What You Need to Know About Major Labels ... Even If You're Indie

So the music industry has nearly died, and the major labels have fallen by the wayside, making way for the rise of self-releasing artists and indie labels, right? Yes and no. Digital means of free or low-cost promotion, marketing, and distribution have greatly shaped the way artists and industry executives make money. And many of today's biggest artists initially broke onto the scene through their own independently produced singles, albums and videos, going viral and spreading by word of mouth through social media and the blogosphere.

Although the digital revolution has definitely changed how the music industry works as a whole, it is essential for those looking to make a living in music business to realize that the three major labels still account for up to 80 percent of industry revenue -- through their parent companies, their means of distribution, and their subsidiary labels. Although the way they function has and will continue to shift, major labels still dominate the music industry.

Whether a songwriter, recording artist, publisher, major label executive or the owner of an indie label, industry professionals should understand the strength and influence of major labels and what they have to offer. Students who earn an online Master of Music in Music Business and Entertainment Industries (MBEI) from the Frost School of Music have the opportunity to learn about major labels by studying record label agreements, integrated marketing strategy, licensing, publishing and other aspects of how the music industry works, which helps them navigate their music careers successfully.

What Are the Big Three Major Labels?

Although there used to be a fair number of record labels controlling large portions of the market, including Polygram, BMG and EMI, the last few decades have seen three majors rise to the top through sales and mergers: Universal Music Group, Sony Music and Warner Music Group.

Interestingly, the roots of two of these majors in some way derived from the film industry. Universal came about when Decca Records was established in the United States in 1934. The label was attached to Universal Pictures. And, after acquisitions and mergers with other labels, the parent company became known as Universal Music Group, now owned by Vivendi, a French corporation.

The Warner Music Group is another major that came from the film industry. Initially, Warner Bros. Pictures established the Music Publishers Holding Company to negotiate better rates on music for the company's films. From this was spawned Warner Bros. Records, with the intent of releasing music from their film stars and film soundtracks. Warner Music grew to be the parent of other such large record companies like Atlantic, along with numerous smaller subsidiary labels.

Sony Music began as the American Record Company in 1929, evolving through the years into Columbia, CBS, and eventually Sony (when the company was bought by Sony Corporation). After merging with BMG in 2004, Sony grew to its dominating status amongst the remaining three majors.

So What Do the Majors Still Have to Offer?

Largely, the major labels can offer a level of financial and artistic support not feasible for most indie label budgets, as well as decades of experience in every facet of the industry. This allows the majors to invest in their artists by giving the artists time to develop their music, nurturing that development, recording the artists' music at the highest standards of quality with top producers, distributing it widely, and giving tour support. Majors generally recoup these investments out of future sales, tour income and royalty revenue. They often control much of the publishing and master use rights for the artists' music as well.

Major labels generally conduct all industry functions in-house as opposed to many independent labels and artists who hire out these tasks to various companies. These functions include production, recording, distribution, marketing, management, booking, etc. This allows for a high level of collaboration and communication between the various arms of a label, which often results in better execution of artist launches, record releases and tours, leading to more revenue for all.

And an interesting note: Although indie labels have risen to control a substantial share of the music industry market, the vast majority of these indies are actually subsidiaries of one of the big three majors. While being "indie" gives these labels artistic credibility and a large degree of autonomous creative control, being under the umbrella of the majors gives them access to the financial backing, distribution and promotional prowess of the majors.

Concerns With Major Labels and Resulting Developments in Artist/Label Relationships

The way major labels traditionally earn a majority of revenue from a successful record (compared to the artist) has created controversy and discontent. Many current artists make a name for themselves independently or on small labels where they can retain more rights to their music and therefore more income. Logically, this leads many artists to question the benefit of majors as compared to indies or self-releasing.

This has also led to a shift in the way records are made and contractual agreements are drawn up. Many artists make their own records on a minimal budget. Yet they eventually sign with a major label or one of their subsidiaries, basically allowing that label to release and earn money from these already-made records. This saves the label substantial money, which often translates into better contractual deals for the artists (plus the distribution and marketing strength of the majors).

Major labels still play an integral role in the music industry. They largely command the way money flows and the direction of the industry as a whole. And the changing industry has led to a change in the way these labels and artists interact. Understanding the importance of the majors and learning about the complexities of how they function is truly essential for any professionals in the industry, whether on the indie or mainstream side.

Learn more about Frost's online MBEI program.


Sources:

The Guardian: Behind the Music: What Do Record Labels Actually Do? You'd Be Surprised

The Balance: The Big Three Record Labels

Medium: Musical Cold War: Artists and Record Labels Need a Better Business Model

CareersinMusic.com: Famous Record Labels: A Guide to the Major Labels

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