How the Big Four Record Labels Became the Big Three

Lady Gaga is now a Universal Music artist

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If you're a music fan, it probably seems like there are literally thousands of music labels out there, scattered across the world. New record companies are created every day to cater to niche audiences and music styles.

However, just three major record labels rule the global roost. EMI was once one of the big boys—but Universal Music purchased EMI in 2012. So, where once there were the Big Four, now there's just the Big Three.

The Big Three

The Big Three record labels are:

  • Sony BMG
  • Universal Music Group
  • Warner Music Group

These labels can make up almost 80% of the music market or even more—depending on the year—although it was estimated to be about two-thirds in 2016.

How Artists Are Affected 

Artists who are signed to one of these major record labels are either signed to the central label or signed to a subsidiary of that label. A band might be signed to Sony, or it might be signed to Columbia Records, which is a Sony subsidiary. These subsidiary labels have their own staff, they sign their own artists, and they make most of their own financial decisions, but in the end, they must answer to their parent company. The "main" company sets its overall budget and makes decisions regarding things like reducing staff.

Poor performance can close the subsidiary. Its artists would then be distributed among the other subsidiaries under the major label. In this respect, the hierarchical structure of a major label can be quite complex, and it can differ a bit from label to label.

These Big Three record companies also occasionally offer distribution to indie labels. Under these deals, the major label offers the indie's releases to stores along with their own releases, but they do not have a say in what albums the indie releases or how the indie manages its label.

Controversy Over the Big Four

Universal Music expressed interest in purchasing EMI in 2012 and made an offer of $1.9 billion. Consumer watchdog groups released a report encouraging the government to halt the deal on June 14, stating that the buyout would cause major issues within the industry. They felt that this new mega power would be able to disrupt pricing, costing consumers significant amounts of money.

A congressional hearing was held on the issue, and it was examined by European authorities as well. After several months of debate, American and European regulators approved the takeover of EMI. Universal Music gained access to the work of some significantly major artists, including the Beatles, Pink Floyd, Lady Gaga, and Kanye West. The sale created a huge shift in the industry, consolidating power to the Big Three and changing the business landscape. The Big Three now controlled the vast majority of the music market. Some artists moved to smaller independent labels or opted to self-publish in response in an attempt to gain control over their works and careers.