How do record companies and “labels” work?

Question

You always hear “we’d like to sign you” stories. What does that exactly mean? Who pays who and is there any difference in the terminology?

In: Culture

Answer 1

An unsigned band is relatively on their own. Maybe they have a few friends helping out or a hired manager. This means, along with sing writing, practicing, performing and finding gigs, they’re also juggling merch, managing an online store, working a regular job to afford studio time and all the costs. Hitting it big unsigned means maybe a few local venues call you and ask you to perform as opposed to you having to hunt down gigs. You’re recognized as a solid band around your community,maybe 2 towns over.

But,you sign with a label like Capitol Records. They pay you to be a full time musician: compose, practice, play. So you’re free to quit Pizza Hut and focus on your craft. They also have a network, so instead of Bob Smith trying to send his demo to Pepsi for an ad, or a radio station for air time, Pepsi asks Capitol for a song. Since Capitol signed Bob Smith, they offer up his song, Pepsi buys the rights,and Bob Smith becomes a Pepsi anthem.

A label also has producers to make Bob sound his best, lawyers to make sure Bob’s work is never stolen, Marketing so everyone between the ages of 15-34 know who he is, and Social Media managers who builds his online clout. Luxury brands reach out to Capitol and now Bob Smith is the soundtrack to Aston Martin.

Now, in exchange for Capitol adding Bob Smith to their “stable” (all the other acts they signed) there’s a few contractual obligations. Since Bob Smith is using Capitol infrastructure, Capitol is entitled to 85% of profits off Bob Smith songs. So Pepsi buys his song for a million dollars, Capitol takes their cut, Bob Smith gets 150k. Seems unfair, but Capitol is using that money to ensure he’s taken care of ;). Bob Smith is also now required to tour for 18 months, write a new Album with 2 hit singles in the next 6 months, do the late night talk show circuit, and of course be available for press events.

Capitol grows Bob Smith’s fame, and he becomes a super star, something he could never achieve playing one gig a month between delivering pizza and writing in his basement apartment. But, as Capitol gets him more, they take their cut and grow their wealth and influence too.