Record labels are companies that manage brands and trademarks, coordinate the production, distribution, marketing, promotion, and copyright of music, music videos and music shows of artists. The term “record label” is derived from the circular label in the centre of a vinyl record where the manufacturer’s name is displayed, along with other information. Recording artists have relied on record labels to broaden their audience, market their albums, and promote their music on streaming services, radio, and television. Record labels have publicists, who assist performing artists in gaining positive media coverage.
As of 2019, the global music recording market was worth $57.3 billion. Although there was a dip in the value in 2020 due to the COVID-19 pandemic, the market has been predicted to grow by a significant 6% within 2021 and 2023. According to the 2019 IFPI Global Music Reports, the United States holds the spot for the largest music market across the globe. They are trailed by Japan, Germany, UK, France, Australia and Canada in no particular order.
The Nigeria National Bureau of Statistics (NBS) in its GDP report for Q1 of 2020 stated that the motion pictures, sound recording and music production sector contributed over $4.42billion (0.99%) to Nigeria’s GDP in 2019. The country houses one of the fastest-growing music industries in the world, with new and developing acts taking their music to the international fronts through international collaborations and record label deals. Music in Nigeria has been considered the new oil sector. Record labels are predominantly found in Lagos, which is considered the entertainment seat of the country. Although the competition is stiff, it still holds lots of promise for both individual acts and investors.
If you’re considering starting a record label business in Nigeria, this detailed guide will show you what pitfalls to avoid and how to make the best of your investment.
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What Is A Record Label?
A record label is a company that records, distributes, and promotes the musical records of musicians based on contracts. Naturally, record labels work to sell the brand of the artist and the products they create. Various departments within record labels work together to market their products and artists.
What Is A Record Label Business?
A record label business dwells so much on the power of influence and finance. Recently, record labels rely so much on social media platforms to promote their artists. The target is to promote the said artists and their songs among the public. They undertake all costs of studio sessions, recording, branding, promotion and marketing in exchange for an agreed percentage of all profits made from the songs and/or videos produced by the artist. Record label contracts are bound by legal frameworks, just like every other business transaction.
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Business Opportunities In Record Label Business In Nigeria And Across The World
1). Social Media Management:
Much of the promotion that record labels do happens on social media because that is the platform where they get to interact with the public. Such social media accounts are handled by skilled social media managers who study and analyse the behaviours, reactions and preferences of the public. They draw conclusions from such information that help to inform the decisions made at the record label. Also, social media managers are in charge of promoting their songs and other label activities on the internet.
2). Artist And Repertoire (A&R) Department:
Another vital opportunity in record label business relates to scouting for new artists. The role of the talent scout is to discover talents and convince them to sign with the label. They find talent by going to live shows, keeping up with industry developments and breakout artists, listening to demos, and networking. When the A&R department finds talent deemed worthy of a record deal, they lead negotiations between the label and the prospective artist. They continue to be involved with the artist throughout their career by either supporting the recording or promotion processes. The A & R department is the department that is most heavily involved in artist development.
3). Music Production:
Record labels work with disc jockeys (DJs), sound producers, sound engineers, studio managers, and so many other experts, to help their artists make good and marketable songs. Music production keeps lots of people in job in the music industry.
4). Music Promotion:
In addition to the use of the social media for promotion of artists, record labels depend on expert promoters to distribute their artists’ songs to radio stations, internet radios, satellite radio, podcasts, popular streaming platforms, etc. The aim is to give the songs as much airplay as possible so that the public could appreciate the songs.
5). Publicity And Marketing Services:
In addition to promoting the songs, record labels promote the artists too. This is where publicists and marketing experts come in to play. The role of the publicity department is to get the public interested in a product, event, person, or any other thing being marketed. In the record label sector, the publicity department is responsible for finding, managing, and scheduling opportunities for press or media presence, alongside finding opportunities for artists to get publicity on terrestrial radio or streaming stages. The marketing department is in charge of press and promotion campaigns for artists, releases, tours, and anything else that needs to be sold. The marketing department works directly with the publicity, sales, and promotions departments as they execute the plans designed by the marketing department.
6). Sales And Distribution Services:
With the invention of streaming platforms, record labels pay less attention to producing CDs and other hardware music units for distribution. However, the section still creates opportunities for distributors and marketers. They work in partnership with creative designers who create album covers, arts for advertising shows as well as other visual items relating to the artist in question.
7). Fashion Design Services:
Record labels employ the services of professional fashion designers to make amazing fashion styles for different occasions including video shoots, tours, shows, interviews, etc. They also work with other categories of experts such as make-up artists, and personal costumiers, among others.
8). Legal Services:
To bind contracts with artists, related professionals, media giants, and other categories of people they work with, record labels involve the services of legal practitioners.
Facts And Benefits Of A Record Label
- They run all the promotions and marketing for artists.
- Since the success of their label depends on the music of their artists, they do everything to improve the artists and make them presentable to the public.
- They help with public image and relations.
- They invest in artists who they feel have potentials and they help them unleash said potential.
- The United States, Japan, Germany, UK, France, Australia and Canada have some of the biggest music industries across the globe.
- Lagos is considered the seat of entertainment in Nigeria.
- They sponsor concerts, video shoots, foreign trips, tours, etc.
- Over 90% of music consumed all across the world are downloaded illegally.
- Record labels and artists sometimes make more money from endorsement deals and sponsorships than music.
- Musicians typically get the smallest percentage of the profits garnered from their music.
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Types Of Record Deals
1). The Exclusive Record Contract:
Also known as “major label deal”, this deal is a big and comprehensive one. It is however not as salivating as it used to be due to significant changes in the industry. Most of these contracts put artists under the management of a label. The label advances the artists money in making an album and paying for marketing the album and also paying for expenses involved in the process. In return, the artists must pay back all the costs the record company has spent through record sales and other income. If the sales aren’t booming, then the artists would have specific issues with the record company, not to mention a lot of debt.
2). The Independent Label Contract:
In theory, this kind of contract is the replica of the exclusive record contract. However, there are so many independent labels representing diverse kinds of artists. In other words, there are so many varieties in the real deals that are signed. Sometimes, this contract allows the artists to retain control of their rights to their music. It may only cover recording and not promotion (or vice versa), or any number of setups that are worked out among the label and artist. It should be emphasized that a lawyer should review any contract because even agreements that seem to favour the artist ultimately can have clauses that could be very dangerous for the artist in certain situations. It is always best to fall on the side of caution.
3). The 360 Record Contracts:
This form of contract was developed some years ago. Essentially, this puts labels in control of all aspects of an artist’s career, including touring, publishing and merchandise, in addition to record sales. In exchange for providing these artists with more support and money, all revenue is also split with the label. Since this is a relatively new kind of deal, the overall advantages and disadvantages for artist and labels are still being determined.
How To Start A Record Label In Nigeria: A Step-By-Step Guide
1). Understand The Business:
There is a fine line between performing as an artist and operating a music business. Understand the difference. Have your business plan together, network, observe and if you can work for other label company in other to know the game.
2). Choose A Brand Name:
A right name can sell the business faster. Keep it short and sweet. Phrases like “Marvin”, “DMW”, “YBNL”, “YAGI” e.t.c are common examples in Nigeria. Go to the internet to be sure the name you have chosen hasn’t been used by anyone, to avoid a lawsuit by the original owner.
3). Raise Capital:
Building a record label irrespective of the scale or size requires money. To acquire a recording studio, staffs, promotion, all involve money. Ensure to get a suitable capital that will cover all costs at the start.
4). Register Your Brand Name:
Register your label with the Corporate Affairs Commission (CAC) and obtain the necessary licenses. In Nigeria, registering a brand usually costs ₦ 100,000 – ₦ 200,000.
5). Get A Production Team:
Work with a team of experts, including sound engineers, producers, publicists, social media managers, graphics designers, etc. For a start, you could work with those from other record labels until you can sign your own team of experts.
6). Invest In A Recording Studio And Other Equipment:
A recording studio is the heart of music production. However, in the absence of none, you can liaise with a sound recording studio around your locality whose charges are affordable.
7). Scout For Artists:
As a record label, your job is to scout, secure, develop and promote the artist you want to represent. This job is usually for the A&R team. They search for rising stars in the industry that can successfully recover whatever the record label spends on them.
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Challenges Of Starting A Record Label Business In Nigeria
- High start-up capital
- Difficulty in promoting unknown artist:
- No guaranteed ROI
- Competition from more prominent labels.
- Technological advancements
- Piracy issues
- Contract bridges and scandals from artists
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To Sum It Up
Music is a commodity people can’t do without, which, therefore, makes it a profitable enterprise for everyone, not for its financial gain alone but for the services it provides to man. Although technology has provided various platforms for an artist to showcase their art, the benefits derived from working with a record label is still profound. The record label business in Nigeria can be a lucrative and profitable venture to start-up, due to its vast market demand and on your ability to build a wide network. If you’re looking for a lucrative business to venture into, the record label business in Nigeria is a great option to explore.
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