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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Labels are necessary for publishing and distribution. Let’s say you have a great band that everyone in town likes. Great – now what?
Well, you will probably want to record a few songs and get them out into the market place. Studio time costs money, so someone has to pay up. If you want it to really sound good, you’re going to need to hire a producer, an engineer, and possibly even some studio musicians.
Okay, the band can pay for all this themselves, so let’s say they do. Now what? Where are you going to sell them? It’s a pretty limited market just selling them at bar gigs. You can put it on spotify or itunes along with the millions of other artists and get a couple of pennies per download, but it’s a long shot to cut through the mix and get noticed.
You’re going to tour? Great. How are you going to get the word out in a town that no one has ever heard of you? You need promotion. How are you going to pay your bills while you leave your day job and go on the road? Bars generally don’t pay bands much if anything at all to play.
There’s more, but hopefully you get the point. The label pays for the recording, the promotion, the touring, and other expenses so the band just has to focus on practicing and performing. The label has the professional connections in all the distribution areas such as streaming, local concert promoters, radio, television, etc.
It’s a big risk financially, which is why most first contracts aren’t all that great for the artist. It usually involves an advance against future earnings. The artist owes that money back to the label, but only against future sales. They don’t have to pay it back if the product doesn’t sell, though.
It’s mostly just for marketing and branding purposes, which are still crucial…anyone can make a song, getting an audience is a bit trickier. Independent artists are against the thick of it, hard up to get attention, though with the rise of the internet…they can get play much easier than they could before. All you need is a YouTube video.
But before YouTube, it didn’t matter who you were, how good your song was…if it didn’t have a known label backing it, pushing it, ain’t nobody was going to hear it.
They are the ones with the contacts the bands need.
360 contracts have hurt the bands who may not be as prolifically successful as the biggest artists. Labels will carry one being big players, but, I can see them diminishing over the next decade or so.
A label is like a bank. They provide money to record your music, and after you’re done, they want their money back. Every dollar that an artist earns through sales or streaming gets divided up, the majority going back to the label to pay off the loan (called an advance).
The label is also interested in continuing to make money even after the advance is recouped, so they market the music.
A label with dozens of artists and tons of industry connections has more promotional power than a single artist on their own, hence their power.
Source: Am in music industry.
They are risk aggregators: they “combine” many artists so that the successful ones can cover the cost of the unsuccessful ones.
Artists aren’t traditionally good at business. Business isn’t in any way good at art. So it goes one of two ways:
1) An artist is in such high demand that they are approached by labels begging to be associated with them. In this scenario the artist has the leverage and a greater chance to be their own CEO and dictate most of how their career play out. Since their demand is so high they don’t need the label for exposure. Often the artist will have so much leverage that they can get very favorable “terms” and retain rights to all of their publishing royalties. The label needs them as a trophy to show artists in the next scenario. (See: Nirvana, Sturgill Simpson)
2) An artist hopes that with the right amount of backing and support they can reach a greater audience and thusly create a high demand through the influence and efforts of the label. In this scenario the label has all the leverage because they have access to what the artist can’t get, fund, or manage themselves: exposure, marketing, studios, money, production, licensing, touring, merchandise, etc. (See: Kesha, Dr. Dre before Jimmy Iovine) There are also artists who don’t need anything from a label but end up signing shady contracts that leave them slaves to a corporation as if they had no leverage at all (See: Prince, The Beach Boys, Brad Paisley).
However, in modern times a third scenario has come into play wherein there is no label. Or, rather, the artist IS the label. In this scenario the artist just goes out and does everything themselves. (See Butch Walker)
If you’d like to take a lighthearted deep dive into this exact subject I’d suggest reading Butch Walker’s book titled *Drinking With Strangers*.
In the olde days artists relied on radio and albums to become known, albums in particular (vinyl or CD) are expensive to start mass production. A label would really the risk that the artist would take off by paying for this start up cost, which should easily be in the tens of thousands of dollars.
They lose money on many of the artists that they sign. And the rare artist that becomes wildly successful usually breaks away from their old label to make more money. Without their willingness to take risks in a highly volatile market, you may never have heard some of the musicians and singers that you love.
becoming a professional celebrity musician requires a metric fuckton of startup money.
there’s also a nightmare of logistics, networking, wheel greasing, etc.
sure, you can put your mixtape on soundcloud for 100 people to criticize. or you could sign with Island Records and immediately sell a million copies just by brand recognition.
and if the producer really likes you he’s gonna tell Ariana Grande to do a cameo on your first album. bam, now you’ve done an album with a real musician. sure behind the scenes she literally just showed up for one saturday and phoned it in, and you never even spoke to her, but no1 else has to know that!
A predatory industry of talentless people with business sense taking advantage of talented people with no business sense
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