Steve PMHAs it turns out, publishing music is way more complex (and expensive) than most people imagine.
Someone has to deal with all that racket before you get to play your favorite tracks.
The majority of the hard work lies on the shoulders of record labels.
If you’re fairly new to the music scene, hearing words like recording contract, recoupable cost, and release cycle can be a bit overwhelming.
So, what is record label operation like, and how can new artists navigate their way through them?
Let’s dig in!
What is Record Label Business Model Like?
A record label is a company that takes up deals with artists to produce, promote, and distribute music.
By investing in this release cycle, the label stays profitable while helping artists push their art into the market and make money off of it.
How Does a Record Label Operate?
Back in the late 1800s, when record labels first became a thing, they focused on distributing music in the physical sense with commercialized phonographs.
With time, the line of operation shifted to suit the introduction of digital music.
Although it became easier to find talent, the market has gotten more competitive. It also became harder to protect the copyrighted material.
Let’s take a look at the typical processes that a record label is involved in:
Artist and Repertoire
The first part that an artist gets to see from the label is usually an agent from the Artist and Repertoire (A & R) department.
What this agent’s role is all about is finding new talent to recruit and develop.
Networking at this stage can be through live shows and events. However, the artists can also take initiative by sending their demos to the companies.
It can take quite a lot of filtration and auditing before the label settles on taking on an uprising talent as a client.
The department then handles the negotiations for the recording contract, which opens up the way for the music creation process to begin.
Sales and Distribution
Between signing and publishing, the track goes through recording and production phases.
This all happens under the guidance of the label’s creative team, of course.
Once the music is all ready to go, the company sets up a proper distribution network with its selection of retailers.
It’s also responsible for marketing to boost sales through adverts, and music videos.
Labels might even push pay-for-play deals with radio stations to get their music across to a wider audience base.
Keep in mind that pay-for-play without disclosure is considered illegal payola, though!
Licensing and Copyright Enforcement
Traditional record deals give the label ownership over the mechanical rights and master recordings.
It essentially purchases these rights from the artist with an advance payment.
That’s why labels try to strictly apply copyrights as hard as possible. After all, copyright infringement is a loss of the company’s profit!
If you keep up with the music scene, it’s not uncommon to hear of lawsuits and claims over song piracy.
In the States, these allegations are often filed under the Digital Millennium Copyright Act (DMCA.)
Paying the Artist
The relationship between labels and musicians is mutually beneficial. So, the original creator ends up getting a split of the revenues.
However, there are a few hurdles before the artists can get a steady stream of income for their arts.
For one, the company needs to cover its recoverable expenses.
This means that it needs to get back all the money invested in the steps of making music, from recording to marketing.
Keep in mind that the minimum spending line is set within the contract as a release commitment band.
If the sales of the track or album never make it over that recoupable line, the artist settles for only the very first advance check as a master royalty.
It’s all a very well-thought-out deal when you think about it!
Yet, this well-oiled machine comes to a halt in the face of peer-to-peer sharing and digital piracy.
More recently, artists are even skipping label deals altogether and self-publishing.
Can Artists Release Music Without a Record Label?
It’s absolutely possible for musicians to produce and release tracks without needing a supporting label.
These are called unsigned artists, and they’re more common than you’d imagine.
While record labels do the bulk of the heavy lifting on behalf of the artist, their contracts can sometimes be too restricting.
Plus, for small-scale creators, the major companies tend to be out of reach. That’s why a portion of musicians now find ways to release their music independently.
It also helps that the process is getting easier with technological advancements.
Even the most novice of beginners can now produce an album and distribute it worldwide. It only really takes a decent recording setup and an account on any music aggregator.
Record Labels vs. Music Aggregators: What’s the Difference?
So, unsigned artists can release music by finding an aggregator, but what does that mean?
How is it different from landing a record deal?
Here’s the gist of it:
Music aggregators are independent digital distribution services. For the consumer, they typically double as streaming services.
Meanwhile, they enable artists to release their art globally for a set revenue per stream.
Don’t let the technical definition confuse you. You’re more familiar with aggregators than you think!
The top music aggregators out there are iTunes, Spotify, Apple Music, Tidal, and Qobuz. The concept doesn’t feel so detached now, does it?
You open up any of those apps on your phone to play your favorite tracks. In exchange, you either pay for a subscription or deal with a few ads here and there.
On the other end, the original creator gets a profit that’s proportional to how well their music is doing on the platform.
Let’s see how these independent distributors compare to record labels:
Publishing Availability
The main appeal of music aggregators is that they’re wildly available to anyone, and I’m not even exaggerating.
Any artist can set music with a distributor as long as they have a laptop, a decent-quality sound recording, and an account on a third party site like Wiseband, RouteNote, or Tunecore.
It’s one of the perks of the internet, I guess!
Meanwhile, it’s definitely way more challenging to land a record deal with a major label.
Unless you already have clout, it takes a lot of effort (and a bit of luck) before your demo is picked up by an A & R agent.
That’s why up-and-coming artists might find it easier to release on music aggregators versus a label.
Artistic Control
When compared to traditional labels, aggregators offer their musicians more artistic freedom.
A lot of record deals give the company control over the music. This encompasses how the music sounds to the most minor details like the album cover art.
Some artists are even limited in the type of songs and lyrics they can create during their contract period with the label.
This can make the relationship between musicians and labels feel a little contentious in some cases.
You’ll still have to comply with standard terms of use to have your music accepted on aggregators.
However, it’s much more forgiving than your typical record deal.
What Are the Top Record Labels?
Despite all the challenges facing digital music, the market is more or less an oligopoly.
That means that a small number of companies take up the majority of the market space.
It all started with six big names. Over time, it ended up slimming down after a couple of mergers.
The most notable is the one between Sony and BGM or the one with Universal and Polygram.
The top parent record labels now include:
- Warner Music Group
- Universal Music Group
- EMI
- Sony Music Entertainment (SME)
Of course, indie labels are a whole different story!
What Are Indie Labels?
Indies are independent record labels that operate with limited capital, funding, and distribution networks.
Even if Indie label names don’t end up gathering much traction, they still have a deep impact on the industry.
Here’s a list of notable Indie labels and their top contributions to the art form over the years:
- Sub Pop: Released hits from Death Cab For Cutie, Foals, and even Nirvana’s first album.
- Rough Trade: Dealt with Rock bands like The Strokes and The Libertines.
- Modular: Collaborated with Tame Impala, The Presets, and The Avalanches.
- XL Recordings: Distributed for The Prodigy, Basement Jaxx, and Radiohead.
- Domino: Witnessed the start of many UK bands like The Kills and Arctic Monkeys.
- Transgressive: Worked with The Shins, Two Door Cinema Club, and others.
- Warp: Most commonly known for distributing for Grizzly Bear.
- Communion: Started as a promotion company but also published for artists like Ben Howard.
How Indies Compete With Major Labels
Unlike popular belief, Indie isn’t a new face on the music scene. It has always been there.
However, the general anti-corporate attitude that popped up with the rise of Punk Rock in the 1970s helped push Indie labels even further.
Later on, College Rock turned into the well-developed Alternative Rock genre.
By then, major labels had caught up with the scene and started fitting the new style into their catalogs. After all, they’re commercially oriented.
Since the deals you’d get from large labels were tempting, a lot of artists ditched their loyalty to Indie.
Yet, the small-scale labels didn’t disappear from the scene. They found fresh talents to represent.
This new talent might also sell out later on to large companies, but that’s mostly what it has been for the last few decades.
Indie fishes out the styles that would later on become trendy with large corporate-style record labels.
Why Indie is Still Relevant
Despite the profit disbalance, there are a few merits to signing up with an Indie label.
For one, the structure of a typical Indie label makes it more on the ground level. This allows it to predict and find the music styles that have the potential of catching on.
As a plus, the artist usually has more control all the way through. The label interferes mostly with distribution only.
The resulting art can be a little raw, but it still has its appeal as something true to the musician’s vision.
It is, by definition, cutting-edge art.
In fact, some major record labels are now mimicking this operation style by letting their hit-name musicians set up a vanity label, much like Madonna’s Maverick, under the Warner Music Group.
However, those are usually less successful than the real deal with true Indie labels.
What is a 360 Record Label Deal?
Besides setting up vanity labels, companies have also tried to catch up with the changes in the market. They expanded their reach by readjusting their contracts.
A prominent example of that is the introduction of 360 deals.
In the music industry, a 360 deal is a relationship between artists and a record.
It’s a little more conclusive, though, since it covers more than just the aspects that cater to music creation and distribution.
It typically includes rights for merchandising, sponsorships, media appearances, product endorsements, live performances, and touring.
All of these would have been considered off-limits in the past, and they can gather quite the income.
As a part of these conclusive deals, the record label has to be continuously seeking new opportunities to develop the artist’s brand in the scene.
That’s why 360 deals usually have a longer contract with a bigger cut going to the company.
In a way, it allows the record label to make the most out of the artists.
Meanwhile, the artists get to sit back and have the majority of the tough calls made for them.
Despite the criticism and controversy around such restricting contracts, they’re still getting more and more common.
For instance, Nicki Minaj, Young Thug, Migos, and Robbie Williams were all involved with 360 deals at some point in their careers.
Some Indie labels are also jumping on the opportunity.
All in all, it could be an indicator that the old way of conducting business is losing its profitability.
What is Record Label: Conclusion
Despite the complexity, record labels play a vital role in launching artists. They handle everything from production to marketing, in exchange for ownership of recordings and a share of profits.
New artists can navigate this system by understanding the process and comparing record deals with independent distribution offered by music aggregators. Both have advantages: labels offer wider reach but less control, while aggregators provide more freedom but less exposure. Indie labels, though smaller, can be a good starting point for artistic development.
Ultimately, the choice depends on the artist’s goals and priorities.
