What do record labels do?

Before the internet, record labels were just about the only way music got to the public. Back then, record labels discovered artists, signed them, recorded them and distributed them along with handling all the promotional, legal, and accounting sides of things.

As such, the labels had a lot of clout. Quite literally, they were the hit makers. Two of the biggest influencers in the music industry back then—the radio station and the record store—dealt extensively with the record labels. Now, today’s radio stations and music stores have seen their roles in breaking new music significantly reduced if not altogether eliminated.

In just the past decade, a LOT has changed in terms of who does what when it comes to getting music out to the world and into listeners heads (and hearts). Many artists have chosen to do the majority of the work themselves. Many have even started their own record labels. While this has given the artists a lot more independence, and exposed the public to music which probably would have gone unnoticed by the giants of yesteryear, starting up a label is not for everyone.

Some say that today the major record labels are a dying breed—dinosaurs from the past which stifle creativity and compensation for the artist. However, even to the die-hard independent artist, the major record labels have some advantages over starting up your own label. Bear in mind that deciding to go with an established record label vs. starting up your own record label does not have to be an “either-or choice.” Consider it this way. Would going with an established label make sense to you if you can establish a working relationship that works for you? Perhaps one that plays to your strengths and provides support in areas where you’re lacking?

Signing with a record label is not a one-size-fits-all move. All it means when you’ve signed with a label is that you grant the label exclusivity for the life of the contract. The major, established record labels have war chests of money. The traditional role of finding new talent still exists in the labels’ A&R department—it’s just the process that has changed. Rather than spending long nights in scouting for talent in nightclubs, today’s A&R department is more likely to be scouring the internet looking for new artists.

If a label has recently reached out to you, this is likely why they’ve wanted to meet you. They can help you, the independent artist, by funding the recording and marketing/promotion process. This can allow you to pay for the best producers, sound engineers, studios and songwriters in the business. It can also allow for much bigger promotional and marketing budgets than you can probably afford on your own. The major labels can also get you access on an international scale and use their influence and connections in broadcasting, media, advertising and PR create buzz ahead of the release of your single or album. They can also be invaluable in helping setup concert tours.

The major record labels are excellent at all the administrative and legalities involved with the music business. They are setup to handle the tracking, collecting and distributing of royalties to the artists, producers and copyright owners. They are invaluable in securing clearance for samples as well.

Today, Distribution is Digital

When it comes to distribution i.e. getting your music out to the world, that’s no longer dominated by the record labels. With streaming and download services it’s no longer necessary to have hard copies (CDs) to place in retail brick-and-mortar stores to sell your music. In fact, it’s no longer necessary to have working relationships with music retailers because almost all of them are out of business. However, the major labels still have a great knowledge of the various online distribution platforms and should at least be considered. That being said, there’s a wealth of information out there on how you can get your music into most if not all of today’s music streaming platforms.

Not All Deals are the Same

There are many types of deal arrangements you can have with an established record label—be aware that they each come with a price. You can have a label deal (aka record deal). With this the established record label pays for the making, distributing and marketing of the recordings. You get paid a royalty rate based on sales of your music. The record label takes a healthy cut to make sure they get paid back for their investment in you. The main thing with this type of deal is to have a thorough understanding of who owns the music, how long you are bound to the label, does the major label get to recoup their costs before paying you royalties and what the sales splits are.

Another type of deal to consider is a licensing deal. Many an independent record label has some form of licensing deal. Essentially, the major label licenses your music from your label and then pays you a set fee for these rights. Usually, the major label promotes and distributes your music in this type of arrangement. Things to consider with a licensing deal are how long it lasts, and what territories or verticals they have rights to sell your music in. Make sure you know the difference between a mechanical license, sync license, performance license, master recoding license, print license and blanket license—for instance you might want to retain the rights for your music if it gets used in a TV show, a movie or video game.

The third common deal between an independent label and a major record label is a M&D deal (manufacturing and distribution deal.) This type of deal is less relevant these days as the manufacturing process deals with the pressing of CDs or vinyl and the packaging of same and the distribution process has evolved into a do-it-yourself process that most artists are comfortable doing. In this type of deal, the major label fronts the costs of manufacturing and distribution, then the major label recoups these costs plus a pre-determined percentage of the profit based on record sales.

As the artist, you get to decide whether you want to setup your own label and ignore the major labels or setup your own label and pursue a deal with a major label. If you’d like to know why it’s because that big label can use their power and influence to (hopefully) speed up your career path to success. The old adage of 100% of nothing is nothing comes to mind. Entering into a deal with a major label is complex and might not be to your advantage. So research things carefully before you sign anything with a major label. Keep your eye on the prize–the path that’s most likely to lead you towards the future you want to achieve.