So many artists are signed to different labels, but they are extremely popular. How does a label work and why would an artist even want to sign to one since labels typically get a percent of money. Also, I thought independent or indie artists were not signed to a label but if you go to Spotify and look up indie music half of them are signed to a label.
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A record label sells recordings for profit, and the artists in their rosters are their contractors.
Artists are paid advances upon signing, and are paid royalties from record sales. Of course they only see the royalty money when they have recouped the amount of the advance.
How do record labels earn money? Back then they sold physical records, which had huge margins. On a physical level, the music has no intrinsic value. But the vinyl/tape/CD contains popular music so they can jack up the price from a few cents per piece of media to $15 an album. Artists get their cut from sales proceeds or net profit.
Record companies also earn money by licensing songs in movies, shows, ads, etc.
These days, they mostly earn through streaming. Because it’s weird for people to pay extra money for something they can’t touch, the market has dictated that digital music should be cheap, so artists also get much less, as most of the revenue needs to hit profit goals of the record label.
So now, why is it important for musicians?
They’re not.
Labels promoting musicians is practically using the artists as endorsers for the record label’s products, which are the recordings.
Artists who want to be signed to labels want to be signed to labels because they want the exposure. In exchange, the record company owns their recordings and recording rights, and most of the sales revenue.
If an artist was good enough musically, and are well-versed in marketing, and/or really good with fans and making friends, there is no need for a label, and they will be much more financially stable, assuming the same rate of plays and sales.
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