The Record Label's Role in the Music Industry

Record label execs Lucian Grainge (CEO, Universal Music Group) and Russell Simmons (Def Jam Records)
Getty Images/Lester Cohen

Record labels are companies that market recorded music and corresponding videos. They engage in a wide range of functions in the music industry, including new artist recruitment and development (known as A&R, which stands for artis and repertoire), music publishing, and copyright enforcement.

Marketing is one of a record label’s most important functions, as public awareness of their brand and associated artists is the way it makes money.

Record label logos and their contact information once figured prominently in the center of vinyl records, which is how labels such as Arista, Capitol, and Epic became household names.

Major Labels

Major record labels offer deals to the world’s most successful music artists. These record labels, such as Sony and Universal Music Group, own distribution networks that put the music of the artists they sign to exclusive contracts in the hands of the millions of consumers sometimes in a matter of days or even hours.

Major labels sign a range of agreements with their artists, including licensing and distribution agreements, which give them significant cuts of artists' earnings worldwide. Many major record labels also own sub-labels that specialize in publishing, recording, and promoting various music genres such as country, Latin, jazz, and hip-hop.

Independent Labels

Often with barely enough money to keep their office lights on, independent, or indie, record labels sit on the cutting edge of the music scene, giving low-paying deals to up-and-coming artists, which help them become known. Indie record labels are known as such because they are independent companies without corporate backers.

A&M Records, founded in 1962 by Herb Alpert and Jerry Moss, stands as one of the most successful indie labels of all time, having signed artists such as Sting, Sheryl Crow, and Joe Cocker during its four-decade run.

True indie labels have smaller distribution networks than their big label counterparts and typically reach consumers one at a time. However, indie labels have a strong reputation for having their fingers on the pulse of upcoming music trends and for giving chances to unknown artists who eventually become international sensations.

Record Label Control

Record labels typically set the terms and conditions of artist contracts in their favor. In the case of newly signed artists, record labels can control the type of music they record, which can include everything from the way the music sounds to the song lyrics. They also control album cover art in most instances.

Depending on the contract structure, record labels also have the ability to set the amount of money their artists earn. While the relationship between artists and their record labels is often mutually beneficial, there always is the possibility of that relationship becoming contentious. The more successful artists get, the greater their ability to renegotiate contracts to include more favorable terms.

Labels Today

Throughout the 20th century, record labels were the dominant force behind the most successful artists. Record labels had the power to make or break artists, depending on the amount of money they invested in promoting their music.

The internet has freed artists from dependence on record labels, and many artists market and distribute their music independently through social media and streaming platforms at a much lower cost. To stay in business, given the reality of the digital age, record labels now offer so-called 360 deals to artists that give them a cut of all the artist's work, including album sales, media appearances, and product endorsements.