Record labels have a rich history, dating back almost as far as recorded sound itself. Traditionally, being signed to a label was seen as a mark of success in the music industry.
Despite the rise of the internet and digital platforms, record labels remain influential players in the music scene. Yet, many people aren’t familiar with the ins and outs of how they operate. This guide will shed light on the role, structure, and history of record labels.
What Is a Record Label?
Record labels handle everything from producing music to promoting it. They operate various departments to have their artists’ work reach as many listeners as possible. In exchange, the label earns a percentage of the revenue generated by the music sales and other income streams.
Evolution and Consolidation of the Record Label Industry
Record labels began in the late 1800s with the commercialization of phonographs and phonorecords, led by the Thomas A. Edison Company, Victor Talking Machine Company, and Columbia Phonograph Company. In the 1910s, the expiration of audio recording patents allowed independent labels to emerge, despite competition from radio and the economic impact of the Great Depression. By the 1930s, the industry had consolidated, with American Gramophone Company, Decca, and RCA Victor as the leading labels.
The 1940s saw the rise of new independent labels and film studios entering the music business. In the 1960s, major consolidation took place, with CBS, Warner Brothers, and others acquiring many smaller labels.
The 1970s saw aggressive expansions and mergers, with Warner creating WEA and Polygram buying several labels. EMI and MCA also grew through acquisitions. In the 1980s, major acquisitions continued, including RCA by General Electric and Columbia by Sony. New labels like Def Jam and SubPop emerged.
In the 1990s, MCA became Universal Music Group, CBS Records became Sony Music, and Warner-Elektra-Atlantic became Warner Music Group. Numerous mergers and acquisitions strengthened Universal’s position. By the 2000s, Universal Music Group, Sony Music Entertainment, and Warner Music Group were the top three labels, and this has been true since.
The Leaders: Universal, Sony, and Warner
Universal Music Group, the biggest player in the music industry, holds sway over more than 30% of the market’s revenue. Apart from Taylor Swift, UMG’s umbrella includes:
- Republic (Drake, Post Malone, Ariana Grande, The Weeknd, Nicki Minaj)
- Def Jam (Kanye West, Justin Bieber, Rihanna)
- Motown’s partnership with Quality Control Records and Lil’ Baby
- Interscope Geffen A&M (Billie Eilish, DaBaby, Eminem, Lady Gaga, Olivia Rodrigo)
Warner Music Group doesn’t have the star power of the UMG, but it’s making strategic moves elsewhere in the industry.
They’ve acquired media outlets like Uproxx, HipHopDX, and IMGN, and invested in Dapper Labs, known for NBA Top Shot. They also invested in Roblox before it went public. They want to avoid over-reliance on giants like Spotify and Apple to protect their margins in licensing deals.
Sony Music has been spending a lot, acquiring independent record labels and forming partnerships. They’re targeting indie labels because they struggle to maximize exposure for their artists. Sony’s CEO says talent acquisition is getting pricier as attention becomes harder to capture.
How big are these labels, you might ask? In 2023, the three major music companies — UMG, WMG, and SME — collectively made around $13 billion just in half a year. This was a billion dollars more than what they earned in the same period in 2022. This breaks down to roughly $72 million per day or about $3 million every hour.
What Does a Record Label Do?
Let’s walk through the process of working with a record label from an artist's perspective:
Signing the contract
- You meet with various record labels to discuss potential deals.
- You negotiate the terms of the recording contract, which includes financial, creative, and promotional support.
- Once both parties agree, you sign the recording contract, which is an exclusive agreement between you and the label.
Receiving an advance
Upon signing, the label gives you an advance. This is a lump sum of money to support you during the recording process. Remember, this advance is recoupable, meaning it will be deducted from your future earnings like royalties.
Recording the album
- The label assigns a representative to assist you. They help you find the right producers, songwriters, and collaborators.
- The rep arranges for recording studio time and provides feedback on your recordings.
- The team supports your creative vision while making sure that the recordings meet commercial standards.
Marketing and promotion
The label’s marketing team creates and executes promotional campaigns to launch your music. They handle press releases, media appearances, and social media promotions. These marketing expenses are also recoupable.
Distribution
The label makes sure your music is distributed through physical mediums (like CDs and vinyl) and digital platforms (like Spotify, Apple Music). For this, they leverage their distribution networks to reach a global audience.
Revenue sharing and royalties
The label manages the income from your recordings, and verifies that you get paid according to the contract. They handle the licensing of your music for mechanical rights, needed for physical and digital distribution.
Additional revenue opportunities
The label’s brand partnership team looks for opportunities for you to collaborate with brands. The sync team licenses your music for use in movies, TV shows, and commercials, all this to create more income streams.
Ongoing support
The label continues to support your career growth through new recording projects, tours, and other promotional activities. Finally, they work with you to develop a long-term strategy for sustained success in the music industry.
The Role of Record Labels in the Digital Age
With digital recording software, musicians can now create high-quality tracks from their living rooms using just a laptop. This accessibility means artists can record and distribute their music independently, and this makes it harder for record labels to justify taking a share of their profits.
However, record labels still offer advantages, particularly for artists looking to advance their careers. Labels provide essential funding for promotion and distribution, which is prohibitively expensive for independent musicians. They have connections and expertise that can expand an artist’s reach by a lot.
Labels also improve the quality of an artist’s music by providing access to top-tier recording studios, equipment, and producers. Once the music is ready, labels handle branding, public relations, and strategic release plans to maximize sales and exposure. Then, record deals lend credibility and help artists secure better instruments, sponsorships, and overall industry standing.
The Structure of a Record Company
At the top of a record company is the CEO, who oversees the entire business. Each label within the company has its own president. Below the president are vice presidents in charge of various departments, which include:
- A&R (Artists and Repertoire) — This department discovers and signs new talent, helps with song selection, and coordinates album production. They are a bridge between the artist and the rest of the company.
- Art department — Responsible for creating album artwork, advertisements, and store displays.
- Artist development — Plans and promotes the careers of signed artists. Sometimes called Product Development, focusing on initial heavy promotion rather than long-term planning.
- Business affairs — Manages bookkeeping, payroll, and finances.
- Label liaison — Coordinates between the record label and the distribution company, decides album release dates and prevents conflicts between labels.
- Legal department — Handles contracts and any legal issues involving the company and its artists.
- Marketing department — Develops overall marketing strategies for album releases and coordinates with promotion, sales, and publicity departments.
- New media — Manages music video production, online presence, and new technologies for streaming music and videos.
- Publicity and promotion department — Secures media coverage, including articles, radio, and television appearances.
- Sales — Works with retailers to get albums into stores.
Record company structures vary, especially as large companies acquire smaller labels. Most companies provide detailed information about their labels and artists on their websites.
Types of Music Labels
Here are six categories of record labels you could see today:
Major label
The pinnacle of the industry, major labels represent the dream for many artists. They offer massive exposure, resources, and opportunities to collaborate with top producers and musicians. However, signing with a major label means sacrificing some creative control and navigating a highly competitive environment.
Independent label
Independent labels are good for artists seeking authenticity and creative freedom. They provide a more intimate and personal approach to music-making and allow artists to explore their unique sound without the pressure of commercial demands. While they lack the vast resources of major labels, indie labels offer a supportive community and opportunities for niche audiences.
Digital label
Digital labels are like the virtual stages of the music world. They offer artists the opportunity to showcase their work online and reach audiences worldwide without the need for physical distribution. Just be aware that while they provide a platform for exposure, breaking through the digital noise and gaining recognition can be challenging.
Vanity label
Vanity labels allow artists to take ownership of their music and artistic direction. Artists can release their work independently and retain full control over their creative vision and decisions. Again, breaking into the mainstream and reaching a wider audience will require additional support and resources.
Production label
For artists passionate about the craft of music creation, production labels offer a collaborative environment to experiment and innovate. Working closely with skilled producers, artists can refine their sound and bring their musical vision to life. However, success in the industry will hinge on finding the right balance between creativity and commercial viability.
Open-source label
Open-source labels provide a platform for artists of all backgrounds and styles to share their music freely. The good thing is that they offer opportunities for exposure and networking. The bad thing is that it’s hard for artists to get noticed among so many talented people without substantial backing.
Major vs. Indie: Questions to Ask Yourself
Do you want access to substantial resources and experienced teams?
Major labels have more resources and experienced teams dedicated to developing artists and their careers. This can provide you with high-quality production, marketing, and promotional support.
Do you prefer stability and established practices?
Major labels provide a safer and more stable approach to an artist’s career. With well-established practices, risk management, and financial backing, major labels offer a more secure path for artists.
Do you value the industry influence and connections?
Major labels have extensive industry networks and influence, which results in broader exposure and access to traditional distribution channels. This is crucial for artists seeking to reach a larger audience and achieve international fame.
Do you prioritize artistic integrity and focus on music over profit-driven objectives?
Indie labels are better at protesting the artist’s creative vision and musical authenticity. They sign artists based on their passion for the music rather than focusing solely on commercial success. This allows for greater artistic freedom.
Do you prefer being one of many clients at a major label or receiving more personalized attention at a smaller indie label?
Artists need to decide if they’re comfortable being part of a larger roster at a major label, where they might receive less individualized attention. Or they may prefer the more personalized support provided by smaller labels.
Can You Be a Music Artist Without a Record Label?
Yes, you can. Many independent musicians have successfully built their careers through self-promotion, social media, and online platforms.
However, while being independent offers creative freedom and control over your music, it also presents challenges, such as limited resources and marketing reach.
Ultimately, if you’re serious about pursuing a career in music, it’s better to seek backing from a record label. You can try your hand at being an independent artist in the beginning, but signing with a label will help you elevate your career to the next level.
How to Get Noticed by a Record Label
Getting signed to a record label is not as elusive as it seems. Here’s a guide to help you land that label deal:
- Quality is key. Make music that demands attention and showcases your unique style.
- Grow a dedicated fanbase that will support your music. More fans mean more potential buyers for your music and merchandise while catching the eye of labels.
- Identify labels that align with your musical style. Study their current roster and past releases to understand if they’re a good fit for your music.
- Make sure labels are actively seeking artists and follow their submission guidelines meticulously. Verify the information is up-to-date before sending your demo.
- Look for A&R personnel or other contacts responsible for artist submissions. Use websites, LinkedIn, or industry directories to locate them.
- Have a professional website and electronic press kit ready with essential information about your band, music, and contact details.
Concluding Thoughts
We are in a music revival, where new sounds and easier production, marketing, and distribution methods are giving artists more control over their careers. Independent and small labels are important because they provide essential support to artists. At the same time, big companies, with many artists on their roster, are the true creators and supporters of the industry. They make things happen by offering extensive resources and opportunities and driving the success of the music world.
Whatever avenue you choose, be sure that labels matter, and no amount of self-produced music will change that.
