Making Money – revenue sources for indies

Independent labels attending the recent A2IM Indie Week in New York were treated to lots of helpful advice about where they can make money in today’s marketplace.

 

A Think Tank with 100 representatives from indie labels, distributors and other services discussed the best ways for labels to generate revenue in today’s tough environment.

The general consensus from those attending was that labels should no longer think of themselves as record companies. They should instead operate as marketing companies that manage recording, distribution, publishing etc. and should adapt the structure of their organisations accordingly.

The Top Five revenue sources for labels were defined as follows:

 

1. Physical sales

Depending on the music genre, physical sales are still 50 to 70 percent of a label’s income from the sale of master recordings. To boost this revenue, some labels are focusing on added value packages. For example:  limited edition vinyl sold in specialist shops, sales at venues and through social media promotions.

2. Digital distribution

Download and streaming revenue is increasing overall, although some distributors complained that download sales are flat. Younger labels tend to have a higher percentage of digital sales than physical and often see the CD format purely as a marketing tool to drive fans to artist and label websites. On those sites unique digital products are sold and relationships with fans are built.

3. Publishing

An increasing number of labels are establishing in-house music publishing companies. Revenue is primarily derived from mechanical royalties, sync licensing of songs for film, TV and advertising, as well as some other sources.

4. Licensing

In general, licensing opportunities for sound recordings are generating more revenue than ever before, sometimes even exceeding the revenue generated from digital sales. Income sources include licensing for film, TV, advertising, compilations etc.

5. 360° artist contracts

These newer-style deals are generally thought to be more popular with labels than with artists. In these contracts, labels receive a percentage of all income from sales, merchandise, tour receipts etc. Whilst some artists might be resistant, the 360° deal mirrors the consensus that a modern record company offers a range of services and areas of expertise, and should perhaps therefore share in more revenue streams than the sound recording alone.

Background

A2IM is the U.S. trade organization representing independent labels. It is affiliated with other national associations, such as AIM in the U.K. and VUT in Germany. This year’s Indie Week hosted a number of panels including discussions on video monetisation and cloud based music services, licensing music to ad agencies for brands, case studies of artist website presentations, and a discussion of today’s hot button legal/legislative music industry issues. Hundreds of A2IM members participated and AIM sent over 25 representatives from UK indie music sector in conjunction with the British Consulate.