There are a lot of misconceptions and myths when it comes to record labels. With the music industry constantly evolving, it’s easy to be confused and not know what the hell is going on. Thankfully, I’m here to inform you with 10 things you probably don’t know about record labels.
First of all, I should define the very overarching difference between the two. One, majors usually have more distribution networks and larger budgets, but are more controlling. Indies typically give the artist more creative control, more lenient with contracts, but lack the distribution reach and funds. this is just the basic difference, but of course there’s a large gray area.
1.
Majors often own the music by the artist
What many people do not know is that when an artist signs with a major label, particularly at the beginning of their musical career (as their more naive and more excited about the whole major label prospect) the label will own the music. This includes the right to use that music in any way they so please, including licensing the songs to video games, commercials, and for mp3 downloads through a Lucky Charms cereal box. When a band signs with a major, they have the pluses of the major label, but also the massive con of losing ownership of their creation. The copyright, and essentially anything relating to the property of the music is owned by a label. That’s why when video game company such as Red Octane and Activision, the ones behind the Guitar Hero franchise, license music, they contact labels. This is why Apple must get permission from the label to distribute music for their popular Itunes download service.
This is not always the case. bigger acts who have been in the industry for awhile, can either buy their own licenses from the label (for future contractual obligations I’m sure) or can get this stipulation removed if the label finds them extremely valuable. It’s just a common misconception among fans that believe that the artist has full control on where their music inevitably ends up.
2.
Indies are often partly owned by major labels
A common idea is that an indie label acts completely on their own. But what is often the case, especially in larger independent labels, is that they are partly owned by a major label. An indie may rely on funding from a major for purposes such as international licensing deals or making distribution agreements. The truth is, many indies are created from majors wanting to branch out their brand and accompany different types of musical artists in their repertoire. A major is restricted in some ways with experimentation, but when, say, Interscope, has part ownership and control of 25 different indie labels, they now have different revenue streams. The indies are happy to be either partly owned because of what a major can offer, or to even be created from a major, and having more control on their own terms.
Many labels are completely independently owned, but many are seeking oversight from majors who have a stake in their well-being, so think twice before you attack a major label and promote your favorite indie label- they just may be the same thing!
3.
Labels sign hundreds of artists
A common misconception amongst fans is that labels are very selective. Sure, they are selective. there are millions of bands in the world and they sign hundreds. The idea here is more prominent in major labels who may sign 600 acts in a year. out of this 600, who actually gets an album finished and on store shelves? 400? Out of that 400, who actually earns enough sales and attention to be featured and advertised and promoted appropriately? 10? And out of that 10, who actually earns the label money?
These are theoretical numbers, but the idea is that for every COLDPLAY or DAVE MATTHEWS BAND there are 99 complete unknowns. These 99 acts are money losers. They were signed in the hopes that the internet would buzz over them, the label puts in the necessary promotion, and they become huge. The label is banking on a massive act out of every 100 they sign. Most of the bands who even get an album on the market, fail and are immediately dropped from the major label.
This is less prominent in indie labels who are willing to work a bit more with an act they find promising but are having a rough start. As well, the idea of signing many acts is becoming less prominent in major labels. The truth here is that majors are losing money regardless, and they are shifting their strategy. This is not to say the major labels are signing hundreds of acts yearly, and out of those 100 you are hearing roughly 10 new acts yearly on the radio- and only a select few of those are profiting the label and making up for the 90+ losing acts.
4.
Majors sign bands for a decade long contract
This at first appears contradictory to the above, where labels drop bands who do not meet their unruly expectations. But the truth is that major labels sign bands for 5+ albums, sometimes even 7 and perhaps even as low as 3 or 4. the point here is that if a band IS successful with their first or second album, they are tied to the label for a whole collection of albums, and not just those first few. This is the exact situation the pop rock band WEEZER found themselves in in 1995 when their debut self-titled album went platinum (1 million sales) in the course of a year. The label put pressure on them to make their follow-up, and their contract stipulated 7 albums before they were able to leave the label and join another.
So that is exactly what they did. 16 years later, Weezer released their 7th LP Ratitude, and following that release, left Interscope records and signed with prominent indie label Epitaph. This is the perfect case of a band being tied down to a contract for many years. This exists in case the band becomes extremely popular, the label has them for their own. How many bands actually make it to 6-7 albums? By that time, most bands will have dwindling sales and be dropped from the label 3 records in. They never make it to 4 let alone 7! But every once in awhile a band comes along who remain popular for many years.
LINKIN PARK is another example. They are 4 albums into a contract with Warner Bros., making their debut LP Hybrid Theory, selling roughly 10 million copies since its release, and are still tied into the contract with the label for another 3 albums. This contract usually involves some sort of Greatest Hits (which is why bands sometimes push greatest hits albums to get out of a contract) but the point is that a popular band is often tied to a label for a solid decade before they can earn their full creative control.
5.
Labels leak their own music
In a world where leaks are commonplace, digital sales often exceed physical album sales, and the single is the big ticket to profit, we have labels using unconventional methods to get attention. A common misconception here is that labels are often upset when a big album leaks. A leak means that the album is available online before it is available in stores, often jokingly referred to it as “falling off the delivery truck.” Labels may leak a popular record to build a buzz around the release. There was a lot of stirring in the music world when EMINEMs long awaited LP Recovery leaked to the internet weeks in advance of its street release. The label responded with dissatisfaction, but in reality, the street date was pushed forward due to the leak and the internet was buzzing about how fantastic the album was and how it was a return to Eminem‘s roots as a rapper in his 2000-2003 prime.
This type of buzz was exactly what the label wanted, and likely helped push Recovery to be one of the best selling albums of 2010 and relaunch Eminem’s career. Of course, the solid music and the marketing team made Eminem succeed extraordinarily this year, but with album sales, the leak undoubtedly assisted in giving the fans two weeks of anticipation and buzz for a street release. (Plus ringtone sales and concert sales etc etc…)
It is also worth noting that many bands tour on an album that is yet to be released, and the album leaks during or right before the tour. Coincidence? Or perhaps it is a way for the band or label to build some buzz around their newest album and perhaps attend the show with the new songs being familiar?
6.
Bands have been releasing songs outside labels for years
One of the biggest misconceptions is in the act of releasing music for free across the web. This is now a much more common act, and is in itself a new way of marketing without the control of either a major or indie label.
When RADIOHEAD released their groundbreaking record In Rainbows in 2007 for a pay-any-price download through the internet, they did it with no label. Not only did they make all the profit (without a label’s cut) they also had full control of WHEN it was released and the body of the music being from entirely their own creation, and no label oversight (a nosy producer meddling with their work for example).
But it was free? Radiohead never officially released any specific numbers, as far as I know, but it was reported that they made more money from this album than all their previous albums combined. (this does not account for merchandise or concert sales).
So from strictly album sales, they made an astounding amount. Trent Reznor of NINE INCH NAILS fame, took this further when he released a four side LP titled Ghosts for free on his site, and followed that up the next year with a brand new studio LP…for free.
Both artists eventually made hardcopy’s of their albums through a label, and it’s worth noting that Ghosts and In Rainbows both sold well in their physical form (In Rainbows broke 100,000 copies in its first week)
But bands have been doing this for years, though they did not receive the attention for doing so. This is nothing new. Since the implementation of Napster in 2000, free music downloads have been a staple in the indie community. With Myspace reinventing itself for the music market, now largely known as Myspace Music, we have artists putting entire catalogs for free. ACE ENDERS, lead singer of the former band The Early November, released material online for free for quite sometime before Radiohead popularized it. Now, entire websites are dedicated to posting free albums online and where they can be found.
Many artists can not market themselves with a massive budget, and many are unsigned, so the next best step is to release their music for free and let the labels come to them- if they even need them.
7.
Itunes is not the saviour of the record label
When Itunes was released in 2001, it was a slow start. Even from a company like Apple, it took quite some time before Itunes was popularized and became a significant money maker. Even now, Apple openly admits that Itunes is not nearly their most substantial market in dealing with profits. the Itunes store launched in 2004 with the newest Itunes version update, and allowed you to go online and download any song available on their market for a reasonable price.
That reasonable price was 99 cents.
Labels took quite some time to embrace Itunes as a reasonable money making outlet. Major labels were notoriously against digital albums, going so far as to block the import of songs into a computer from a bought copy of the disc. So it went against every grain of their being to promote the sales of digital copies of their beloved music. Wouldn’t that just promote more downloading?
The fact is, yes, it would. The vast majority of Itunes users, and IPOD users in fact, do not listen to a legitimately purchased collection of music. Tt is understood that approximately 13% of music on IPOD’s was legally purchased, making the vast majority of it illegally obtained.
The truth here is that Itunes will not give a second life to the major record label. Many are misinformed that labels are making massive amounts of money through digital outlets such as Itunes. Unfortunately (or fortunately depending on how you look at it) the sales for Itunes songs has been a prominent bell curve since its inception, and it is only a double-strength band-aid for the ailing major record label in a 21st century climate.
8.
Bands really don’t make money from album sales
There is a myth that bands make a reasonable amount of money from an album sale. This of course varies by the act, but bands who newly sign to a major label are making nearly no money from each album sale for the first 100,000 copies. This means that the vast majority of major label acts do not make money from album sales, unless of course they sell 100,000 copies. Once they hit that magic number, the amount from each album sale could be anything from .75-2.25. It is very rare for it be outside that range. In reality, bands make the bulk of their sales from merchandising, such as selling shirts, posters, and other types of products. The best thing you can do to support a band is NOT buying their album at the local Wal-Mart, but going to a show and buying a shirt. You could also purchase albums directly from a band’s website, as it is likely they purchased that album wholesale from their label (yes, their own album) and they will make slightly more than if you purchased it through a retailer.
It is becoming more common that labels add live touring stipulations in their contracts. Right now, labels make little from live touring, so they are beginning to add stipulations that state they earn profit from ticket sales, or they earn a consistent amount from each live show played. Their argument is that in promoting an album they are likely promoting the live show, and the money a consumer would have spent on the album they are spending on the live show (as you can’t download a live show…well…not really).
It’s a sound argument, but it is essentially the labels exploring different profit avenues. Madonna announced a $120 million contract with her label Warner Music Group in 2007 that ultimately gave the label a powerful unrevealed stake in Madonna’s future merchandising, concert sales, and fan club and website revenue streams.
It’s a groundbreaking deal that could reinvent the labels ability to make profit, and is more promising than anything labels have seen in recent years.
On a final note, the larger an act or the longer they have been a profitable act on a label’s roster, the more they can bargain a higher percentage per album sale. But the rule of thumb here is that the more the album sells, the higher percent an act makes.
9.
It will take a long time for major record labels to die
Many believe that the major label is on its death bed. Fortunately for them, they will likely have a place for many years to come. Many bands still find the major label the place to be, the place where success is realized. And there will always be a need for buying physical albums, as collector’s will strive to fill their shelves with the latest releases in whatever format seems to be gracing the mainstream. Major labels may die soon, but the idea of the record label has a long life. Indie labels are still extremely important in building a band, and using their business connections to promote in ways that a solo act or band simply couldn’t reach without some luck on their end.
Major labels have a wavering but reasonably long life ahead of them. but I believe it is in independent labels where the money is- where their image in the public of being creatively openly and signing more unique and experimental acts gives them an edge in the public eye. People are getting sick of cookie cutter safe acts signed by labels, and a large amount of their undoing is directed at their inability to consistently sign and market acts which break the mold instead of adding to it.
10.
There are thousand of thousands of labels, and many of them are strictly online
The music industry is a survival of the fittest. many record labels have died out and now only the ones reinventing themselves in an online world are surviving. This is where we get the misconception that a label’s only responsibility is making a physical album. The truth is, beyond promotional tasks, many labels exist solely on a digital basis. They use internet radio and internet publicity and the vast network of blogs to promote on a scale that 5 guys in a band simply cannot. Not all labels make physical albums, and not all labels have physical albums sold in famous retail stores such as Wal-Mart. Wal-Mart carries approximately .02% of albums on the market, and yet they are responsible for 55-60% of all album sales.
When thinking about this, this is extraordinary. It means that there are hundreds of thousands of albums available to buy that are not available in large retailers.
Many labels strictly work with vinyl. A niche but slowly increasing market for those who still like their record players and the purchase of a large physical disc. And there are labels who hardly even sell the music at all, leaving that to the band to sell the music (even create the physical albums) and they simply do the promotional work necessarily to strive and succeed- they make money not from music sales but from advertising.
In the music industry now, there are unlimited possibilities for musicians to make money. The music industry is NOT dying. It is the record industry which is dying, and they are not down and out. There will always be room for major labels who promote massive acts, but even more importantly, there will be room for a 13 year old kid to make a Youtube channel and make videos, at no cost, and become a revolutionary superstar. The options are endless. Musicians have more than two possibilities. They have the world in front of them, in an industry that is more profitable than ever.