Record labels exist to discover and develop artists for the purpose of producing, distributing, and promoting their music. That function hasn't changed, but company practices have in this new age of digital music, self-publishing, home recording, and MySpace. What are companies doing to change with the times and connect artists with listeners?

There is a curious statement on the back cover of the Sevenglory CD Over the Rooftops, down in the fine print where the usual copyright and legal disclaimers live: "PERMISSION GRANTED: feel free to burn a copy of tracks 1 and 2 for as many friends as you like." Not the sort of thing you would expect in an age where the recording industry has had a quarrelsome relationship with listeners who ignore stringent copyright warnings.

Just when you thought you had those big, money-hungry record labels figured out, one comes along and invites you to copy their music. Such is 7Spin Music, a label that was born in the tumultuous days of illegal downloads that changed the industry and its business model forever. Founded in 2004 by Peter Khosla, 7Spin is an unconventional label in an unusual setting, located in the small town of Valparaiso, Indiana. But it may well be drawing the roadmap for the future of the music industry.

To say that record labels are in a state of flux is an understatement. Shrinking CD sales have caused labels to rethink and reevaluate almost everything they do. It would then seem a gamble to enter that fray with a brand new record label. The music business as a whole was and is challenging, but if ever there was a time to rewrite the book, we're living in it. The name "7Spin Music" is an indication that the book-rewriting process has gone through a few rough drafts.

 "The dot com name was available," explains Khosla, "and at the time we thought conventional distribution was going away, so we were thinking more of an online-only business, maybe with 77-cent downloads." The site is still there, as are the $0.77 downloads (along with some free ones!), but so are the conventional CDs for an ever-expanding roster of artists.  

A single conversation with Khosla may touch on everything from music, small business in America, modern theology, profit sharing, Barna research, and the early church in the Book of Acts. The topics are as diverse as his background and the winding path that brought him where he is today. A one-time concert promoter, then a manager, and now a label head, Khosla already had degrees in Biblical Literature, Biology, and Economics before he finished his Juris Doctor degree by taking 17 hours and 3 years worth of writing assignments in one semester. Not many lawyers take so many classes at once to accommodate their busy schedule of booking rock concerts.

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This unique set of background skills seems to have prepared Khosla perfectly to head 7Spin, which operates alongside sister companies that provide booking, management, publishing, and consulting services. Indeed, Kosla's circuitous academic and professional experiences could serve as the template for label presidents who find they also need to step in as manager, booking agent, accountant, and music business consultant. With such hindsight, Khosla humbly admits that he was "really slow" to pick up the utility of his skill set. "People say it's unique, but I say if you had gotten into these courses, you would have figured this out sooner." A particular phrase resonated with him in our conversation: "Making it up as you go along—I know that well!"

Don't let the casual humility fool you, though. Khosla understands how the music business works, and he firmly believes that there is room for innovation, especially in the contracts signed by artists.  Traditionally, when an artists signs with a label, all the revenue earned from sales, booking, and merchandise goes directly toward paying back the label's investment in the artist. While the label makes a profit, most artists never pay back that "recoupable account", and even if they do, the label still owns the master recordings of their music.

Khosla uses the analogy of a homeowner to explain the deal. "You get a mortgage, work hard to pay it off with the hope that one day you'll own your own home. With that record deal, you get a loan, pay it back, but then you do not own the asset—the masters." While he recognizes that deals with major labels are still appropriate for some artists who rely on their significant resources, he offers an alterative. "At 7Spin music, either there is no recoupable account or we put nearly 100% of revenue towards recoupable." In other words, the label makes no money until the artist does. 7Spin contracts do not have to be all-inclusive, either. If an artist only needs help with booking concerts, they can sign an appropriate deal that fits those needs.

Such differently structured deals are not meant to alienate other business models. In fact, Khosla and his team will be the first ones to point a new artist toward a different label if they think it's a better fit. 7Spin has its own distribution deal with Provident-Integrity, part of Sony/BMG, one of the "big four" labels along with Warner, EMI, and Universal. Of the major labels, Khosla quips, "They either want to compete with you or own you. Let's work together—we're all in this economy together. I want to be a farm team for Sony or EMI when I need help. They know things about marketing risks that I don't."

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Ian Eskelin of 7Spin band All Star United has interacted with many labels, big and small, during his career. When the time came for a new All Star United CD, Eskelin was careful in his label choice. "The last thing we wanted to do was go sign a 360 deal with someone. I was looking for a sort of 'indie-plus' label, with less red tape and more fun. 7Spin allowed me a level of freedom I haven't had anywhere else."

The label connection is also helping All Star with a new kind of "product placement"—the appearance of songs on movies and TV. Songs from Love and Radiation have appeared recently on NCAA Baskteball programming, movie trailers, and ads for the CBS Fall TV lineup. Khosla describes the process: "It is an area that we are actively pursuing. We have met personally with Music Supervisors, sent them music, and I've tried to cultivate relationships." Eskelin notes the advantage such placement provides. "At the end of the day, people still want songs, and guys like Peter Khosla are looking for creative ways to get them out."

Innovative economics are met with innovative promotion and marketing at 7Spin. A "Prize Inside" program has rewarded CD purchasers with the chance for something more, much like the prize inside a box of Cracker Jack, but on a grander scale. Tucked inside CDs have been autographs, guitar picks, free merchandise, and even "Golden Tickets" awarding a listener with a personalized backyard concert. Sevenglory traveled to Gary, Indiana for a backyard concert that turned into a memorable worship time for several families. Still, Khosla notes, "It's a good prize, but logistics can be tough."

It is easy to imagine that most small labels would like to foster community among their staff and artist roster, but 7spin takes that concept to an unusual level. The company has ties with a small apartment complex now called "The Dorm" that tends to house artists, staff, interns, and anyone associated with 7Spin who needs a place to stay. There was even a time when most of the artists attended the same local church because it had a Monday night service that fit their schedule. A Bible study there on Luke and Acts was led by Khosla himself, and he sees the examples of the early church evidenced in the 7Spin crew. "The sense of community is atypical, not just for a music business but really for any Christian business. Our little community is a microcosm of what's happening nationally, with a growing understanding of how the Body is supposed to work, our interdependence. We benefit from seeing the needs of each other and learn to identify our God-given talents."

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Fred Butson of Sevenglory echoes the sentiment. "It's quite a family. We're all on board with what 7Spin is doing and what they're about. It's important to us that the environment is family-friendly, and that we're working with people we would want to call part of our family." The band has been with the label since their mutual origins, and Butson's recollections convey the gravity associated with a band's decision to sign with a label. "We trusted Peter a lot—he was in charge of us making a living. The industry was changing so much, and we didn't feel any security going with someone we didn't know."

It is undeniable that record labels still play a critical role in the music business, though models are necessarily changing with the times. Far from "making things up as they go along", 7Spin music is at the forefront of that change—a small label making big music and changing the industry, one innovation at a time.