In the late 1980s, the fledgling Seattle record label Sub Pop was a mess. It struggled to pay the phone bill; staff would race to cash their wage cheques before they bounced; and the management couldn’t even cover studio time that had been booked for their artists. “We were a big train wreck,” laughs Megan Jasper, who was then the label’s receptionist. “But the funnest train wreck you’d ever want to be on.” One of the label’s mottos became: “Going out of business since 1988.”

Then, in 1989, Nirvana released their debut album on Sub Pop and saved it. Now, as the company celebrates its 40th anniversary, Jasper is the chief executive. “Is it rewarding and is the label still working? Yes,” she says. “But it’s never been easy – there have always been challenges and now there are more of them. Plus, it’s harder than ever for artists.”

Other independent record labels are hitting big milestones this year – the Indiana-based Secretly Group turns 30, as does the Los Angeles hip-hop and alternative outfit Stones Throw, while Rough Trade is 50, having gone from being a little west London record shop to the label that launched the Strokes, the Libertines and countless indie legends. In some respects, the future for indies is rosy: more people are listening to them than ever, thanks to streaming. But with the vinyl market wobbling and major labels hungry for the hip acts that are the lifeblood of indies, this part of the industry is just as shaky as it was when Jasper was starting out – perhaps even more so.

“The labels hitting these anniversary milestones were built in simpler times – it would be so hard to start out now,” says Phil Waldorf, the co-owner of Secretly Group, which includes the labels Dead Oceans, Secretly Canadian and Jagjaguwar and is home to indie stars such as Bon Iver, Phoebe Bridgers and Mitski. Even for big companies such as his, “there are things in the ether that concern me as to what it looks like in 10 years”, chief among them the fact that “there is a gutting of mid‑tier artists – the kind that can have a good, steady career that pays the bills, but is not at superstar level. Now, it’s either really working or you’re just accruing debt – there’s not a lot in between.” Because of the high cost of touring alongside the low income from streaming, unless you’re getting decent numbers, “artists are either really big or they’re kind of losers, economically.”

Waldorf is often in competition with major labels when signing artists. “Our numbers [revenue and streaming stats] are trending up, but the investment you make in artists is outpacing that,” he says. In a competitive market, artists can command greater and greater cash sums for the advances they get paid to make records. By offering big advances to new acts, “it feels like the major labels are trying to take artists off the board and scoop up everything away from the competition at almost any cost – like they’re buying as many lottery tickets as they can.”

Another head of a large independent label, who wants to remain anonymous, says advances for artists at this level have tripled in the past few years. An “entry level” artist with a modest following might be looking at low six figures for their first album, whereas “anything that has any juice at all” is now mid six figures, up to $1m (£740,000). “It’s very aggressive,” they say. “But the conundrum I can’t wrap my head around is: these artists aren’t selling any more records. There’s currently no signing an artist where the math problem looks good.”

Also, costs are spiralling upwards in the social media age. Now, you have to hire videographers and shoot much more than a music video to promote your work. And those social media accounts where people recommend records as though they’ve been curated personally? “So much of it is paid for,” says Waldorf. “There’s not a lot of transparency around it. It’s like this race to flood the algorithm.”

Labels feel the pinch of growing tour losses, too. “Touring is so hard for artists,” Waldorf says. “Tour support budgets [mini advances to fund artists going on the road] are up and we are covering a lot of deficits. Artist development just costs a lot. Once you’re over the hill, you can scale,” meaning the artist can play bigger venues, earn more from streaming and sell more merch, with the label potentially taking a cut of all of it. “And you can do very well. But that first 10 miles is very hard.”

It means that established labels are reliant on trading off their legacy. “Our back catalogue largely drives our sales,” says Jasper of an inventory that includes platinum albums by Fleet Foxes and the Shins as well as Nirvana. For nearly 12 years, until it closed in December, the label had a shop at Seattle airport, where its biggest seller was a Sub Pop logo T-shirt.

This rings true for Bradley Zero of the genre-fluid London-based label Rhythm Section. “Merch is huge and counts for about 25% of sales for the label,” he says. “We have printed tens of thousands of T-shirts and that’s allowed us to sign artists and put money into projects.”

One thing that isn’t booming, though, is vinyl – even though yearly headlines about the “vinyl revival” suggest otherwise. “You read that streaming is destroying the music industry and artists are struggling to make a living, but it’s 80% of our profit,” says Zero. “You can sell a record for £15 to £20, but you have to make at least 300 – and if you only sell 100, you’ve lost about two-and-a-half grand. It’s easy to vilify companies like Spotify, and with good reason, but that’s more of an ethical thing than a practical consideration.”

Marcus Scott, the manager of the London-based electronic label Hyperdub – which has released albums by Burial, Laurel Halo, Loraine James and DJ Rashad – begrudgingly accepts that streaming is beneficial to indies. “It works,” he says. “Obviously, none of the artists and the label want to work with Spotify, because it’s hideous.” There are widespread complaints about Spotify’s royalty rates, while it has been criticised for previously hosting adverts for ICE, the US government’s immigration agency, and for its chief executive funding a military technology company. “But we all understand that it’s the biggest streamer for us.”

Everyone here says vinyl sales peaked during the Covid lockdowns and are now, after returning to pre-pandemic levels, plateauing or even on the downturn, while production costs are going up. “As standard, we were pressing 1,000 units,” says Zero. “The last two or three years, the most we’ve pressed is 500 and it’s usually 300 or 400.”

A problem for smaller labels such as Rhythm Section is that buzz and demand can mean an initial run sells out, but a restock order might take three months, by which time momentum and interest have waned, leaving the label with dead stock and lost profit. Jasper says Sub Pop’s vinyl sales are “strong and stable”, but she has caveats: “It was a quarter of our revenue last year, but we’re not seeing it grow. Conversations are now about whether vinyl makes sense, so we don’t do it for every artist.”

At Melodic, a Manchester-based label that has put out records by WH Lung, the Soundcarriers and Strawberry Guy, revenue is now 82% streaming versus 5.5% for physical. In the early 2000s, albums might have shifted about 7,000 vinyl and CD copies. “Nowadays, we’d be happy with selling around a third of that,” says the label’s founder, David Cooper. The past three albums released on the label sold 3,500, 2,360, and 1,330 physical copies. These days, 2,000 is a good number of physical sales for Hyperdub, while album advances paid to acts on these labels is between roughly £1,000 and £7,000. “We’re a critics’ favourite, but we’re not doing massive numbers,” says Scott. “But it’s not our ambition to grow; it works fine as it does. It’s tighter than ever, but we’ve got pretty good at figuring out how to still keep going and make decent money.”

Scott admits that the label needs the popularity of its enigmatic artist Burial to keep it going in its current form. “Burial is vital,” he says. “It would be a much smaller label without him. Any money that comes in from him selling back catalogue helps cushion the blow of our releases that might not recoup for a year or two.”

To survive such precarity, Melodic has branched out into label management, running UK operations for US labels such as Daptone, Carpark and Secret Friend, music publishing – handling artists’ songwriting catalogues – and artist management. “We couldn’t survive with our staff of six solely with the label’s releases,” says Cooper.

Memphis Industries – which puts out Field Music, Dutch Uncles and the Go! Team – has made similar moves, which have paid off. “The general perception is that it’s probably tougher than ever running an indie label,” says Matt Jacob, the co-founder of the London-based label. “For us, it’s probably one of the most exciting periods in our modest history. Streaming has given us a base level of monthly income, so we can go off and do fun stuff like managing Yard Act and Fat Dog while we keep the label bubbling.”

There is also the unpredictability of social media hype to contend with. Strawberry Guy, a Welsh indie pop musician on Melodic, went viral and now has more than 10 million monthly listeners on Spotify, with his biggest hit, Mrs Magic, creeping towards 700m streams. With 50% of that income going directly to the label, it has been a huge boost, although not one you can reverse-engineer.

Unexpected placements in film, TV and advertising can also bolster labels during tough times. “Wolf Parade is a heavy hitter again,” says Jasper, because the indie rockers’ song I’ll Believe in Anything was recently used at length in the ice-hockey drama Heated Rivalry. These are vital income streams; such deals make up 9% of Sub Pop’s annual income.

What do you do when you don’t have a large back catalogue, big-name stars or an established label identity to generate merch sales? Could any label founded today have the same longevity? Waldorf doesn’t think so. “The CD business was an amazing thing for smaller entrepreneurs to build on and that model doesn’t quite exist any more,” he says. “Without the partnership of larger infrastructure – another label or distributor – it would be a real struggle and you’d be deeply under-resourced. But I admire those labels that have that feeling of being boutique. It’s a rare thing.”

Zero says we are at a “generational crossroads. I would have no idea how to launch a label on TikTok – and I think that would be what you’d have to do now. It’s a battle for attention, and it always has been, but the rules for the game were a bit more understood by millennials.”

But as someone who recalls struggling all those years ago, even in the so-called glory days, Jasper remains optimistic, with the same determined – and some may argue naive – belief that idealism will carry these labels through. “Is it still possible? Yes. Is it going to be challenging and are you going to fuck up to the point of risking the business you’re starting? Probably. But it’s all about that moment where someone hears a song and they’re like: ‘Oh my God, how was I even living before I heard this?’ That’s the stuff that means the world and drives all of us.”