What you need to know about Record Labels

Posted by Daniel Hodson (Updated: Wednesday, April 19, 2023)

Approximately 4 minutes reading time

What is a record label?

In short, a record label is a company that works with musicians to manufacture music, distribute and promote it. These companies can vary in size, from well known major labels such as Universal Music Group to smaller independent labels. Although there are some key differences that we'll get into later in the article, the motive of all record labels is the same - to sell the artist's brand and the product that they create.


The history of record labels in the music industry

The history of record labels in the music industry goes all the way back to the 1800s when mass production came into full force and music (then in the form of phonorecords and phonographs) began to be commercialized. At the time, the industry was dominated by three big labels: Victor Talking Machine Company, Thomas A. Edison Company, and Columbia Phonograph Company. Yet, at the turn of the 20th century, patents to audio recording technologies expired which provided access for independent record labels to emerge.

Throughout the 20th century, film studios began extending their reach to audio, such as Warner Records which continues to be one of the major players today. Yet, one of the biggest changes to the music industry came in 2003 when Apple launched iTunes, effectively revolutionizing the way we buy music via legal downloads, consequently narrowing the list of major labels to eventually leave the big three operating today - Universal Music Group, Sony Music Entertainment, and Warner Music Group. One of the burning questions for many artists today, is what is the difference between these major labels and independents?


The difference between major labels and independent labels

In addition to the big three labels we already mentioned, you may also have heard of other major labels such as RCA Records, Atlantic Records, and Capitol Music Group. Although still major labels, these labels are subsidiaries underneath Sony (RCA), Warner (Atlantic), and Universal (Capitol) respectively. When it comes to independent labels, some may be fully independent, while others may also fall within the jurisdiction of a major parent label - it is common for independent labels to utilize the distribution services of major labels.

Major labels typically deal with the world's most successful artists, having the power to place music in the hands of millions of listeners within days. The process of an artist being signed to a major label usually involves an A&R department (Artist and Repertoire) who seek out new talent and conduct negotiations between the artist and label. Artists will have to sign exclusive contracts with the label, often providing them with a large cut of the artist's earnings. 

Independent labels or indie labels are known for existing within the cutting edge of the music scene, often throwing their support behind up and coming artists. Unlike major labels, there typically isn't lots of money available at the label so lower-paying deals are offered to artists in the hope to get them more well known. They also often have a far smaller distribution network available for pushing out their signed artists' music. Yet, indie labels also have a great reputation for scouting and supporting the next big music trends and artists. Many of the most influential music artists in recent history began their journey with independent labels. 

As an artist, the label you sign to will most often depend on your current reach and success. It's rare for an artist to be signed to a major label without having already made waves with an independent. 


What bands and artists need to know

Artists that are curious about record labels may also be interested in the various recording contracts available to them. In which case, the first thing to remember is that a record label exists to promote an artist's music to make money for the record label. Therefore, the main part of any contract between an artist and a label is to agree that a certain amount of the artist's earnings and royalties will go to the label. In return, artists receive the marketing, distribution, and professional connections that they require to grow.

Every artist contract will be different, but most will include information on the type of deal, the amount of money going to the label, the length of the deal, as well as any limitations to the deal. There may also be certain obligations the artist has to adhere to attain and maintain the deal. 

The relationship between an artist and record label will always depend on the individual artist, and it is ever-changing as the music industry continues to evolve. Whether an artist should sign to a label, and whether an indie or major label is best for them will be a personal choice, as they decide upon the benefits of what's offered to them compared to the financial cut and rights being taken. 


How necessary is a record label?

Where we currently are in the 20th century, music artists are gradually becoming less and less reliant on record labels to get their music out into the world. This is of course, due to the internet and the wide range of popular websites, social media, and apps that allow artists to distribute their music themselves. Although record labels can still have a huge influence on shaping an artist's personal brand and growth across the globe - self-promotion on the internet has become much more attainable and wider-reaching. As a result, record labels are no longer the only tool that can make or break an artist.

This has also meant that record labels are changing the way they operate to stay in business. Many labels will now offer their signed artists a so-called 360 deal that ensures they get a cut of all the artist's work, going beyond music to also include media appearances, social media, and product placements. 

Overall, record labels exist to support the growth and profitability of a music artist to ultimately support their own financial growth. Hopefully, this article answered many of your key questions about what a record label is, how they came to exist, and how important they are in the music industry in the 20th century.

Daniel Hodson

Daniel Hodson is a co-founder of Music Missile, and the drummer and founder of various UK bands. His passion stems from both studying and working in the music industry for the past decade.

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