How Small Record Labels Benefit From Undiscovered Artists

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Date:

November 24, 2020

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Milan Kordestani

Entrepreneur, writer, and founder of 3 purpose-driven companies oriented toward giving individuals control over their own discourse and creation. Milan works to produce socially positive externalities through a mindset of social architecture.

Hi! I'm Milan, an LA based founder and writer, architecting impact-first businesses.

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What Differentiates Small Record Labels From the Bigger Players?

When you think of a small record label, you probably think of first-time music enthusiasts trying to pull together a collection of undiscovered artists to promote and produce. While this is sometimes true, the concept of a small record label is far more complex and elusive. For example, 1017 Records — an indie record label founded by Gucci Mane — helped launch the careers of artists like Waka Flocka Flame, Lil Wop, Young Thug, and Asian Da Brat.

Few would argue that 1017 Records is a small record label. Today, the label only produces six artists (besides Gucci Mane himself), though Gucci Mane has a knack for scouting new hip hop talent. Despite the huge careers that began at 1017 Records, the label works with a relatively small budget and has little sway over the music industry outside of Atlanta, Georgia.

On the other hand, 1017 Records has the backing and support of some of the biggest players in the business. 1017 Records’ parent company is Warner Music Group, one of the three biggest music and entertainment conglomerates in the world. Moreover, 1017 Records currently does all of its distribution through Atlantic Records, one of the longest-running record labels in the U.S.

In short, there’s no set definition for a small record label. Yet, thousands of small labels work tirelessly to find the next top artists. This is part of what makes small record labels a force with the capacity to challenge and compete with the music establishment. Indie record labels may not have the funds or the name recognition to sign major artists, but they do have the passion and freedom to produce undiscovered singers, rappers, and musical groups who can become the next modern artists to hit the airwaves.

The Benefits of Signing Undiscovered Artists

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There’s always a certain amount of risk involved when record labels seek new talent. Signing a new or undiscovered artist means that you’re allowing that artist to represent your brand, to one degree or another. Thus, larger record labels and entertainment conglomerates don’t waste time on undiscovered artists unless they believe that they can make them the next big stars in their genre. This is where small record labels fill an important gap in the market.

While major record labels have to worry about their branding and their stockholders, smaller record labels have more freedom to diversify and experiment. So, let’s examine some of the benefits of signing undiscovered artists for small record labels:

Undiscovered Music Has Greater Potential

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Even outside of the music industry, there’s always more potential in the unknown. As a record label, signing an established artist is a pretty cut-and-dry deal. You know (more or less) what you’re getting and how much you stand to gain from the deal. Alternatively, undiscovered artists are like a blank slate with the potential to either toil away in obscurity or become the #1 selling artist in the world.

For example, Taylor Swift showed great potential as a country/pop artist when she was just 14 years old. After ditching her first record label, she signed with the newly-founded Big Machine Records. Though Big Machine Records has since grown (thanks in large part to Taylor Swift), it was a pretty small operation at the time. However, by signing the young artist, Big Machine Records grew into one of the most prestigious record labels in Nashville, Tennessee. Though Swift would eventually leave Big Machine Records and have a somewhat tenuous relationship with her former producers, the company would not be where it is today without her.

Undiscovered Artists Are Easier to Sign

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As any experienced record producer will tell you, established artists come with a lot of baggage. When signing an established artist, record labels often have to meet certain demands, which usually include higher royalties for the artist. The artist knows that they can make more money for the company right from the start, so it puts them in the driver’s seat. This means less negotiating power and a smaller piece of the pie for the label.

Fortunately, record labels rarely have this problem with undiscovered artists. A new or up-and-coming artist probably has a relatively small or niche fanbase, which gives them little (if any) bargaining power. As a result, small record labels can sign them on with deals that greatly benefit the label and make it easier to manage and curate new artists.

It’s Easier Than Ever to Find the Best New Talent

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While it’s inherently difficult to find the best undiscovered singers and artists, the Internet gives small record labels equal footing with larger labels. Nowadays, you can easily find undiscovered artists on Spotify, Soundcloud, Youtube, and any number of social media channels. That said, there are thousands of undiscovered artists to choose from, so selecting one that has the potential to gain a large following can be complex.

Nonetheless, the years of large music conglomerates dominating the industry and scooping up every available artist are long gone. Not just because the Internet gives smaller labels access to new artists, but because artists themselves desire more freedom to practice their craft without constraints. Thus, teaming up with a small or indie record label is a win-win situation for both the artist and the label.

Conclusion

There’s no exact science to finding artists that will take off and create revenue for a small record label. However, undiscovered artists present a number of unique benefits to smaller labels working with limited budgets. Additionally, small record labels often give artists more freedom to create music with little to no constraints. Finally, small record labels that sign new musicians ensure the industry remains diversified and does not close its doors to real talent.

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