Why We Wrote This Guide

Record labels have been around nearly as long as recorded sound. For years, being signed to a label was thought to be synonymous with “making it” in the music industry. While the internet and digital technology has made it easier for artists to succeed without record labels, they still have a major role in the industry. However, many individuals lack a basic understanding of the responsibilities, structure, or history of record labels. We wrote this guide to explain just what a record label is and does.

Who This Guide Is For

  • Artists who want to learn more about record labels and what they are designed to do for them.
  • Individuals hoping to work in the music business that are curious about the departments and structures of record labels.
  • Music lovers who want to know more about the past and present of record labels in order to better understand just how music comes to the public.
  • Songwriters, artists, or bands that want to learn more about how record labels work in order to better self-release using similar tactics.

Contents

Definition
History
The Big Three
Types of Labels
Structure of a Major Label
Record Labels & Artists

What is a Record Label?

Record labels are companies, large or small, that manufacture, distribute, and promote the recordings of affiliated musicians. Essentially, record labels work to sell the brand of the artist and the products they create. There are various different departments within a record label that work together to best sell their products and artists.

History

Record labels began in the late 1800s when phonographs and phonorecords began to commercialize as technology allowed mass production. By the end of the century,three record companies had established themselves as the leaders of the industry: Thomas A. Edison Company, Victor Talking Machine Company, and Columbia Phonograph Company.

In the late 1910s, the original patents on audio recording technologies expired and entered the public domain. The access to these innovations led to the emergence of independent labels throughout the twenties. Simultaneously, the invention of radio was becoming popular and taking consumers away from the recorded music industry. Lastly, the Great Depression was preventing consumers from purchasing many luxuries at all. The combined result was a decline of the record industry in the late twenties and early thirties. The industry also consolidated in the late twenties as as Victor and CBS both acquired labels. Edison, the company that led the audio industry in the beginning, shut down their phonograph and audio division in 1929. Consolidation continued throughout the thirties and left American Gramophone Company, Decca, and RCA Victor as the top record labels of the decade.

The 1940s saw a large number of new independent record labels established. There also began a trend of film studios extending their services to include a audio divisions. MGM created MGM Records in 1946. Paramount Pictures and Warner Bros. followed next by creating ABC Records and Warner Records. Eventually, 20th Century Fox followed by forming 20th Century Records.

Consolidation occurred again on a larger scale throughout the sixties. At this point, CBS had acquired Columbia Records and American Record Corporation (ARC) along with their stock of subsidiaries.

Warner Brothers bought Reprise and then Seven Arts. As Warner-Seven Arts, they bought Atlantic and Elektra Records before being purchased and folded into the Kinney Corporations umbrella in 1969. In 1967, MCA put subsidiaries Brunswick and Coral under the MCA label. They also bought Decca (US).

By the end of the sixties, CBS was the top record label followed by Warner Brothers. RCA Victor, Capitol-EMI, Polygram, and MCA also remained on the leaderboard of the recording industry.

Warner was incredibly active in the 1970s, establishing Casablanca and acquiring Sire and Asylum records. WEA was also created under Warner Communications through the merger of Elektra and Atlantic in 1973. Polygram (formed in 1972 in the merger of Phonogram and Polydor) bought half of Casablanca from Warner. They went on to purchase RSO Records in 1976. By the end of the decade, they owned many labels including Polydor, Mercury, Smash, MGM, and Verve.

EMI Records, formed by EMI in 1972, partnered with Capitol Records in the late seventies to create EMI-America. EMI purchased Liberty Records in 1979, putting them under the United Artists brand name. EMI was then bought by Thorn, becoming Thorn-EMI.

ABC-Dunhill and its newly acquired subsidiaries were bought by MCA in the seventies. Curb Records was established by MGM veteran Mike Curb, and Sugar Hill Records was formed as the first rap exclusive label in 1974. Other labels were also founded throughout the decade.

By the end of the 1970s the top major labels were CBS (owner of Colgems), EMI, Warner, PolyGram (owner of Polydor, Mercury, Smash, MGM, and Verve) and MCA.

The major acquisitions of the 1980s were General Electric’s purchase of RCA Victor (sold to BMG only a year later), Sony’s purchase of Columbia, CBS’ purchase of Monument, and MCA’s purchase of Motown. Time, Inc. and Warner Brothers merged during the eighties to form Time Warner, Inc. Labels founded in the 1980s included, IRS Records, Boardwalk, Def Jam, SubPop, and Matador. By the end of the decade, the top labels were Sony, Warner, Polygram, MG, EMI, and MCA.

In 1990, MCA was bought by Matsushita. The following year, CBS Records became Sony Music, establishing one of the label groups that remains a leader of the industry today. That was the same year that Warner-Elektra-Atlantic (WEA) changed their name to Warner Music Group. Another major record label today, Universal Music Group, formed in 1996 after Seagrams bought MCA. During the purchase, an MCA subsidiary label called Rising Tide changed their name to Universal Records. Universal went on to buy Interscope and Polygram, solidifying their top position in the industry. Universal also merged Island Records with Def Jam and Mercury and merged A&M and MCA. Other acquisitions occurred as Elektra bought a percentage of SubPop in 1994 and MCA bought Geffen Records in order to allow the head of the label to create a new company, DreamWorks. Rhino Records purchased the catalog of defunct rap label Sugar Hill Records in 1995. The following year, Thorn EMI separated and became EMI Group and the Thorn Company, respectively.

In 2000, Canal+ and Seagrams came together and, as a result, made Vivendi Universal the largest music company. The next year, AOL merged with Time-Warner. After initial resistance due to infringement problems with companies like Napster, record labels began to move towards accepting and promoting the internet in marketing and distribution. Vivendi Universal purchased MP3.com, BMG and Warner launched MusicNet, Sony and Universal created Pressplay, and BMG tried (and failed) to purchase Napster.

In the early 2000s, many major record labels went to court with representation from the RIAA in order to combat the upcoming trend of illegal file-sharing. In the later half of the decade, Sony and Warner ended up in court for their own illegal activity. The two labels admitted to payola, the illegal bribing of radio personalities and companies in order to get more airtime. Both Sony and Warner paid hefty settlements.

In April 2003, Apple launched the iTunes Music Store and entirely changed the face of music consumption. By providing legal, fast downloads of MP3s for only $0.99, the store became the number one American music retailer by 2008— even surpassing Walmart. In 2004, Sony Music Entertainment merged with BMG to form Sony BMG. By doing so, the list of major labels was narrowed down to only four: Sony BMG, Universal, EMI, and Warner. Four years later, Sony purchased BMG’s share of the joint venture and returned to the name Sony Music Entertainment.

In late 2012, the sale of EMI to Universal Music Group was approved. With this acquisition, the top three record labels were solidified as they remain today: Universal Music Group, Sony Music Entertainment, and Warner Music Group.

The Big Three

There are three main types of record labels: major labels, major label subsidiaries, and independent labels. Today, the record companies considered to be major labels are referred to as the “big three.” In 2016, the big three possessed nearly 70% of the world market share of recorded music: Universal Music Group (28.9%), Sony Music Entertainment (22.4%), and Warner Music Group (28.9%).

Warner Music Group has three main record labels: Atlantic, Warner Bros., and Parlophone. Under each of the main groups, there are several smaller labels. Alongside that, Warner Bros. has international labels, distribution alliances, and multiple smaller record label groups.

Universal Music Group’s main record labels are Interscope Geffen A&M Records, Capitol Music Group, Republic Records, Island Records, Def Jam Records, Caroline Records, The Verve Label Group, and various smaller groups and international labels. Again, each of the main label groups have authority over a multitude of labels.

Columbia Records, Epic Records, RCA Records, Sony Music Nashville, Provident Label Group, and several other smaller and international labels make up Sony Music Entertainment’s current roster.

Types of Labels

The largest type of label is a major label. As stated previously, the three major labels are Sony, Universal, and Warner.

Labels such as RCA Records (Sony), Capitol Music Group (UMG), and Atlantic Records (WMG) are all major labels. The labels directly under their leadership, still within their parent label’s jurisdiction, are the major label subsidiaries that are in the middle ground between major and independent labels. These can be referred to as “sub-labels” or “affiliated labels”.

The true definition of an independent label is fairly complex. Some labels affiliated with major companies are still considered independent. Often, independent labels use distribution services provided by major labels. The real difference between a sub-label from a non-affiliated independent label is if the label shares their services with a major label under an umbrella of sorts.

Structure of a Major Label

Major record labels are often led by a board of directors and executives like the president and vice president of the company. The board of directors oversees everything and has the final say on major decisions.

The Label Liaison is either one person or a small group of people. The liaison acts as the spokesperson in communications between the label they work for and the parent label or distributor.

The Artist and Repertoire (A&R) department of a record label is the portion of a record company that is responsible for finding new talent and convincing them to sign with their label. They seek out talent by going to live shows, keeping up with industry developments and breakout artists, listening to demos, and networking.

When A&R representatives find talent deemed worthy of a record deal, they lead negotiations between the label and the prospective artist. They continue involvement with the artist throughout their career by supporting the recording and promotion processes. The A&R department is the most heavily involved in the creative aspect of artist development.

The marketing department of a record label is responsible for leading press and promotion campaigns for artists, releases, tours, and anything else being sold. The goal of a good marketing team is to identify key demographics and market to them in order to maximize sales and public knowledge of the product. The marketing department typically works in direct association with the publicity, sales, and promotions departments as they carry out the massive plans designed by the marketing department.

The “creative services department” creates the aesthetic of the graphics involved in sales, publicity, and other facets of the industry. They design tour sets, advertisement graphic design, product packaging, merchandise design, and other visuals.

The production department of a record label focuses on focuses on the manufacturing, packaging, and release of records on a strict timeline. They work closely with marketing and A&R in order to ensure everyone is on the same timeline of pre-release promotions. The production department also keeps track of the stock and production data in order to maintain sales records.

The sales and distribution department works as the middleman between retailers and the production department. They work to take orders and make sure the production team has the correct number of products available at the correct time in order to avoid losing money making too many records or running out of records to sell. Regardless of whether a label is working with an independent manufacturer or in-house manufacturing, the sales and distribution team is always communicating with manufacturers through the production department. If any of this communication is lost, a release can quickly fail due to a lack or surplus of supply.

The new media department handles new streaming platforms, technologies, and opportunities to spread their product on new, creative outlets. As trends evolve and new media emerges, successful trials by the new media department become parts of other departments.

The international department typically only works with artists that have grown successful in multiple countries or territories. They work on handling the manufacturing, copyrighting, and distribution of records in non-domestic markets. Typically, international departments make licensing deals with foreign record companies in order to have them manufacture and distribute in their native territory. The international department also works on organizing publicity and promotion as well as tours when artists go abroad.

Where the vast majority of a record label is focused on how to sell the products handed to them (the artist or their recordings or tours), the artist development department is focused on progressing the artist in order to improve the product itself. This can involve working with artists on improving branding, social media presence, performances, or recordings. They push the creative side of the artist with the goal of increasing sales. As the music industry becomes faster and faster moving, this department is being taken out of many labels.

The goal of the publicity department in any industry is to increase the public’s knowledge of a product, event, person, or other thing being marketed. In the realm of record labels, the publicity department is responsible for finding, managing, and scheduling opportunities for press or media placement. Alongside this, publicists work to find opportunities for artists to get publicity on terrestrial radio or on streaming platforms.

In the promotions department, radio airplay and streaming placements are the goals. They work on creating and distributing recordings for analog radio, internet radio, satellite radio, streaming radio, and music videos. In today’s day and age, publicity on streaming platforms can be very helpful because of curated playlists that get hundreds of thousands of listens each week.

Independent labels function similarly to major labels, though they often outsource some responsibilities due to their smaller staff sizes. Public relations, for instance, is often outsourced by independent labels. Artists can also serve as their own labels through services like TuneCore or The Orchard.

Record Labels & Artists

There are a variety of different recording contracts (“deals”) that record labels will offer artists. The details of these will be outlined in a separate guide. The important thing to understand is that labels sign artists in order to promote them so that they will make money, which will go back to the record label.

When artists sign to a record label, they agree that the record label will take a portion of the royalties the song or recording generates. In exchange, artists can be provided with a vast network of professional connections, specialized marketing campaigns, and a plethora of other services.

Contracts between labels and artists often include the type of deal being made, any limitations, the term or duration of the deal, the amount of money exchanging hands and when it will be paid back, and any obligations that the artist must meet before the deal ends.

There is no cut and dry method to decide when an artist should sign with a label (or if they ever should). In the simplest terms, a record deal is an artist giving up some of their future profit in order to gain professional services to advance their career. The opportunity cost of the signing is the potential loss in profit. However, the goal of the record label is to increase the profit of an artist regardless of how much they are taking out.

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Composed by:
Mamie Davis, Jacob Wunderlich, Luke Evans, Rene Merideth, & Aaron Davis

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