Traditionally, small labels do something like this:
- Pay up-front for the making of CDs and/or vinyl and coordinate the process, instead of the artist doing that; this process could also include handling design
- Sell back a number of units, stipulated in a contract, to the artist at a wholesale price. This part of the deal often goes by the name artist copies, and it subsidizes the label's manufacturing cost, ideally in full if the quantity is high enough. For example, the label could make 1,000 CDs and sell 300 to the artist for $7 each; the artist could then sell those units off-stage while touring for the full $15 or $20. The label gets $2,100 from the artist; the artist gets the >50% profits of selling those units.
- Do with the rest of the quantity as the label wishes
But, for an asset-light model with the right artist, why not try this:
- The artist arranges manufacturing/design and pays for it
- The label purchases "label copies" to subsidize the cost that the artist paid
- The artist has the rest of the quantity
Such an artist would have to be willing to spend the time to coordinate manufacturing and also have a plan for all their units. If they don't want that hassle, the traditional model is better. But when they do, a label that operates with this "reverse boutique" structure could administer many more deals with a lower overhead commitment of time and money; you'd just have to lean on one skill: the ability to sell those units effectively. I wonder if you don't see the reverse deal because that skill is indeed the bottleneck in the cottage industry of tiny labels.