From their conception back in the late 1800s record labels have gone through many different changes, as time has gone on the roles of record labels and their impact on the music industry has definitely shifted.
What are record labels
A record label is associated with the marketing of recorded music as well as music videos, they are also involved with artist recruitment also known as A&R, the copyright of recorded material and also publishing. There are two different types of record labels although both are tightly linked, the first type of label is a major label, the big three major labels Universal Music Group, Sony Music Entertainment and Warner Music Group all have the most successful artist in the world. All these labels have their own distributing network in which they use to get the music for artist that have signed an exclusive contract with them out to the millions of consumers across the world in multiple platforms. The other type of record label is an indie label, the biggest difference between major labels and indies is money. The majority of indie labels are very small and have little money behind them they also do not have their own distribution network in which they can get music by signed artists out to consumers.
The contracts record labels use are often confusing and in the case of major labels it would seem that they are often unfair, often the artist will only receive 14 to 18 percent of the record’s dealer price which can be between £6.50 and £8.50. Major labels offer advances, which for most artists is the biggest reason they want to be signed to a major rather than an indie. New artists signing to major labels can expect anything from US$50,000-350,000 however the artist in question will first need to recoup this advance before they ever start to make money from record sales or depending on the type of contract even merchandise. Typically indie labels will do what is called a 50/50 deal which is when 50% of money earned goes to the artist and 50% go to the record label. This deal is good because once the artist has recouped advances and other costs they will be making way more money than they ever would be but it will take longer for that money to be recouped. Major labels will always take a larger cut normally between 12 to 15% of the retail price of the record, which is a significantly smaller amount than a 50/50. Although it does make sense when record labels invest so much money into artists that they would want a way to make a profit from them. As u can see from the table bellow major labels take big risks when signing new artists because they can never know if they will be profitable or not.
|Marketing and Promotion||US$200,000-700,000|
Another type of deal that major labels often use is 360 deals, the difference between a 360 deal and a normal record deal is that with a 360 the record label not only gets that 12 to 15% on the record sales but also receives a portion of other income streams. Things such as touring and merchandise, this is a very modern creation as record labels historically never did this. Major labels however have tried to adapt to the modern age were record sales are declining and even the most profitable artists are not making the type of money from records that labels would want. As you can see by the graph record sales have continually gone down but not even just physical but digital to. It is clear that the casual music fan who makes up most of the people who listen to music no longer care to buy albums or singles but would rather stream. With this change labels have turned their focus to the real money-maker which is touring and because with the old model of contracts the label would lose out on even more money so the 360 deal mean that even if record sales are declining the major labels can still make big money from their artists.
The way that music is distributed has also changed a lot, in the past the only way you could get music was by going to a music shop and buying a CD, vinyl, cassette tape etc. But now it seems people are less interested in physical copies and more into digital instead. Digital is much more long-lasting and can never really go wrong, although many people of the older generation like the novelty of having a physical copy of an album. So because of this change record labels have had to look at online distribution to make some money from all the digital sales.
The Internets Impact
A big reason for this shift from digital to physical is of course to do with the internet and its world-wide reach, music is now easier than ever to listen to and download. One of the biggest issues when it comes to music and the internet is the fact that many if not most people who listen to music on the internet download and listen to it illegally. Even though outdated sites like Napster allowed its user to share files with each other using a peer-to-peer system meaning you could download any song you wanted at the time. Many sites like YouTube have strict restrictions on copyrighted material which does help but the internet has grown to big to be contained and it is now impossible to stop it. It is not to say the internet has not done any good, the internet in some aspects allows you to be your own record label. You can put out your own music and make money from that same music and the money goes straight to you without any sort of record deal independent artists still have a platform in which they can share their music with an audience around the world it goes without saying that many young stars in the industry have had some kind of success on the internet. But does the good out way the bad? Well one way to look at it is that with online distributors like iTunes and Amazon labels and artists still have a way to make money from the sale of their music but also with the popularity of 360 deals the focus has shifted more to the mind-set of how can you make an artists not just an artists but in itself its own business. The internet allows more people than ever now to have an opportunity of making it somewhere in the industry, something a few decades ago would be just a dream is now a reality that many independent artists can see.
With the rise of the internet and the digital age record labels have gone through many changes, the introduction of indie labels as a way to give up and coming artists a change to get recognised, the changes in how their contracts work by taking into account the declining record sales and capitalising on the other income streams of an artists. Many of these changes have negatively impacted labels and major labels in particular the internet has taken lots of money that would otherwise be the record labels away but at the same time continues to churn out more and more talent that these labels can then make money from, also with the rise of vinyl sales recently although only a small portion maybe there is some hope for physical records. The future of the music industry and record labels is unclear but it would make sense for labels to continue to try to fit their business around a generation that has grown up with the internet and no little about owning CD’s or vinyl. Major labels are already a huge part of the music industry and are going nowhere but their relevance to many up and coming artists continues to decline.