What is a Record Label?

This article asking what is a record label? first appeared in FlyPaper by Soundfly. I reprint it here with permission and I encourage you to check out their courses. You can get a 15% discount code on a subscription using the promo code AJTRUMM15. Finally, you may come across affiliate links, and I may make a commission if you buy.

Twenty, even years ago, the answer to this very basic question – What is a record label? – would have been pretty straightforward. Now, it’s a philosophical quagmire, and you’re likely to get a hundred different answers if you ask a hundred people.

It’s true, the role of the record label in music as a whole has changed. The role a label may play in an individual artist’s career may even be different, but contrary to popular opinion, the record label is not dead, nor is it likely to be soon.

So rather than spend a thousand pages (and we could) on the subtle history and nuance of record labels, their role in the music industry, and all the varying opinions on their usefulness or morality, let’s start by sticking to the basics, and get a fundamental understanding of what a label does.

So, first things first: The standard definition which you will see a thousand times if you Google “what is a record label?”:

A record label is a company that manufactures, distributes, and promotes music recordings.

A Simple Proposition

In the real world a record label may be complex, but at its heart what a label does is simple. A record label monetizes recorded music.

That’s it. Record labels’ sole business mission is to find ways to make money from recordings of music.

They do this by contracting with music artists who make recordings either with a production team or on their own or in collaboration with another company. They may fund the recording process or not. They may fund manufacture of recorded media such as CDs. They may not. They may fund distribution of recorded media, say to old fashion record stores. And most importantly, they put money into promotion of music.

If you’re an artist signed to a record label, you’re an independent contractor contracted with the label to make recordings.

Before we go any farther there is one thing to understand about a record label: A label is not a publisher. A publisher finds ways to make money from the songs themselves. This could get confusing, because many companies operate as labels and publishers, but the two are separate.

Make Money How?

This is where things get more complex, as there are myriad ways to make money with recordings, and a ton of complexity gets introduced in contracts, with even more confusing twists and turns added almost daily due to streaming, new internet thingamabobs, and various and sundry other craziness.

So, let’s boil it down to basics again.

Recorded music generally is monetized in one of these ways:

  • Sales – Sell a CD in a store. Sell an MP3 download. Sell a vinyl record. Sell a tape. This means sales to customers who then listen to the music for their own enjoyment.
  • Licensing – If the producers of a TV show or movie or any other project such as a live show or a YouTube video want to use a recording in their production, they need to negotiate and pay for a Master Use License. Remember this is separate and distinct from licensing the song itself.
  • Digital Performance Royalties – A recent addition to the list. Traditionally, broadcasters of recordings such as radio stations are only required to pay songwriters/publishers for “performing” their songs, not the owners of recordings. Now, however, labels can make money from performances on digital platforms such as the internet or satellite radio.

That’s the list! Every way of making money directly from music falls into one of those categories.

Of course, in today’s world, record labels don’t necessarily stick to these two categories – labels nowadays often do more than just sell music. That makes most record companies more than just record companies.

A modern label might make money from merchandise like shirts or stickers, YouTube monetization, licensing the likeness or name of an artist, live appearances and concerts, or any number of things that are traditionally not the purview of a label.

What IS a Record Label??? Another Way Of Thinking About It

Now that we have the basic picture of what a record label is, if you’re an artist you may want to think about it another way (this is going to help you when deciding who to submit to).

From an artist’s perspective, you could think of a record label as a service. This service is the business structure that allows you to make money being a musician. The label provides services like recording funding (think of this as a loan you could never get elsewhere), manufacturing, graphic design, marketing and promotion, and distribution.

If you sign with a label rather than building that structure yourself, you will have to pay them. Luckily, you don’t pay up front. Instead, you share the revenue generated from the monetization of your music.

Of course, in most cases you won’t be getting the majority of this money – in fact you might only be entitled to 10 to 25%. It’s up to you to decide if that’s worth it, but the idea is your ability to build the structure and promote your music is so miniscule compared to a big company that even 10% is a world better than 100% of what you could make on your own.

This theory was definitely true in the beginning. Even to have access to a recording studio was such an expensive proposition that artists had no way to make a record without a label.

Now Things are Different

Now of course, it’s only partially true. Not only can you make a recording on your own, with a little knowledge and work, you can even build a following, distribute music, promote, and create the entire structure yourself, skipping the label entirely. Think of Chance The Rapper and you’ll see how far its really possible to go.

That doesn’t mean there’s no place for a company that can do all that for you. The fact is, not all musicians want to become graphic designers, recording engineers, digital marketing gurus, concert promotors, and agents.

Still, many musicians have trouble with the idea of sharing the wealth. If you think of a label as an organization you’re paying to help you with your music career, a lot of what you see in the contract might make more sense.

There It Is, In A Nutshell

Record labels and the music industry in general are complex things. We haven’t even scratched the surface here, but we hope that understanding what a record label is at the most basic, fundamental level will be a good first step toward your understanding of the industry.

So, there it is in a nutshell – the basics of record labels.

While you’re here, if you’re going the independent route, take a look at one of the most important pieces of your music business structure – distribution.

I’m a producer, vocalist, and writer. When I asked myself “what IS a record label?” my life became all roses and puppies. Do you believe me? 🙂 Let’s talk about it on Facebook or Instagram

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