What 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?
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They are risk aggregators: they “combine” many artists so that the successful ones can cover the cost of the unsuccessful ones.
In the olde days artists relied on radio and albums to become known, albums in particular (vinyl or CD) are expensive to start mass production. A label would really the risk that the artist would take off by paying for this start up cost, which should easily be in the tens of thousands of dollars.
They lose money on many of the artists that they sign. And the rare artist that becomes wildly successful usually breaks away from their old label to make more money. Without their willingness to take risks in a highly volatile market, you may never have heard some of the musicians and singers that you love.
A predatory industry of talentless people with business sense taking advantage of talented people with no business sense
Labels are like banks, they basically loan money to bands. Usually the band doesn’t make a penny until the label has made their initial investment back.
Labels are the venture capitalists / angel investors of the music business. Becoming famous isn’t really about talent, it’s about investment.
It’s the same as having a product idea. Its useless if you dont own the factory or have money to develop your idea. So you need to team up with a manufacturer which has the production means and the distribution network. And since hes doing most of the work he gets more money
Artists aren’t traditionally good at business. Business isn’t in any way good at art. So it goes one of two ways:
1) An artist is in such high demand that they are approached by labels begging to be associated with them. In this scenario the artist has the leverage and a greater chance to be their own CEO and dictate most of how their career play out. Since their demand is so high they don’t need the label for exposure. Often the artist will have so much leverage that they can get very favorable “terms” and retain rights to all of their publishing royalties. The label needs them as a trophy to show artists in the next scenario. (See: Nirvana, Sturgill Simpson)
2) An artist hopes that with the right amount of backing and support they can reach a greater audience and thusly create a high demand through the influence and efforts of the label. In this scenario the label has all the leverage because they have access to what the artist can’t get, fund, or manage themselves: exposure, marketing, studios, money, production, licensing, touring, merchandise, etc. (See: Kesha, Dr. Dre before Jimmy Iovine) There are also artists who don’t need anything from a label but end up signing shady contracts that leave them slaves to a corporation as if they had no leverage at all (See: Prince, The Beach Boys, Brad Paisley).
However, in modern times a third scenario has come into play wherein there is no label. Or, rather, the artist IS the label. In this scenario the artist just goes out and does everything themselves. (See Butch Walker)
If you’d like to take a lighthearted deep dive into this exact subject I’d suggest reading Butch Walker’s book titled *Drinking With Strangers*.
becoming a professional celebrity musician requires a metric fuckton of startup money.
there’s also a nightmare of logistics, networking, wheel greasing, etc.
sure, you can put your mixtape on soundcloud for 100 people to criticize. or you could sign with Island Records and immediately sell a million copies just by brand recognition.
and if the producer really likes you he’s gonna tell Ariana Grande to do a cameo on your first album. bam, now you’ve done an album with a real musician. sure behind the scenes she literally just showed up for one saturday and phoned it in, and you never even spoke to her, but no1 else has to know that!
The age-old saying “You have to spend money to make money” applies here, and the labels are the ones spending all the money to record, advertise, and distribute the music, so they get a larger chunk of the profits. The artists most likely don’t have enough money to get all that done themselves, so they have to make a deal with a label giving away a bunch of power over their music in order for the chance at making it big. Once they do make it big and have their own money, they are usually still bound by the legal agreements and deals they made with the label before they became famous.
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