Types of Record Labels: The Companies That Produce and Sell Music

Record labels play a huge role in music industry. Fact that many types of record labels manage the artists is also a huge thing. Let's take a look at it.

by Derrick Reeves | Updated: October 12, 2021

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There are many different types of record labels that can be found in the music industry. Some artists may work with a major label, while others may not have this opportunity. Let's discuss what each type of company does and how they make money! 

The Money Making Process Of Record Labels

The Money Making Process Of Record Labels 

Independent record labels make money the same way the big players do , but they don't have to share it. They make money by providing musicians the space and resources needed for them to create their music, as well as selling it on iTunes or at concerts through merchandise stands. 

Record labels can also be responsible for funding tours that are in conjunction with the artist's album release. 

Traditional Distribution 

Major labels usually deal with traditional distribution, which is the act of selling a product to retailers who then sell it to consumers. 

Record labels make money by being paid for each sale that occurs from their album or single at retail stores like Walmart and Target.  

Digital Distribution 

Lately, CDs and other physical forms of music have fallen in popularity , so artists are mostly selling their music online. This means that record labels have to change the way they make money since they no longer get a cut for each physical sale. 

In this case, record labels will be paid by service providers like iTunes and Google Play who digitally sell their music. 

Making Money Using Spotify 

Spotify is a free music streaming service, although there is also a paid, premium option . Artists are compensated when people listen to their music. How much they make is determined by the popularity of an artist and how many plays they have on Spotify, which is then converted into cash royalty payments. 

Types of Record Labels

Types of Record Labels

Record labels are divided into two types for artists to join. The first is a major label, which generally has access to more resources such as money and distribution networks. The other kind of record label is an indie or independent label that artists may work with if they are not fortunate enough to be signed by a major company! 

Major Record Labels

Major Record Labels

Advantages

Most major labels have more resources and experience promoting artists than amateur labels, so securing a deal with one could be a dream for amateur singers. These companies are well-known, which could lead to a wider audience for the artist. A big budget for marketing and promotion is the most valuable thing these big companies offer.  

  • Established powerful connections and influence 
  • They have a larger "pay-to-play" policy, meaning that artists need to buy their own songs in order to be played on the radio. This would mean they also must fund a video and hire staff for tour production if it is required! They are more likely to control an artist's image because they can afford. 

Disadvantages 

As an entertainment company, their company is very busy, so they have many demands on their time. They need to be careful when selecting artists because it will affect them, the artist and any other label they work with! 

However, there are some restrictions with working with big record labels . Artists may have to change their style or content in order for the label to be interested, and labels limit an artist's freedom because they own most of the rights. 

Major Recording Labels And The Artists They Represent 

Universal Music Group (UMG): 

  • Tylor Swift 
  • Lady Gaga 
  • Justin Bieber 
  • Akon 
  • Kanye West 

Sony Music Entertainment (SME): 

  • Beyoncé Knowles 
  • Britney Spears 
  • Alan Walker 
  • AKA 
  • Backstreet Boys 
  • BTS 

Warner Music Group (WMG) 

  • G-Dragon 
  • Ed Sheeran 
  • Madonna 
  • Jason Derulo 
  • Prince 

Independent Record Labels

Independent Record Labels

Advantages 

You are more likely to creatively express yourself with an independent label, you may not have the resources to produce and release your music like a major label can, but you do have more freedom. 

The artist is responsible for finding their own marketing team and distribution company that they will work with in order to sell music through the internet or on CDs. 

The promotion and distribution of your music will be significantly more expensive on independent labels because they are smaller. 

An independent label will typically have a much smaller budget than that of a major record company, which means they can’t afford to market you in the same way. 

Even though they are small, independent labels can still make money. How? By getting your music out to as many listeners as possible and then cashing in on the popularity of it later. They do this by promoting you through tours, making sure that people know about you with social media sites like Facebook or Twitter outside of just their website – all without spending too much money thanks to lower budgets. 

Disadvantages 

The sound of your recordings may not be as good as that of a major studio because you might have to record in smaller studios. 

You may not be able to tour extensively in the same way because independent labels simply don’t have the money for it like majors do. 

One more disadvantage is lack of promotional opportunity with an independent label when compared to a major record company, which means you won’t get your music out there on TV or radio nearly as much and might not reach people who would enjoy hearing it otherwise.  

Labels And Artists Of Independent Recording Companies 

XL Recordings 

  • Adele 
  • Beck 
  • Damon Albarn 

Brainfeeder 

  • DJ Paypal 
  • David Firth 
  • Captain Murphy 

Ninja Tune 

  • Andreya Triana 
  • DJ Food 
  • FaltyDL 

A Glimpse Into The World Of Record Labels 

There are many people behind the scenes of a record label, independent or major, that you do not see, but they still play a key role in how your favorite artists make their music. 

Majors - Record Label Executives  

These executives put together albums and budgets for upcoming projects so they know what to expect when it comes time to pitch them to retailers like Apple Music or Best Buy. They not only focus on making sure an artist is doing well financially, but also want the album to be successful in terms of sales overall. 

Vice President 

In addition to strategizing for the label, the Vice President (VP) decides which artists are best for specific projects. They also oversee all of the work that is being done by their company and make sure it's up to par with industry standards. 

A&R Director  

An A&R director searches for new talent to bring on board, as well as helps develop their skills through proven methods like mentoring or coaching them in various fields (such as singing lessons). They help set out a strategy so they can find something that will resonate with listeners worldwide, which usually includes listening to songs from the artist themselves before signing onto them. This ensures everyone involved feels confident about what they are doing when releasing an album or single together internationally. 

Accounting 

Because record labels are businesses, their financial matters must be handled by Business Affairs or Accounting. They make sure everything is in order and the company has enough money to cover expenses. This may mean setting up an international tax plan or renewing royalty accounts with musicians who receive a portion of revenues from their work. 

Legal 

Music labels require artists to sign contracts before they can work under their label. The contract will specify the amount of time an artist is signed to a label as well as what they are entitled to. A lawyer, sometimes called Legal Affairs or Business Affairs may be in charge with approving contracts for new artists and ensuring everything goes smoothly between both parties. 

Artist Development 

They can determine if an artist is ready to enter the big leagues of show business by consulting with the Artist Development department. This department may be in charge with organizing things like tours and making sure that they are prepared to handle all aspects of a successful tour, from promotion to production and management. 

Marketing 

The marketing department works to spread the names of the artists using a variety of methods. This department may be in charge of making and distributing promotional CDs or utilizing social media sites like Facebook or Twitter for example, which has been proven by recent studies as a successful way to reach out to potential fans. 

Public Relations 

Marketing gives their artists opportunities to appear in interview spots, radio and TV sports, live performances, and even print advertisements for their companies. They are in charge of their artists’ public image and how they will be perceived by the general population. 

Read More: The 25 Most Famous Music Producers Of All Time

Conclusion 

Artists and record labels have a symbiotic relationship of sorts . The artist needs the record label to make money, and the label needs their artists in order for them to turn a profit. 

In conclusion, it is apparent that there are many different types of record labels out there today with various responsibilities - but what we can take away from this article is how they all work together to create a profitable business model. 

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