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The Role of Recording Label In Todays Music Industry

Cambridge Dictionaries Online website defines label simply as: a company that makes and sells musical recordings. In order to understand the role of labels, we should define basic label types, discuss labels typical structure, and understand how the recent changes in the business affected the labels.

Label types Two basic types are Major record label and Independent label (or Indie). A major label is a large record company with many departments, years-proven experience, and large-scale budgets. The biggest major labels are the so-called Big-3, represented by Sony, Universal and Warner Bros. These mega-companies own many smaller labels. Such a child-label is a company by itself: it manages its own staff, signs its own artists and has its own budget. An Independent label is a smaller company that doesnt have a parent company to report. Independents specialise in one music genre, unlike the majors, who can handle vast spectrum of music styles. Passman (2011 pp.66-67) defines two subtypes of Indies: Major-Distributed Independent and True Independent. He explains:
Major-Distributed independent entity that has little or no staff, but rather signs artists and contracts with a major label to perform all functions except recording the records.

A true independent is not owned by a major label, but rather is financed by its owners
and/or investors ..distribute their records through independent distributors

The Label structure One can learn the labels basic functions are by studying its departments.

Larger label naturally has more specialized departments, while smaller labels members have to cope with multiple responsibilities. Knab (2010) describes major label management as the following hierarchy: CEO responsible to the whole business of all the labels involved President runs the child-label business, reports to CEO Senior Vice President responsible for a department inside a label Large label should have departments common to any company that manufactures and sells products: Finance, Human Resources, Legal, Marketing, Sales, International, Product Management, and Production. In addition, large label has the following business-specific departments: A&R, Artist Development, Art, Live and Touring, Synchronization, Promotion, and New Media. Here are some of the key departments explained: A&R explores the current market trends, finds and signs new artists. Bruce Lundvall, CEO of Blue Note Records, calls A&R: the most critical of all the functions in any record company. Knabs (2010) definition is as follows:
They work with the artist in song selection, choice of producers, recording studio selection and they communicate with the label's Business Affairs to make sure all the paperwork and accounting issues involved with the actual recording of an act's record are setup properly.

A&R searches for artists who can hopefully return the companys investments by selling large number of records, Passman (2011, p.67) sets the numbers:
...if youre an independent label, its a big deal to get an order for 25,000 units. ...a major label would yawn over an order for 25,000 units.

To avoid risk, major would typically sign artists who play music, which currently sells best, which obviously results in poor music variety on the market. Since only majors 3

have money to access mass-media channels (radio and TV) and control the music the public listens to, they can be held responsible for the feeling many people have that the music is dead.

Artist Development - in the older days, A&R also searched for fresh undeveloped talented artists with great potential. Artist Development would help them then to learn the craft: improve song writing, stage behaviour, personal image etc. Today A&R prefer rather finding artists that have already developed themselves and have a good digital presence, decent demo records and a solid fan-base: According to Schwartz (2002 p.4-5):
A record label is more likely to sign an artist who is working to get exposure for her music and who has a fan base. Labels prefer you to have a core of buyers for the first round of records. The days of artist development are history.

Knab (2010) agrees: The Artist Development Department has changed over the last decade. Many labels no
longer have such a department.

New Media Department is well-described by Knab (2010): ..produces and promotes the music videos for the label's artists ..also oversees some
promotions and marketing opportunities on the Internet that use the audio and video technologies available from online hardware and software sites that support music.

New Medias findings about opportunities online can serve other departments like Marketing and Promotion.

Production - manufactures the product, which can take a form of a CD, DVD or downloadable audio file. Production of an audio record includes actual recording in a studio (sometimes can be done by an Indie label instead), mixing, and mastering. 4

A music Producer hired by an artist or by a label manages the process of the recording. For a video clip, the process may depend on a budget and the deadline available.

To summarise, labels find and sign new artists, produce records and videos, and finally distribute and sell them to the customers via distributor companies. Large labels also can participate in other aspects of the artists career: live tours, merchandising, promotion. In that case, the label will want the artist to sign a deal, which lets it earn not just from the record-related income, but from all the other artists activities. These are so-called 360 deals, described by Passman (2011, pp.102-103):
Under these deals, the companies get a piece of artists earnings from touring, songwriting, merchandising, fan clubs, sponsorship money.. Most companies get from 10% to 35% of the artists net income from non-record sources

Changing Role In the pre-digital era, the only way for artists to get into music industry was to sign with a record label. Passman (2011, p.88) claims:
Historically, record companies held the keys to the kingdom. It took a large organization to manufacture and ship records to stores... Also, in order to really sell records, you had to get your music on the radio and MTV, which took a promotion staff and a lot of money.

Moreover, the label was the only place for a musician to record his music because there was no compact and cheap means to do it somewhere else. According to Dolata (2011, p.7), in 1997 they (majors) alone held over an 80 percent share of the market.

But things changed drastically over the last decades. Those changes are explained in detail by Passman (2011, pp.67-68, 88-89), Kusek (2005, chapters 4-6), and Dolata (2011), and can be summed as follows: 1) CD sales continue to shrink due to retail space competition and many alternative options to receive music (file-sharing, iTunes, Internet radio, YouTube etc). Another reason is that fans realize that most of their money paid for overpriced piece of plastic, goes to retailers and record labels instead of their favourite artists. As a result, the labels whose revenues are still heavily based on CD sales, loose money. 2) Internet and mobile phones provided new ways to promote and sell music. It became possible to reach more people and also enabled more focused marketing. According to IFPI (2010, p.12), total revenues from digital channels made up about 29% of record companies revenues. 3) Many artists became aware of new career alternatives such as: To sign with Indie label rather than with major Not to sign with a label at all, but rather do it independently by promoting and distributing records online, thus sustaining control, profit and artistic freedom. Artists interviewed by Deanna Schwartz (2005, pp.44-45) say:
Michael Johnathon: The formula is simple: unless youre going to sell more albums in the store than at live gigs, you do not need a record company Clint Black: The record company dont pay for the recordings. The artists do. If I pay to record the product, the idea that they own it does not make any sense.

Ezina Moore: Being on a label means that I have absolutely no faith in my own abilities to make it happen on my own. I am worth more. We are all worth more.

As described by Kramer (2010), some Publisher companies manage to release artist records without any recording company.

To establish their own labels. Many examples of that brought by Reevers (2011).

4) The power shifted from major labels to Indies. Schwartz (2005, p.33) explains the causes:
Consumers are fed up with the music coming from major labels. Theyre realizing that the newest, most innovative music comes from indies Manufacturing costs are down considerably, so more independent music gets exposure

Musicians who work in non-mainstream genres will sign with Indies because they know they wont sell thousands of records, so theyre not profitable from majors point of view. Also it can be much simpler for a new artist to sign with an Indie label, because he wont be expected to sell enormous number of records.

Conclusion With rise of Digital era, labels stopped being the only gateway to the industry. Consequently, the artist-label relationship is gradually becoming partnership rather than ownership. Kusek (2005 p.23) says:
Artists, if they want to, are shifting into a position of power in which they are working with the labels, not for the labels.

Indie labels are very important by being flexible and providing more innovative music to customers, though the majors money, connections and promotion power cannot be underestimated. Labels still remain an important player on a music industry landscape. Passman claims (2011, p.90):
As of this writing, most new artists still want to sign to a record company ..the reality that no artist has been able to launch a major career by using the Internet on their own today most mainstream artists and their managers believe they need a record companys marketing machine to really make it

Dolata U. (2011) The Music Industry and the Internet: SOI Discussion Paper 201102. University of Stuttgart. Available at: Last accessed: 9th Jan 2012 IFPI (2011) IFPI Digital Music Report 2011: Music at the touch of a button. Available at: Last accessed: 7th Jan 2012 Knab C. (2010) Inside Record Labels: Organizing Things. Available at: Last accessed: 5th Jan 2012 Kramer E. (2010) The Publisher as a Record Label. Music Business Journal. Available at: Last accessed: 7th Jan 2012 Kusek D. & Leonhard G. (2005) The Future of Music: Manifesto for the Digital Music Revolution. New England: Berklee Press Lundval B. What Departments Make Up a Record Label? Artists House Music. Available at: Last accessed 6th Jan 2012 Passman D. (2011) All You Need to Know About the Music Business . 7th ed. London: Penguin Record Label in Cambridge Dictionaries Online. Available at: Last accessed: 5th Jan 2012 Reeves C. (2011) 14 Artists Who Launched Their Own Labels. Paste Magazine. Available at: Last accessed: 7th Jan 2012 9

Schwartz D. (2002) The Real Deal: How to Get Signed to a Record Label . New York: Billboard Books Schwartz D. (2005) I Dont Need a Record Deal: Your Survival Guide For the Indie Music Revolution. New York: Billboard Books