Area 2: Record Companies

The job of a record label can be broken down into 5 simple steps:

1. Find Artists
2. Sign Artists
3. Record Artists
4. Promote/Market Artists
5. Make money from sales of the Artist's recorded music

There are two types of record label, independent (indie) labels and major labels. The two are very different and despite most artists dreaming of being signed to a major, both have their advantages and weaknesses.

Since 2012, the major labels are Warner Music Group, Sony Music Entertainment and Universal Music Group. The world music market is absolutely dominated by the 'Big Three'. As of 2007, the major labels controlled 70% of the world music market [1]. Traditionally there has always been this complete control of the industry but recently the advances in technology and the rise of illegal music downloading has seen a dip in sales and many acts have been dropped.

A major label contract has a lot of different sections:

• Advances. Money paid up front to the artists which later has to be recouped
• Exclusivity. Once you've signed a deal with a major you are normally only allowed to record with that label exclusively and they own your copyright and the master copies of your records.
• Territory. Major labels normally sign artists into a worldwide deal. This means their records will be distributed in many different territories across the globe. [2]
• Term. This is the duration of your contract. Normally about 12 months with the label having the option to extend the contract if they wish. This also deals with how many records you have to make. [2]
• Royalty Rates. The percentage of every record sale that you get as an artist. Artists only start receiving this after everything has been recouped.
• Deductions. The amount of money deducted from your royalties to cover the cost of covers, sleeves and containers that the record is packaged in. [3]
• Producers, Videos and Tour Support. The artist is expected to pay the producer a percentage of their own royalties. Tour support spent by the label also has to be recouped by the artist. Normally artists have to recoup 50% of music video costs as well. [2]
• Websites.
• Recoupment. Money that the artist has to pay back to the label before receiving royalties.
• Delivery/Release Commitments. Artists have to commit to producing a minimum number of songs to be released by a certain deadline. [4]
• Ownership of masters. The label normally owns the masters of the artists records.

Based on the sale of a £9.99 album released on Sony, this is how the money is divided [5]:

As you can see, this might not be considered the fairest contract as far the artist is involved seeing as they only get 1% more than the Tax Man.

With that in mind, I'm going to talk about Indie Labels and how they differ from the majors.

Each indie label is self sustained and isn't owned and controlled by a behemoth corporation. A lot of indie labels have been bought by major labels and although they retain some of their philosophies, they rely on financial backing from the majors. These labels are known as subsidiaries.

Indie labels might not be as lucrative for the artist as far as money is concerned, they allow much more creative control. As an artist signed to an indie, you can pretty much make whatever music you want with barely any interference from the label.

I did my own research and a lot of successful bands I listen to such as: All Time Low (Hopeless Records, Asking Alexandria (Sumerian), Bring Me The Horizon (Epitaph), Mallory Knox (Wolf at your Door Records), Of Mice & Men (Rise) are signed to indie labels. Bring Me The Horizon for instance have headlined Reading & Leeds Festival Main Stage. Even Paramore have remained signed to Fueled By Ramen Records (a Warner subsidiary).

An indie contract is often based on a 50/50 deal and can look something like this [5]:

As you can see, this is a lot fairer to the artist. Indie labels do have their disadvantages however. They lack the global power and contacts of the majors. They aren't going to be able find you the best producers or distribute your record globally to every supermarket in America. They also won't be able to market and advertise you as well. Another comparison between the majors and the indies is that whereas majors tend to prefer signing artists that are already successful, indies very often sign unknown artists that they see potential in. Artists can form a real partnership with indie labels, the label can help them build a fan-base locally and help the artist go on small tours and such. Also for an artist signed to an indie label, there is much less risk of being dropped.