When To Invest In Artists

Record Label Startups in 2022 | When To Invest In Artists

If you’re thinking about starting your record label in 2022, when to invest in artists is a topic that is certain to come up.

One of the major reasons most record labels fail is because they don’t have an entertainment attorney guiding them through the process. If you fail to do all the necessary things to stay legally protected, there is a huge catastrophe waiting for you down the road, and for the future of your record label.

It’s great when that artist knocks it out of the park and brings value back to the label through things like streaming and live shows, but when it comes down to investing in an artist, more than likely, you’re going to have a lot of artists and bands that don’t hit it out of the park, and end up becoming a very bad investment for your record label.

When it comes to the actual artist agreement with your record label, here the most important sections to consider: advances and expenses.

  1. Advances. When it comes to an artist advance, it is usually going to be a signing bonus, which should be recoupable. At least, that’s the hope. Your ability to recoup the advance is dependent on how well that artist does.
  2. Expenses. Many labels only cover expenses (and don’t give traditional advances to their artists, lthough you’re still technically giving advances that cover things like studio time, music videos, and marketing). While the investment may be a little less, you’re still making an investment.

Signing Artists Too Soon

Another possible issue that arises is when labels sign an artist way too soon. The artist does not have a lot going on and is still new to the scene. They may not have a presence on social media, and little to no experience promoting music or being in a studio. But despite all that, you believe in them because they’re super talented and you want to see them succeed. You need to be aware that when you attach yourself to an artist, you’re now responsible for what happens to them as the record label.

When it comes down to deciding how to spend money after you’ve signed someone, look at the value of what that artist can potentially bring. Look at the artist’s commitment to their own career and see if they are going to be a good partner for your label.

Don’t Overcommit

Be careful to not go all in on the first artist, or even the first 10 artists, that you sign. Sometimes you need to give time for artists to build their catalog, to build up their touring ability, and to further establish their presence online.

Contract Options

It’s also important to have options to extend an artist’s contract. As a label, you have to protect your investment. Having options allows you to hold the right to continue to work with an artist after giving yourself some time to see if it’s a good fit.

Test Small First

Another essential note to remember is to not spend money too fast, too soon. When it comes to pulling the trigger, and dumping a bunch of money into marketing, the best thing to do is to wait and do that when there’s already buzz happening.

Furthermore, be patient and do a lot of tests. You might think you know what the hit song is going to be or what song is going to take off, but you don’t. The market is going to tell you what’s working and what’s not. When you find something that is working, then that’s the moment where it makes sense to invest more money.

Indeed, the biggest mistake new labels make is that they’re not conservative up front. They don’t wait until it makes sense to start investing more into a particular artist.

If this is the year when you decide to start a record label, be smart and be patient when it comes time to start investing in an artist.

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