Show me the money! – finding revenues as electronic record label in 2016

Running a music label is buckets of fun. I personally also believe it should be profitable as well. After all you want to support you artists for their hard work and you also want to make some own profit at least to reinvest into the labels future releases. Picking up some new industry figures at Future Music Forum 2015 just recently I decided to write this guide, mostly based on my personal experience with HMWL labels.

Electronic music used to be all about vinyl & CDs back in 1980s and 1990s, then about digital downloads in 2000s and  maturing into a neat split between vinyl, digital downloads and streaming (free and premium) in 2015. Here is your guide to making money with the four above the way electronic music and general industry trends look for the next few years. Of course there are additional revenues in live, public performance and sync, but those will be covered in a different chapter.

Vinyl

I recently had an interesting discussion re vinyl revenues with Jimi Disko at Subwax Barcelona. 95% of all vinyl releases do not recoup. Even when you try and push down your pressing costs as much as possible going for just black sleeves, b&w labels and no jackets, it’s still almost impossible to break even at 200-300 copies sold.

Vinyl costs

  • Mastering: €200 – €400. Go for a pro engineer that charges at least €100 per track, to ensure quality.
  • Artwork €50 – €200 depending on how nice your artist friends are to you
  • Test press = €70
  • Pressing: 300 copeis, Printed labels, plain sleeves ~ €900
  • Shipping = €40
  • + Add full color sleeves = + €400
  • NCB, MCPS or equivalent mechanical rights registration. Copyright license to produce physical records ~ €250

So the cheapest possible vinyl produced in 300 ex will cost you at least €1500. This means you pay €5 per vinyl straight up. A distributor will pay you €3 – €4 per vinyl sold over the next year. You receive the money 14-30 days after every 3 month period. So unless you sell most of the vinyl yourself, count on getting back some 60 – 80% of your vinyl production cost after a year. Unless it sells so well that you make a few represses and hit some 700 – 1000 sold ex. But that happens very very rarely to only few releases.

So vinyl should be seen as purely a marketing cost for the artist / label. Very rarely as a revenue generating asset. On other hand the vinyl will generate more gigs for the producer / DJ so it can be wise to invest €1500 if you think the vinyl release will generate some additional gigs where you can charge €500-€1000 or more. 2-3 gigs generated by a vinyl means break even even though it’s hard to track if a booking was generate by a vinyl release or something else.

Vinyl profits and lost per release

At least one repress is necessary for a vinyl release to break even purely on sales.

Vinyl tips:

  • Releasing “Vinyl Only” increase your chances to sell the whole run with 100% (source: Jimi Disko Subwax Bcn)
  • Always makes sure to make test-presses to avoid 300 vinyl copies sounding crap.
  • Vinyl market in US turned over $224M during the first half of 2015

Beatport

Some 15,000 tracks are being released on Beatport platform every week. From our personal experience It’s all about standing out from the crowd – i.e. getting featured, or charted or doing something else. A small featured icon on the first page gave us some 80 downloads during the first week of HMWL002 release. A track not featured in any way (feature, chart, recommendation, etc) won’t be heard at all due to the constant noize of thousands of other releases.

The best thing that can happen to you on Beatport is that you get into one of the genre specific charts. According to some sources you need some 10k-20k sales during the first few weeks to get into the Top 20 on either Deep house or Tech house beatport charts.

Beatport featured exclusive

Getting a Beatport feature gives you some 50-100 downloads during the first week. You need much much more to get into the charts.

Beatport tips:

  • Tip: Make a good marketing job with blogs, Hypemachine and Soundclouds streams
  • Good PR-tracktion will increase your chances to pitch in your track to be featured by Beatport team.

Premium Streaming

The fun part. Deezer, Spotify, Apple Music and the other streaming services generate some good chunk of revenue, at least for our label. Very simplified you make some €0,005 for ever premium (payed user) stream. Minus the distro cut in the end of every three months period. So if your distributor charges you 30% a 100,000 streams will generate 100,000 * 0,005 * 70% = €350 payed royalties. Every label should aim for at least 500,000 streams on “for streaming” selected tracks over period of 2 years. Hey, don’t forget to pay your artist’s royalties ;)

It would not make a difference for a small nisch electronic labels 5 years ago, but with current streaming volumes and number of paying users, there are actually good money to be made on premium Streaming. As example, US premium streaming market generated $1.03B in the first 6m of 2015.

Premium Music streaming users behaviour

Catalogue is everything as Premium users are more and more likely to look for new music rather than having same tracks on repeat. From Mark Mulligan’s talk at Future Music Forum 2015

Premium streaming tips:

  • Re-release your tracks with the same ISRC codes when adding your old singles into EPs or compilations. This way you avoid duplicate tracks and accumulate streams on the same ones.
  • The biggest playlists (Filtr, Digster, Topsify) are run by the Major labels who usually have no interest in putting your track in their playlists. You can always try.
  • Chase nisch playlists, power users and tastemakers.
  • Radio edits are easier to get on playlists. They are also shorter meaning more streams with “on repeat” users.
  • Recent music discovery figures show that 60% of paid subscribers listen much more to new tracks (discovery mode) than to their old favorite tracks on repeat. So even if you release an electronic super track, talke Pachanga Boys – Time or Greece 2000 as example, your fans won’t have them on repeat as their attention gets stolen by Deezers Hear This, Spotify discovery, and Youtube related tracks. Discovery and Tirany of choice combo can sometime be a bitch.

Youtube & other free, ad-financed streaming

Some $163M were generated in US during 1st half of 2015 by ad-revenue streaming services like Youtube, Deezer Discovery and Spotify Free. Basically you get paid by ads being shown on your track video on your channel or on other channels that use your music. Not much to be said here. Revenues per play are tiny, but remember Youtube (and Deezer Discovery and Spotify free) are perfect for reaching gigantic volumes of free streamers and should be seen primarily as marketing and awareness generating channels. The Youtube streamers population is so very much bigger than the DJs who buy their digital downloads or paying streaming users. Think catalogue over time rather than quick cash.

Youtube vs digita downloads vs premium streaming in US 2015

From Mark Muligan’s talk (Midia Research) at Future Music Forum 2015

Youtube tips:

  • Make sure your track are registered the right way with collecting societies (ask your distro) and connected to Content ID so you can royalties generated by your music being used by other channels (preferably ones with 1M + subs) all over youtube. This is crucial as there are so many ad generated revenues being collected by the channel owners rather by the music copyright holder says Georg Herlitz who works as music account manager at Swedish Youtube ad agency United Screens.
  • SEO is everything. As Youtube is owned by Google and Youtube videos will show among the first few tracks when someone searches for it on Google, make sure to get all your meta data right in order to not miss out.

Sum up:

A successful strategy in 2016 is about deciding on your target group and being available for your fans in all their preferred channels. Vinyl releases won’t reach many people but let you get your record into the hands of purists and collectors who are often much more dedicated fans. Youtube plays give tiny revs but reach global audiences. In the end of the day it’s all about being available and growing on every channel may it be Soundcloud, Mixcloud, Deezer, Spotify, Apple, Youtube and funneling free and payed streams to payed downloads and even more payed streams.

Most importantly it is and always will be about releasing top quality music. If you are also a performing DJ, high quality tracks + good marketing over all platforms will naturally strengthen your brand and give you better paying gigs in the long run. Everybody wins.

About Alex Esser:

DJ, surfer and entrepreneur residing in Malmö, Sweden. I've been DJing since 2004 and started the HMWL blog back in 2007. My music network is always open. Holler @alex_Esser on twitter.


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