0 Question Asked: January 12, 2020In: OtherWhat is the purpose of labels in the music industry and why do they hold so much power as well making more money than the artists signed?0What is the purpose of labels in the music industry and why do they hold so much power as well making more money than the artists signed?In: Other ShareFacebook 27 AnswersVoted azlan121 Added an answer on January 12, 2020 at 10:14 pm they are essentially venture capital incubators, they find promising talent, and loan them a ton of money that they are unlikely to ever see again, and pump time and resources into developing and marketing a product with the talent in the hopes that the product takes off and they can get a return on the investment,the reason the deals seem so lopsided is because its a massively high variance game to play, its essentially gambling on if an artist will make any kind of headway commercially or not, or if they even get a sellable product at all0Reply Share ShareShare on FacebookShare on TwitterShare on LinkedInShare on WhatsApp omgIamafraidofreddit Added an answer on January 12, 2020 at 10:11 pm Hi, so signing an artist is a gamble.The label pays an advance to the artist so they can have money in their pocket and pay their bills.The label pays for the audio recordings.The label pays for music videos.The label pays for tour support.The label pays for radio promotion.The label pays for the publicist.The label pays to manufacture physical product.The label pays for legal costs.The label pays for marketing and digital advertising.The label does all of the work associated with many of the above costs. The label should have existing relationships with people in all of those areas where you would like to have your music featured so your music should cut through some of the clutter..If a record does poorly, the label is loses $20K, $50K, $100K or more. I worked on a record once that it would have been cheaper to tape $10 bills to the ones we sold than to spend what we did on marketing.If a record does well, the sky is the limit.In fact, in many cases a big monster record like a Taylor Swift might end up paying for a record & campaign for 5 or 10 lesser known artists that you might like but weren’t commercial successes on the same label.Because the label assumes the bulk of the financial risk they assume the bulk of the financial reward from RECORDED music. In the past it was not typical that the label would participate in tour sales, merch, or publishing revenues much of which were kept by the artists. Now, because recorded music is much less profitable than it used to be and because the label bears much of the costs associated in making an artist popular there are deals where the label takes a percentage of that revenue as well.Source: Me. Over 20 year veteran of the business side of the music business.0Reply Share ShareShare on FacebookShare on TwitterShare on LinkedInShare on WhatsApp pancakecupcakemuffin Added an answer on January 12, 2020 at 11:38 pm Basically, musicians can not afford to finance records themselves. Musical instruments and recording equipment are incredibly expensive. Since labels have the capital to finance the records, they hold all the cards. Without their money, the record will not be made. Typically musicians are not the most functional people. It’s a choice between bagging groceries or taking whatever offer the label gives them.0Reply Share ShareShare on FacebookShare on TwitterShare on LinkedInShare on WhatsAppLeave an answerLeave an answerCancel reply Attachment Select file Browse Featured image Select file Browse What is the capital of UK? ( London ) Save my name, email, and website in this browser for the next time I comment.