Record labels enable artists to treat music making as a full-time career by providing advances and marketing/sales support. The labels, in return, make their money back by exploiting the artists' music commercially, then collecting the music royalties on the artists' behalf, while taking their agreed share along the way.
Most of a labels income, around 25%, is pumped back into the A&R (artist and repertoire) department, whose job is to find, sign and develop new talent.
Typically the recording and mixing of albums is paid for by the labels (this money is then recovered at a later date through the exploitation and sale of those recordings). Aside from the labels job of manufacturing and distributing the artists' recordings, another important role they play is to promote and market the artist.
Labels can also seek out other ways for the recordings to be exploited, such as being used in movies and adverts, and license rights to global parties in different markets.
Different Types Of Record Labels
They're are two different types of record labels; majors labels and indie labels. The major labels (also referred to as the big four) dominate the music market, usually occupying about 70-80% of the worldwide market. The other 20-30% is shared out amongst the thousands of indie labels and self releasing artists.
In today's world the major labels are just a small part of a bigger umbrella organization which we call a music group. A music group is usually owned by a global holding company, typically having non-music divisions as well. A music group is in charge of record manufacturers, music publishing companies, record labels , and distributors.
Within each of these major labels there are also sub-labels. For instance, Atlantic Records is a subsidiary label of Warner Music Group. What this means is that although they can sign artists and make most of their own financial decisions they are still answerable to the central label, Warner Music Group.
How Do Record Labels Work?
As you can imagine, running a company which manages so many artists is no easy job. It takes a lot of manpower to discover, sign, record, produce, promote, tour, and sell music. In this article you will get an overview of how a recording label company works and the set-up involved.
A Recording Company may have many labels in its umbrella. The business affairs of the entire company are overseen by the CEO. Every label will have a President, who reports to the CEO. The CEO guides the vision of the company and in tandem with the Presidents decides what kind of music to sell, how to sell, financial goals etc.
Numerous departments report to the CEO/President. Chief amongst these are:
Finances and Business Affairs
This department is concerned with the state of the finances of the company. They keep track of territory-wise revenues, artist advances, royalty collections, accounts and audits, banking, expenses, salaries, taxation etc.
This department handles legal issues like artist contracts, producer contracts, taxation and corporate law, and often, issues involving civil lawsuits, copyright infringement, breach of contract etc.
This department is the lifeblood of the recording company. The Artist and Repertoire dept. is responsible for identifying, locating, contacting and signing up new talent, as well as liaison with retail outlets, radio and TV executives etc. They are also closely involved in the creative process and often choose the songs, recording studios, producers etc. The A&R dept. is the point of contact between the artist and the company.
This department handles the production of CDs, DVDs, Artwork, Music Videos, Posters and other promotional literature etc. They also liaison with the artist and the recording studios to make sure that the recording takes place on schedule, as also handle other issues like safe-keeping masters etc.
There can be no marketing without artwork. This department designs the material required for promotions. This includes Posters, Hoardings, Logos, Graphics for print and video, CD Covers etc.
Marketing and Promotion
Marketing co-ordinates the promotional and publicity campaigns around an artist or an album and executes all the activities required to make sure that the word gets out on the street. It has many sub-departments like Online Marketing, Social Media Marketing, Retail Marketing, Events Marketing, Radio Marketing, Sponsorships etc. that focus on releasing audio clips, video trailers, interviews, feature articles etc.
As the name suggests, this department is responsible for nurturing artists. It takes care of managing the entire image of the artist. This can involve basic functions like speech training, dance training, makeovers, as well as more complex issues such as handling promotion and merchandizing deals. Companies no longer have Artist Development departments since they now look for artists who are already well-established.
This department is responsible for vendor and supplier development, signing new franchisees, maintaining relationship with existing retailers, managing supply-chain logistics for everything from CDs to logistics, collection of revenues etc. They also liaison with other departments to provide inputs on issues such as sales turnover, technology up-gradation, promotional campaigns, pricing strategies etc.
As is apparent, every department is essential to running the business. Many Indie labels function with only a handful of employees, while major recording companies can be broken down into many sub-departments even within these major departments. A lot of collective effort and organization goes behind the launch of every new artist and album, and now you have a good idea of the major players involved in the entire operation.