What is the Purpose of a Record Label?

The Traditional Role of the Record Label

Don’t let anyone fool you, the purpose of a record label is to make money. Traditionally, to achieve that goal, record labels found music artists, developed them, promoted them, and manufactured and distributed their music in exchange for a percentage of revenues. When things went well, both the artist and record label made money. When things went poorly, the artist starved, and the record label lost money. At least that’s how things worked pre-internet when the record label controlled all aspects of the process and everything was done in-house. Today’s record labels have had to re-invent themselves in order to remain profitable.

The A&R (Artists and Repertoire) and distribution departments of the records labels were hardest hit by the changes brought about by the internet. Rather than spend time in clubs hoping to find the next big thing, today, record labels can scour the internet and see who has the most YouTube likes or SoundCloud downloads. This has led the labels to significantly downsize their A&R departments. The standard old-school model of distribution, where CDs were sold to record stores, who then sold them to the public doesn’t even exist today. Instead we have streaming services where we often don’t even have to even to download the songs we want to listen to.

This has led many to proclaim that music labels are irrelevant at best, and at worst, that they’re the devil by requiring artists to sell their souls. Neither is really true. Whenever creative minds (musical artists) interact with businesses there’s a risk of conflict. The artist might want to spend more time in the recording studio so that they can achieve their creative vision. The record label (who’s footing the bill for the studio time) might deny their request if the project has reached its designated budget. This is not to say that the labels aren’t greedy, after all they are in business to make money and in most cases the music artist is young and naïve about business. This can lead to deals which are bad for the artist who, through ignorance, signs away multi-year 360 rights for a pittance. But such a situation falls more into the realm of “caveat emptor” than it does signing one’s soul away by dealing with the devil.

Record Labels Today

What is certainly true today, much more so than ever before, is the artist has the ability to be their own distributor and their own label. While technically feasible, bear in mind that doing so requires a lot of hard work and an in-depth understanding of how the complex legalities of the music business work. Keeping pulse of the ever-changing landscape of how music is monetized is also relevant.

Over the last several years, revenue streams for music have been in a state of flux. For a while, streaming and downloads made up the largest slice of the pie. Then concerts were the main revenue stream. Today, music placement in TV and movies is the top revenue generator. Tomorrow, it will most likely be something else.

Which leads us back to where we started; the purpose of the record label is to make money. They make money by selling product created by music artists. With the changes in the music business landscape, the artist has gained a little more leverage in the dynamic between label and artist. The artist, especially the electronic music artist, is more likely to have songs that are ready to distribute. They may even have their own distribution network in place and a significant following on social media. So why on earth would they need a record label?

The simple answer is MONEY

The record labels have lots of it. They also still have tremendous contacts with promoters, radio stations and other media outlets. More importantly, they know exactly which music monetization channels are working best today, and where monetization is likely to go in the future. Nowadays, the fundamental question an artist should be asking themselves is whether an influx of money can dramatically and positively impact their career. This is where the record labels come into play. If the artist needs studio time, wants a music video done, or is looking to go on a concert tour they either have to self-finance, put things on hold, or have a record label front these expenses. The artist must decide how big a piece they want to sign away to the record label in exchange for what they’re getting. The record label must decide if it’s work their investment to sign the artist and front the money. If the record label believes they can make money with the artist’s music, then there is a deal to be had. Ultimately, whether the artist is willing to sign with the label is something only they can decide.

 

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