Introducing Audio AI
Auto-tagging and similarity-based searches at your fingertips. Learn more
Record companies: who are they and what do they do exactly?
November 23, 2020

Record companies: who are they and what do they do exactly?

We get questions about record companies all the time at Reprtoir, so we thought of making this short 101 guide covering the essentials. We wanted to make a beneficial resource for beginners who don't have an in-depth knowledge of how music labels work.

It's common for budding artists to get lost in the who's who of the music industry. Initially, new musicians may believe that a record company supports music creation only – the recording, mixing, and mastering tracks. While this is true to an extent, a record label's role includes much more than making music sound better and louder.

Here's a look at what makes record labels relevant in today's digital streaming economy.

What is a music label?

First things first: a music label's core business is to develop an artist, market their music to a broad audience, and handle all financial aspects. Record labels can be significant corporations like Sony Music and Warner Music Group, or they can be smaller, privately funded endeavors.

Usually, small music labels are specific to a genre, such as Diplo's Mad Decent and Steve Aoki's Dim Mak labels. Both serve the dance music community and, thus, are competing businesses. At the most elementary level, a label is merely a brand that consumers recognize for its quality and expect good music.

It's a brand that makes music fans think, "Wow! This DJ is Mad Decent's newest artist. I'll check it because that label always releases slamming tracks!". Without Mad Decent's brand power – its ability to reach a specific, defined audience – a new DJ would struggle to receive the same notoriety.

What else do record companies do for musicians?

Record companies do more for a musician than merely record music and distribute it; they support an artist through the entire development process. But that's not where a music label's support stops. Often, a record label and an artist grow together and become more than a business arrangement. This is why keeping a clear track of what is happening is such an important task. For example, legendary producers like Rick Rubin and Quincy Jones made their mark by building long-lasting relationships with musicians and record companies.

Although, marketing is where record companies genuinely shine. It used to be a label's central wheelhouse. A simple definition of marketing is all activities that grow the business and increase sales and recognition. A label's primary task in the 1990's era was to sign an artist to a music contract and "get the word out" by any means necessary, meaning radio, television, and other media. Even the smallest labels can substantially impact the music industry as a whole. It's merely harder in today's digital streaming-focused business model for artists to stand out.

Lastly, we have to touch upon finances since it's the 800-lb elephant in the room whenever we talk about record companies' roles. A music label sets the offer and enforces the terms of a musician's contract. A note: If you're signing a music contract for the first time, consult a professional before agreeing to any terms.

The terms of contracts vary so much that it would be unethical for us to make generalizations. But usually, financial terms breakdown into royalty splits, advances, and copyright issues. For instance, once an artist signs to a label, deciding on the contract terms, the musician may be relinquishing all publishing copyrights for a decade or more.

What can be expected in the music industry in 2021?

Record companies still serve a crucial function in the music industry, and their influence remains strong. What audio software and streaming services have done is democratize music production and distribution. Anyone can use a digital audio workstation like FL Studio to make music and publish the tracks on Spotify, iTunes, and SoundCloud.

But is this the most lucrative way to make a living as a musician? No, record labels have the resources to leverage streaming platforms to support additional marketing efforts (i.e., social media campaigns). As 2021 approaches, a record label's role in the music industry remains as essential as ever.

For labels to be able to follow up on all artists, tracks, royalty splits and all types of contracts, Reprtoir created a SaaS solution, integrating a CMS specifically designed for audio files, with integrated solutions such as linking contracts to the right tracks/artists directly in the catalog, private playlists... 

Go ahead and book a Demo, we’d be glad to walk you through Reprtoir!

Continue reading


Get great original music business articles every week.

Get Reprtoir news and in-depth articles on the music industry. No more than one per week. No spam.
No spam!
Reprtoir is committed to music businesses' digital transition.
We offer a 14-day free trial period (no credit card required). Become a customer to benefit from our data migration services and expert advice.
Reprtoir is committed to music businesses' digital transition.