Module 5: The Record Industry

Objective: Study the fundamental concepts of the record business

 The record business provides similar qualities of the entire music industry
o Creativity, intellectual property, contracts, artists, managers, and lawyers

Major vs. Indie labels

 A major label is a multi-national record-oriented conglomerate with diverse revenue sources

o The three major labels are Sony Music Entertainment, Universal Music Group, and
Warner Music Group
 All major labels have:
o Extensive offices and operations in key cities around the world
o Many subsidiary record labels included in ownership
o Each has many businesses in its portfolio
o A large and successful music publishing business
o A well-constructed and viable physical distribution system for its audio products
 Unless a record label is associated with one of the three major labels, they are considered
“indies”
 There are pros and cons to both labels when it comes to people, resources, products,
incubation, success, publishing, and distribution
o Each kind of label has both advantages and disadvantages therefore every artist will be
different in which label would be the best for them

Company Structure/Functions

 Each label has to perform the same number of functions

o Typical offices include:
 President/CEO, legal business affairs, accounts, royalties, international,
marketing, A&R, sales, promotion, admin producers, advertising, publicity, and
artist relations
 There are functions that need to be performed in order to get any recording project finished

The Deal Phase

 Labels develop brands that reflect the companies place in the market
o Primary people in the deal phase are the president, legal department, and A&R
departments
 The label president is the primary leadership position of a record label
o Visionaries and entrepreneurs
o Must have leadership and business skills to make plans for carrying out a company’s
vision
 Legal Department
 Companies of a moderate to larger size have a legal office, or general counsel. Smaller labels
tend to just keep an attorney that is able to step in as a legal representative on short notice
 Artists and Repertoire (A&R)
 o The eyes and ears of the record label
o Find the artists whose recordings will sell
o Employees of the label or independent contractors

The creation phase

 First label recordings

 Producer
o Person responsible for every step of the recording project
o Not the same people who do the technical work of recording an artist
 The Art Director develops a “look”
 Ties together visual elements of an artist and their audio project
 Replication
o Producing the physical product in large quantities

The delivery phase

 How the project is going to be introduced and made available to the public
 Sales
o Physical product and digital/streamed delivery
 Advertising
o Makes customers aware of a label’s offerings
 Publicity
o “To get people talking” about the projects that the label is producing
 Distribution
o From the time an audio project is made and delivered to retailers
o to give to the consumer
o delivered to retailers who give to the consumer
o delivery of a non-physical product
o appropriate platforms for public access

Distribution and Monetization

 Social media and streaming outlets

 Record promotion entails efforts made to get a record company’s tracks added to ratio rotation
lists that broadcast

Finance Office

 Accounts payable and accounts receivable

 Advances
o All advances a record company offers serve positive functions and all payments are
made in advance of earning any money
o Subject to recoupments by the record company
 Cross-collateralization
o Positive earnings from recouped categories will be used to repay the negative earnings
categories of music video and tour support
  Chargebacks
o Expenses for a project charged back to the artist
 Includes packaging deduction, breakage reduction, free good reduction
o The artist basically pays for the packaging of products

Technology has changed the music industry with new ways of recording

The majority of recording projects fail, just about 9 out of every ten fail