Module 5: The Record Industry
Objective: Study the fundamental concepts of the record business
The record business provides similar qualities of the entire music industry
o Creativity, intellectual property, contracts, artists, managers, and lawyers
Major vs. Indie labels
A major label is a multi-national record-oriented conglomerate with diverse revenue sources
o The three major labels are Sony Music Entertainment, Universal Music Group, and
Warner Music Group
All major labels have:
o Extensive offices and operations in key cities around the world
o Many subsidiary record labels included in ownership
o Each has many businesses in its portfolio
o A large and successful music publishing business
o A well-constructed and viable physical distribution system for its audio products
Unless a record label is associated with one of the three major labels, they are considered
“indies”
There are pros and cons to both labels when it comes to people, resources, products,
incubation, success, publishing, and distribution
o Each kind of label has both advantages and disadvantages therefore every artist will be
different in which label would be the best for them
Company Structure/Functions
Each label has to perform the same number of functions
o Typical offices include:
President/CEO, legal business affairs, accounts, royalties, international,
marketing, A&R, sales, promotion, admin producers, advertising, publicity, and
artist relations
There are functions that need to be performed in order to get any recording project finished
The Deal Phase
Labels develop brands that reflect the companies place in the market
o Primary people in the deal phase are the president, legal department, and A&R
departments
The label president is the primary leadership position of a record label
o Visionaries and entrepreneurs
o Must have leadership and business skills to make plans for carrying out a company’s
vision
Legal Department
Companies of a moderate to larger size have a legal office, or general counsel. Smaller labels
tend to just keep an attorney that is able to step in as a legal representative on short notice
Artists and Repertoire (A&R)
o The eyes and ears of the record label
o Find the artists whose recordings will sell
o Employees of the label or independent contractors
The creation phase
First label recordings
Producer
o Person responsible for every step of the recording project
o Not the same people who do the technical work of recording an artist
The Art Director develops a “look”
Ties together visual elements of an artist and their audio project
Replication
o Producing the physical product in large quantities
The delivery phase
How the project is going to be introduced and made available to the public
Sales
o Physical product and digital/streamed delivery
Advertising
o Makes customers aware of a label’s offerings
Publicity
o “To get people talking” about the projects that the label is producing
Distribution
o From the time an audio project is made and delivered to retailers
o to give to the consumer
o delivered to retailers who give to the consumer
o delivery of a non-physical product
o appropriate platforms for public access
Distribution and Monetization
Social media and streaming outlets
Record promotion entails efforts made to get a record company’s tracks added to ratio rotation
lists that broadcast
Finance Office
Accounts payable and accounts receivable
Advances
o All advances a record company offers serve positive functions and all payments are
made in advance of earning any money
o Subject to recoupments by the record company
Cross-collateralization
o Positive earnings from recouped categories will be used to repay the negative earnings
categories of music video and tour support
Chargebacks
o Expenses for a project charged back to the artist
Includes packaging deduction, breakage reduction, free good reduction
o The artist basically pays for the packaging of products
Technology has changed the music industry with new ways of recording
The majority of recording projects fail, just about 9 out of every ten fail