It's never been easier to start a record label -- and never been harder to make it pay. The Internet has changed the tune of the music business, slashing the cost of recording and publishing but also giving rise to piracy that's gobbled up billions in sales. There are bright spots, such as fast-paced revenue growth by digital-music services like Pandora and Spotify. But Paul Resnikoff, publisher of website Digital Music News, doesn't mince words about the industry's prospects. "It's a great place to lose money," he says.
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On the B side, the struggles of "the majors" -- giant labels like Warner and Sony -- have opened doors for smaller players, says Rachel Flotard, whose Local 638 Records has issued seven albums since 2009. The costs of putting out an album are relatively modest; expect to spend at least $10,000 or so to record it, $1,000 to $6,000 a month for a publicist and $1,000 to print CDs. (Getting your opus on iTunes usually costs less than $100.) With the band and the label splitting everything, it's possible to break even by selling just 2,000 to 2,500 copies at $10 a pop. A few lucky media mentions could help an album catch fire, but producing hits is notoriously difficult. "It's like the weather," says Flotard. "One year it's terrific; the next you're broke."
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