music you ought to release, and as mentioned above, you've probably already given this plenty of thought. The one thing I'd encourage every label owner to consider, whether it has to do with looking at one's own music or the work of another artist, is this: before releasing the music on CD, you should really feel strongly that this music deserves it. It is unquestionably easy these days, and even fairly cheap, to get CDs manufactured. To release a CD increasingly falls within the budget of the small label or indie artist. The degree to which it is easier and cheaper to release a CD, is not matched by the degree to which there is more and more good music worthy of releasing on CD. The ease and thrift with which one may now have CDs made, has led to more and more un-CD-worthy stuff being released. One positive aspect of how expensive and complicated it used to be to get CDs made, was that people only released the very best and most worthy stuff. Now, more stuff is being released, and sometimes the world is not a better place for all these new releases. Ask yourself first whether this work really merits release on CD. Will people really be listening to this CD and enjoying it in five or ten years, or is this just something you're doing because it seems like having a CD would be a cool idea? If the answers to these questions are "maybe" and "yes" then stop! Spend your money on something else, and you'll thank me for it later. If the music just cries out to be released and you're convinced the music merits a lasting place in the world, then go ahead and release it. At least you've asked yourself the questions that many times get skipped-over.
From here, you're on to the technical matters of getting CDs done -- mastering, CD package design, and CD manufacturing. I'll flesh out these subjects more later on. It doesn't seem to be a part of the process fraught with confusion and danger, so I'll skip it for now.
Once the CDs are ready, you'll know what to do with them because you'll have answered all the questions answered above. You'll know how to promote the CDs, and how to sell them to distributors or other re-sellers, and/or you'll start selling them directly to listeners yourself. Of course, having a plan and knowing what you're supposed to do doesn't make it easy, but at least it'll get you started down the road of developing and building your label. And you'll travel down that road from "label with one CD release," to the slightly more distinguished status of "label with multiple CD releases." With some luck, and tons of hard work and more than a little good judgement, you'll reach the rare plateau of "successful, stable and growing label." It's not as easy as you'd think, and if you get there you'll really have done something difficult, but it's also something satisfying.
That's It -- Are You Ready?
As an explanation of the history of Hypnos and how I started and and developed it, it might be a bit dry and mechanical. I intend to flesh out some of the more fun, creative and philosophical stuff -- along with embarrassing stories about your favorite Hypnos artists -- toward the end, as time allows.