What is the purpose of labels in the music industry and why do they hold so much power as well making more money than the artists signed?
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It works like all other industries in a capitalist system (but is sometimes noticed more due to the emotional role music plays in our lives).
It’s difficult and time-consuming to become good at this profession. If you don’t have wealthy parents with money and connections to support you (Taylor Swift) you are working 40 hour weeks (more if low wage) to pay for decent instrument / computer, rent, food, utilities while simultaneously investing 20-40 hours making music, running logistics of mixtapes, promotion, shows etc.
On the other hand, we have a handful of individuals and families which have the majority of wealth in the world and nearly all the wealth that is free to be deployed in very large amounts (think multi-millions to billions). How did these people get this money? By and large by being born. That’s it. They didn’t scrounge to buy a computer. They didn’t work. They didn’t learn a useful or beautiful skill. Most wealth in the world is inherited.
The purpose of record labels is to accumulate the money controlled by these families and use it to corner the market in music rights (eg song become their property), returning a reliable income stream to these capitalists. The work record labels do consist of two things and two things only:
1. Approach artists after they’ve invested the time to master music creation and have developed a small following but before their are widely popular/successful. Inexpensively purchase ownership of their songs retroactively and for some number of future years. Artists often have no choice but to sell (they are poor, family members are in desperate situations, tens of thousands of dollars solves their immediate problems) and/or are young and have no idea how capitalism works. By doing this, record labels are collectively able to own most songs that will become popular enough to make money. The songs that actually do cash out pay for all the great songs that never catch on.
2. Once they own the rights to songs, they use another portion of the money (once again, invested by trust fund kids) to crowd out non-label music from being heard. There are only so many songs that will appear on Spotify’s RapCaviar. Or in the past, can be played on the radio. So labels pay to make sure that their songs appear in these locations, either via direct dollars to streaming companies or to marketing companies that buy audience attention by manipulating streaming numbers, pay influencers for promotion, pay for a sweet music video (which is then promoted the same way). Once again, this work requires little talent and no labor from the labels – they pay outside companies to do this work or low-paid millennials.
That’s it. That’s what record labels do to make money. They deploy (largely) inherited wealth to corner a market. This only works because the record labels start with all the money, the artists start with relatively little, and it’s pretty easy to use that leverage to keep this disparity in place on an ongoing basis.
Here are a few sources to back this up:
https://techcrunch.com/2018/09/30/the-war-over-music-copyrights/
https://www.washingtonpost.com/us-policy/2019/02/06/people-like-estate-tax-whole-lot-more-when-they-learn-how-wealth-is-distributed/
EDIT: I can’t believe I forgot to link to Steve Albini’s (legendary Chicago musician, recording engineer, & producer) [seminal article about how this looks to a young artist](https://mpg.org.uk/knowledge-bank/the-problem-with-music-by-steve-albini/).
This article was written in the 90’s about an industry dominated by physical albums and radio AirPlay. Steve was widely quoted 5-6 years back stating the internet has solved many of these problems. But I think the intervening years have demonstrated that this period was only a short interlude that quickly shut as the labels adjusted to the new techniques and leverage points in the streaming economy.
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