I've been giving some thought to starting my own record label. Seeing as I have web design experience and music production experience, I would setup a music store and also sell the tracks on iTunes.

My plan at this point was to basically recruit artists and bands that I like their music, and help them distribute their music. I'd really be doing this to help music I believe in (not just my own) get put out there. My plan would be - I would want to cater to their creativity and not their output. Because they are, after all, artists; creating is what they do. And by putting out the music digital, they can write, record, master and release a song in a day if they want to. They don't have to wait til they have 10 songs to make it more cost effective, they can release it at 4 songs if that's what they want. Nor do they have to pare it down to 10 songs, they can release an album with 50 songs if they want. They can create and release at whatever pace is comfortable for them.
All they'd have to do, is send me the mp3 master, and cover art, and I'd take care of the rest.

Ideally, for the customer, this means more new music, more often. Not more often only because the artist might be creating smaller collections of songs, but surely, wouldn't you rather get 3-4 new songs every 3-4 months than have to wait a year between records? No, I mean more often because no one has to wait for someone else's record to come out before theirs can. No one has to wait for the label to juggle money. The only time constraint on my label's end would be the time it took to upload the tracks.

Now here comes my question. The way I had this planned out...basically means I wouldn't be owning anything. I'd let the artists own their own masters and thus can do whatever they want. They can also profit from whatever they do. So what begins its life as a series of downloadable EPs at at my music store and on iTunes might at some point in the future turn into a box set on the artist's website, or CDs on tour. And you'll know that buying it from them meant every dollar went into their pocket.

So how will I make money on the downloads if I follow this business model? How much is too much to take from profits? Because, obviously I'll need some to keep the label going. (If I'm losing money..it is like Annie said recently, an expensive hobby.) Any suggestions to improve my current business model? I'm also curious, what expectations should I have, as far as, from the artists/bands? Should I expect them to not release or participate on other projects without my consent? Should I expect them to mention the label on their website/myspace etc? The more specific the better. I'd appreciate it!
[Edited 2/7/08 15:28pm]