On a Tuesday night at the Mercury Lounge, the small, dimly lit venue in New York’s Lower East Side, known for being where A&R reps are prone to get their first taste of soon-to-be massive acts like Mumford & Sons, four young guys from Canton, Ohio who go by the moniker Hey Monea! took the first set on stage. The band is one of the latest signees to Hard Rock Records.

A little more than a year ago, the worldwide hotel and restaurant chain, with an obvious and long-standing association to music, announced they would be undertaking a new venture — all in the name of marketing — and joined an ever-expanding list of brands that have launched private record labels in support of the music community. From Red Bull Records to Mountain Dew’s Green Label Sound, it has become an increasingly popular method of raising awareness around a brand or product, and an attempt at adding a certain “cool factor” to a brand’s profile. But if the cost of recording, producing, supporting tours and promoting a band is notoriously high, what is the measure of ROI that makes such a venture worthwhile for a brand?

Blake Smith, co-head of A&R for Hard Rock Records, takes a sip of his Brooklyn Summer Ale at the swanky Sons of Essex, before explaining how this all came about. Along with his partner-in-crime, James Buell, and Chief Marketing Officer at Hard Rock John Galloway, they were exploring ideas. “We were talking about how Hard Rock has been a music-based brand for the last 40 years,” says Smith, “and wanted to come up with a way to give back to the musical community.”

“We take an unknown band, that maybe would not know how to navigate the music industry, but has a lot of talent,” Smith says of the prospects they consider for signing, “And we do everything, soup to nuts for the band,” from funding a record, to buying a tour van, to hooking them up with the top producers, management and agencies in the business. The contract with Hard Rock lasts for exactly one year from the day of album release, and at the end, the band walks away with their masters, publishing rights – the whole kit, cat and caboodle. “We never take a penny the entire time,” says Smith. “So basically, it’s rock & roll philanthropy.“

Smith is hesitant to give a ballpark figure around what the company invests in each of the acts, other than to say that the cost varies. “Certain bands have a more fleshed out sound and probably need more detail in the studio, and are comfortable spending 8-12 weeks making a record,” says Smith, “other bands that we have on the roster just want to go in and bang it out in two weeks, and that is their choice.”

The average cost of a recording studio is difficult to ascertain, as it can range from $50 an hour to several thousand for a full day. Top-of-the-line producers can cost upwards of a hundred thousand dollars to bring on board, and given the small size of the fan base of the acts they are signing, it can take a good while before they are performing at venues that will pay more than a meager fee or offer a door split deal for a set. In the case of smaller acts, tours can often cost more than they bring in.

The Hard Rock Records team itself is lean, with only five dedicated employees. Smith maintains his role as head of music direction for the Hard Rock restaurants, and Buell for the cafés. Seven-piece americana rock band Rosco Bandana was the first band to sign with the label, but this year they are expanding the number of acts on the roster. The financial investment can be justified, as the venture could prove to be a mutually beneficial relationship for a brand the size of Hard Rock. (Hard Rock International was purchased in 2006 by the Seminole Tribe of Florida, at a price tag of $965 million.)

Launched in 2005, Toyota Scion was one of the early adopters of this type of marketing strategy. Intending to reach their target consumers, between the ages of 18 and 34, by promoting lifestyle values that potential customers could connect with on a personal level, the brand launched Scion A/V in an effort to stand apart from competitive brands. Not strictly a record label, Scion A/V is a program focused on music, film and art, but agreements with artist will range from releasing an EP, funding music videos, to sponsoring tours and marketing.

“We are very different from a traditional record label,” says Scion Sales Promotions Manager Jeri Yoshizu, “in that it is not a revenue generator.” The program is project-based, with artists entering in to licensing agreements for a period of six months to a year. Artists are paid between $500-10,000 per song, depending on their size of fan base and potential reach. Scion A/V was responsible for 48 releases in 2012, and has set a minimum of 24 as their goal for 2013, shifting their focus to bigger artists.

Yoshizu explains that the value of Scion A/V to the brand is measured in terms of impressions, and is not tied specifically to sales, as it is only part of an overarching advertisement strategy. Depending on the deal, the brand will have a presence at performances, or feature on materials, but essentially the value lies in creating a connection between a fan and a brand.

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Signed to Red Bull Records, AWOLNATION has a massive fan base with more than 600,000 Facebook page likes and close to 75,000 Twitter followers.

Also in this space, Red Bull Records have seen great success with acts they have signed. The beverage brand launched their label in 2008, and have since established a valued reputation in the industry with commercially successful acts like AWOLNATION on the roster. “Sail,” off the debut album Megalithic Symphony from 2011 went platinum, the band has more than 600,000 Facebook page likes, close to 75,000 followers on Twitter, and about 35 million video views on YouTube. Although it has been more than two years since the release, AWOLNATION saw north of 22,000 spins on US radio in the past month. This translates to broad reach and scores of impressions for the associated brand.

As Rosco Bandana’s contract with Hard Rock Records comes to a close, the band has released an album, recorded music videos, and toured the United States, but there has not been a significant amount of movement in their numbers. The band still has less than 1000 Twitter followers, added a mere 3500 Facebook page likes since signing with the label, and see only the occasional spin on US radio. But Smith isn’t concerned.

“It takes a long time to break an artist,” he says, noting that Rosco Bandana are about to go on tour with Grammy-winners Fun.. “They’re going to be playing in front of 18,000 people a night in a couple of weeks, and they were playing in front of 12 people when we found them.”

As for Hey Monea! – the album is due out in September, and as front man Dan Monea wraps up their set with a version of title track “Cheap Souvenirs” that brings to mind iconic songs like “Long December” from the Counting Crows, it is easy to see why Smith signed them. With a little bit of luck, fans will think of Hard Rock when they sing along.

Liv Buli is the resident data journalist for music analytics company Next Big Sound. Buli is a graduate of New York University’s Arthur L. Carter Journalism Institute and her work has appeared in Newsweek Daily Beast, Forbes, Billboard, Hypebot and more.