How do record labels work

Legal Department - This department is responsible for all the contracts that are made between the company and the artist, as well as contracts between the record label and other companies.

Any legal issues that arise such as lawsuits between an artist and the company go through this department. Marketing Department - This department creates the overall marketing plan for every album that the record company will release. It helps coordinate the plans of the promotion, sales and publicity departments. New Media - This department is in charge of dealing with the newer aspects of the music business, including producing and promoting music videos for the artist.

In addition, this department is often responsible for helping an artist create a presence on the Internet. It deals with the new technologies in which artists can stream music and music videos through the Internet.

Promotion Department - This department's main purpose is to make sure that an artist is being played on the radio.

It must get an artist's new songs on the radio in order to ensure the future success of the record company. This department makes sure that all the other departments are communicating about the best way to sell the artist to the public.

This can be the responsibility of this department or in conjunction with the New Media department. Publicity - This group is responsible for getting the word out about a new or established artist. It arranges for articles to be written in newspapers and magazines.

They also deal with radio and television coverage of an artist. Many artists also have their own independent publicists who help coordinate publicity with this department as well. Sales - This department oversees the retail aspect of the record business. It works with the record store chains and other music stores to get new albums onto retailers' shelves. The sales department often coordinates these efforts with the promotion and publicity departments.

Why shop for a label? Read More. Cite This! Print Citation. Money is no joking matter in the industry and because of that, you need to provide results. However, if you are successful enough, you can negotiate to gain higher percentage on sales. Signing with a big label can be an exciting thing, but that does not mean that the lime light will be directly on you. There are many small artists listed with these labels, so it will be easy to get lost in the crowd. Starting your career may be a difficult process, but will all be worth it once you get recognized for your work.

They provide a more subtle way to record music. Although they are not as well-known as major record labels, they do have their perks. Unlike major recording companies, indie labels want to recruit you because they have interest with you. Receiving an offer from an independent record label is an honor because that means that your image and sound genuinely appeal to them, and they want to give you a platform for it.

Because these companies are much smaller, you can expect fewer people to be signed with them. This means that you have a bigger chance in standing out and building a business relationship with the label. Having a great relationship with the company will open doors to planning and discussing what the next step should be for your career.

As for contracts, indie labels could provide similar to those of major labels but less intense. Some may even include only distribution and promotion deals. Nonetheless, the contracts depend on the company and the artist. After signing with a small recording company, smaller artists will still be able to stick to the image they desire and are given the freedom to possess creative control over their music, especially when it comes to writing lyrics.

A majority of indie labels let their artists own their music after a determined amount of time. Although you are more likely to creatively express yourself with an independent label, you may not have the resources to.

Smaller companies mean smaller budgets which can increase restrictions for your career. Due to the smaller amount of money the label will provide, you may have to record in studios that might not give the same quality as the songs that are currently topping the charts.

Local producers will be able to assist you with your songs, though they may be new to the industry like you. Lastly, your music will not be as greatly distributed. Whether the record label is identified as independent or a major label, it is not a one-man show. There are plenty of people who work behind the scene to keep the company running.

Their job focuses on what genres their label will handle, as well as which direction the label should take. They handle the politics of business, marketing, and the artists that are signed with them. CEOs communicate with the people under them to improve the company and basically control all departments. Although CEOs have the highest amount of control, it does not mean that they run the label themselves.

Generally, the VP conducts meetings to make plans with department heads. They serve as the negotiator with the distributors of their music. Since record labels are businesses, they must have Business Affairs or Accounting to deal with financial matters. Of course, the actual real-life contracts will fluctuate from this averaged simulation — yet, it can give us a pretty good idea of how the label system makes a profit when it comes to newly signed talent.

That is, of course, a very US-centric view on things — the record might generate billions of streams around the world without ever reaching the RIAA Gold. But even if this figure is an understatement, the point is that major labels have a shallow success rate with new signings.

This is precisely why — just like VC funds, labels have to make a lot of risky bets, likely to lose money on most of their newly signed projects. However, their extensive catalog allows the labels to keep on investing in finding those few artists that do break out. The back catalog is the single most valuable resource in the hands of the major labels.

This cash printing machine is one of the main reasons labels can afford to take these risky bets on new talents. The same logic, though on a much lesser scale, can be applied to most indies out there.

The release commitments are lower in the indie deals, so are the advances and recording costs. Accordingly, an independent label will break-even much earlier — but the average stream counts will also be lower. But strictly speaking, distribution-only deal only makes economic sense once the return is higher than k of artist advance — or at million streams. Basically, a fully-independent artist has to take the same chances as a label would. That is the risk vs.

Of course, the returns in a case of success are huge — but should artists bet their livelihood on the monetary success of their art? Pulling a talented, internationally connected team together is no small feat. But that is, of course, the whole point of DIY.

But as long as music marketing means investment, artists or, at least, most of the artists will need someone to bear these costs given they have no troubles assembling the team. That is the very reason why viral success stories of , from Old Town Road to Stupid and La La La turned the heads across the industry. Then, of course, the same viral hits got licensed to read: brought up by the majors, feeding back into the label system — but those dynamics are a topic for a separate discussion.

The point is, labels were, are, and probably always will be an integral component of the music ecosystem, providing artists with financial safety of the up-front advance and taking upon themselves the risks and rewards of the release cycle.

Put simply, the point of the net profit deal is to allow record labels to break-even quickly while making sure that the artist gets a better split if the album is a success. The net profit deal seems like a perfect solution — providing the artist with the safety of advance, allowing the label to recoup the investments quickly, and ensuring that, if the album is a success, the artist gets a fair share of the pipe. Sign me up, right?

Well, the reality is not that simple. There are a few downsides to the net profit deals every artist should be aware of. Primarily, this got to do with overhead fees. When it comes to the powers that be and top-tier, international releases, all the initial label costs can skyrocket.

The skates are huge — and obviously, the label will have to bring major release commitments to support the cycle. So, if the deal has run out, the recoupment deficit will simply go away with it. Cross-collateralization is a clause that is often included in multi-rights recording deals that allows the label to recoup the outstanding deficit with the revenues that are not necessarily connected to the release cycle in question.

Accordingly, in the next release cycle, the revenue gap between the artist and the label will grow even further. That said, there are no good or bad deal types in the music business.