Part 1:

The Recorded Music Industry—Where It All Develops

Key Takeaways

Top banner: Tosca by Markus Roessle

Fernie Ville

Introduction

The recorded music industry's job is to support artists and turn their music into commercial and critical success. Artists who work with record labels have greater opportunities for achieving this success owing to the structures, tools, and services offered by labels, whose business is maximizing the value of recorded music and supporting the career development of artists.

Today, anyone can make music available worldwide with a few clicks of a mouse. However, to maximize the value of one’s music—both economically and culturally—artists require support.

If the music industry is a field and each artist and their music is a seed, how the field is fed, watered, tilled, and cared for, what materials are used, and how much duty of care is taken impacts the quality of the plants that grow. If the seed is left to grow on its own, it receives less care than those looked after daily. This is the role of record labels—the farm, the fertilizer, the farming equipment, the software that manages the supply chain, and so on. They are the support system that gives artists and their music a chance to grow and thrive, and each artist opportunities to develop—through time, patience, and investment.

Once recorded, a song sets in motion a cascading effect that reverberates throughout the music industry and into all our communities, generating cultural, social, and economic value, much like when a plant is harvested, brought to market, sold, and consumed.

In this metaphor, it’s the record labels that care for and create prosperous, healthy plants. And the proof that record labels are improving the quality of the field for everyone’s benefit is in the numbers.

63% of the $41.5 billion in global music copyright revenues in 2022 (up 14% from 2021) can be attributed to the recorded music sector. And recorded music revenues have been growing steadily. Recent data from the IFPI—the global trade association representing the recorded music industry—showed 10.2% growth in recorded music revenues from 2022 to 2023—the ninth consecutive year of increase.

These trends are impressive. However, for a sector responsible for an artform that is essential to all our lives, there is significant room for development.

The interconnectedness of the music industry—including the jobs and skills in the sector—gains momentum when music is recorded, and in the subsequent processes of releasing, marketing, and supporting finished recordings. Each part of the sector—from streaming platform Spotify to promoter Live Nation; video company YouTube to social platform TikTok; merch company Bravado to exercise brand Peloton—benefits from recorded music, just as the artist and label benefit from its usage. The record label is key to this growth, and while they are not the sole protagonist, their impact is significant.

63%

of the $41.5 billion in global music copyright revenues in 2022 can be attributed to the recorded music sector.

10%

growth in recorded music revenues from 2022 to 2023—the ninth consecutive year of increase.

How record labels drive the music industry value chain

Cigarettes After Sex by Ebru Yildiz

Marc Schulte/Pexels

At the heart of what they do, labels finance the production and recording of artists’ music in order to support their artistic and career development.

But this financial support extends way beyond the recording studio, encompassing a full range of development activities, including support for marketing campaigns, video and content production, tour support, providing wages for artists, producers, engineers, mastering engineers, product designers, and more.

Neck Deep

Labels put their money where the music is, taking on financial risk and providing the essential support, knowledge, and expertise required for artists to break through the noise.

While the numbers can vary significantly between artists, labels, and genres, the British Phonographic Industry (BPI) puts the average cost of breaking an artist globally at between $485,000 and $1.8 million. It estimates that “only one in ten investments made [by labels] breaks even.”

Despite this competitive environment, labels continue to invest significantly to support artists. The BPI reports that UK record label spending on A&R grew almost two‑and‑a‑half times faster than their revenues between 2018–2022, with A&R and marketing spend totaling nearly 40% of label revenues in 2021. Likewise, global estimates from the IFPI show that record labels invested 33.8% of their revenues back into music in 2020. Today, labels spend $3.9 billion annually on directly scouting and developing new artists (also known as A&R) and $3.2 billion on marketing these artists to audiences globally.[1]

Joel Muniz/Unsplash

But this is not just about financial investment. Record labels also provide expertise, guidance, support, and, importantly, time, in order to help artists develop their work and build businesses around their music.

Recording and releasing music is an exercise in upward mobility. Ideas may start as snippets, but when melody, rhythm, and instrumentation build on top of each other—alongside the right skills and knowledge—the recorded song appears. This takes time and costs money, all of which are provided by the investor in this process—usually record labels. In the contemporary music ecosystem, labels also support the full range of artist career development, navigating the complex industry landscape on their behalf, helping to develop and scale their brands, market their music, secure licensing agreements, negotiate contracts, manage their data and distribution logistics, create and sell their merchandise and more to ensure that the artist reaches a global audience.

erika8213/AdobeStock

Record label support yields results.

Artists achieve better financial outcomes when they are backed by labels. As a recent survey of music creators as part of a UK government Intellectual Property Office (IPO) study (p.186) demonstrated, artists signed to record labels achieve better career outcomes and earn considerably more than unsigned artists. The amount that artists are earning with record label support is also growing. The IFPI reports that between 2016 and 2021, artists’ share of revenue from recorded music grew by 20.2% to reach 34.9% overall, while in the same time period, label payments to artists grew by 96%.[2]

  • In an extensive study of the music and streaming market released in 2022, the UK Competition and Markets Authority (CMA) showed (see pg. 29–30) that while the advent of streaming and music technology platforms reduced record label costs around production (manufacturing and distribution), labels have, at the same time, increased their financial support for artist development via investment in A&R services including, marketing, data analysis, and other activities that allow artists to capitalize on quickly developing digital trends. While labels continue to take increased financial risks on supporting artists and their careers, the CMA report also shows that they are taking in less of the overall revenue pie, with the record company (label) share of revenue derived from streaming falling from 40% to 37% between 2017 and 2021 (see pg. 65, Figure 2.10 Share of streaming revenues across the value chain).

  • This figure can be compared to a 63% increase in revenues for IFPI’s largest member companies over the same time period (2016–2021).

The diversity of services offered by record labels

Sam Moghadam Khamseh/Unsplash

A label’s role includes managing various in‑house and outsourced services, from those that directly underlie the release and promotion of recorded music—production, distribution, promotion & marketing, for example—to providing broad expertise and support for everything from brand development to live touring, merchandising, and more. Labels are not the only organizations that do this—they work symbiotically with promoters, managers, booking agents, music publishers, and other valuable partners. However, as the entity responsible for the recording, which underpins the entire musical value chain, they play an outsized role in driving value to artists, the industry, and beyond.

The diagram below presents a selection and description of the key roles undertaken by record labels.

The Diversity of Services offered by Record Labels

  • Record labels support artists to record their music to match their artistic vision. This includes everything from providing the financial support required to pay for studio time and personnel, to making connections between artists and key collaborators like producers, engineers, musical collaborators, session musicians, and more. 

  • Labels provide financial support across several areas, including marketing, business services, living expenses, tour support, video production, graphic and content design, distribution costs, and more.

  • Artist & Repertoire (A&R) staff scout for talent and prepare artists and their work for market. Signing an artist can take years, and record labels coach and provide developmental support during this process. Once signed, labels provide knowledge, advice, and support towards holistically building artist careers. A&R’s work closely with artists to understand their needs, and coordinate within the label to ensure they receive the support they need to meet their artistic and career goals—from setting up studio sessions to reviewing and commenting on works in progress, managing collaborations, and more.

  • Record labels are data centers that capture huge quantities of information. Collecting, assessing, and capitalizing on data and analytics is integral to their role. From understanding streaming plays to social media engagement, record labels’ capacity to capture, analyze and develop strategic insights from data is one of their most impactful roles, and plays a huge part in helping artists to target and find traction with audiences.

  • Record labels function as music promoters—be it through radio, streaming, publications, social media, or in physical or online stores. Either independently or in partnership with outside suppliers, record labels bring together media, influencers, journalists, radio producers, TV presenters, brand partners, and playlist editors to disseminate recorded music and coordinate paid, partnered or other campaigns. Artists who work with labels also benefit from association with the label’s name and brand, which acts as a beacon for business partners and curators who make decisions about which artists they will feature, leading to more artist opportunities and amplifying their visibility.

  • Record labels work directly with physical and digital distributors—and other supply chain partners—to ensure that recorded music finds its way to audiences, whether through brick‑and‑mortar music stores or online via streaming platforms and internet radio.

  • Record labels provide and coordinate essential business and legal services, employing and working with lawyers, accountants, and business managers. For example, labels often provide legal services to help artists collaborate with other musicians and producers in the recording process. Likewise, financial tracking and reporting pay bills, and it is the role of record labels and artist managers to coordinate this. That means managing song details, registering copyrights, negotiating contracts, licensing and usage, and collecting royalties. Some labels do this in‑house, others through partnership.

  • Record labels are creative agencies. They support artists’ ancillary needs—such as designing album artwork, producing music videos, and creating social media content. These roles can be fulfilled in‑house or by working with a diverse pool of talented directors, illustrators, writers, and more, meaning labels are often the economic heart of local creative networks that support artists and their work.

  • Record labels employ specialized teams who work to secure diverse opportunities for third‑party use and licensing of artists' sound recordings. With artist approval, labels explore synchronization opportunities, encompassing placements in popular media like television, films, commercials, video games, and more. They also take advantage of many other licensing opportunities including, for example, placing music in compilation albums and magazine covermounts, and exploring future‑facing media like non‑fungible tokens (NFTs). The work to secure licensing opportunities often includes re‑editing songs, recording cover songs, building music libraries, seeking out direct commissions, and more. It can be one of the most lucrative business areas for the recorded song. Record labels manage this process and ensure every time a recorded song is used, it is attributed correctly and paid for.

  • Merchandising can be an important revenue source for artists, and some record labels offer support to artists in this sector, including design, managing online and in‑person stores, fulfilment, and providing the initial capital required to manufacture goods.

The roles outlined above apply to all types of record labels—majors or independents—of all shapes, sizes, and genres. However, labels operate in different ways. Those differences demonstrate the importance of a successful label and the challenges that can emerge when this role is mismanaged.

How music gets released

Karsten Winegeart/Unsplash

In today’s music industry, artists have multiple options for getting support to release and market their recorded music.

The most popular is through a record label[3], commonly divided between majors and independents. Alongside labels are artist service businesses, which offer a different value proposition and configuration of services based on the needs of artists. More recently, new options have emerged—like crowdfunding and direct investment platforms—that allow artists to raise capital for their projects directly. Here’s a breakdown of the different options:

It’s important to note that these differentiations can be blurred. For example, independent labels can be clients of major‑label‑owned distribution services. Likewise, artists on independent labels or who use artist‑service models may sign publishing contracts with major labels, or vice‑versa. These relationships can be complex and vary from artist to artist.

  • Record label contracts vary widely. We recommend the United Musicians and Allied Workers ‘Recording Contract FAQ’ as an excellent resource for understanding the different details and specifics of how record deals work in practice.

  • While crowdfunding cannot replace the expertise and investment provided by labels, it acts a democratic option for artists to pursue support—especially early in their careers—and serves an important function within the broader music industry, as a “demand‑based” mechanism for recognizing artists and revealing (local) talents.

Case Study

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Case Study ///////

Everlasting Records x Guadalupe Plata
From creative connection to sustainable success

Guadalupe Plata

Mark Kitcatt, the founder of the Spanish independent label Everlasting Records, recalls the first time he saw the experimental rock and roll band Guadalupe Plata perform: “I started talking to them, and we ended up at 6am in a bar singing pasodobles and coplas with a pianist. And that’s how we met and did the deal.”

The band’s talent and eclecticism prompted an immediate connection with Kitcatt, from which the relationship with Everlasting grew. “We have all the same reference points,” he notes, adding, “We listen to the same kind of music. We kind of come from the same culture. I don't think they would have signed with just any label. We're quite close in that sense.” 

This personal connection set the stage for developing a supportive, long‑term business relationship between the band and Everlasting, which recently passed the ten‑year mark. Guadalupe Plata are not just musicians, but multi‑talented artists who produce their own album artwork, videos, and more. The financial support provided by Everlasting has driven their career growth. “The videos are pretty spectacular. And sometimes they cost a lot,” laughs Kitcatt, while acknowledging the impact this creative work has had on growing the band’s appeal with audiences.

Everlasting’s strategy with Guadalupe Plata has always been to support their career holistically. The label realized early on that the band’s brand of wild rock'n'roll has unique power in the live setting, and began offering help with tour booking and management. “They can be doing between 80 and 100 gigs a year, so they're playing twice most weekends,” says Kitcatt. This recognition led to a strategy of using live shows to support the band’s growth outwards from their strong roots in the local Spanish music scene—where they consistently occupy top rock'n'roll chart positions—to become a successful European act, drawing between 300 and 1,000 fans a night at venues across the continent. This supports a full‑time income for the band.

“We listen to the same kind of music. We kind of come from the same culture. I don't think they would have signed with just any label. We're quite close in that sense.” 

Continuous and patient investment from Everlasting yielded a sustainable career for the band: in an average year, they bring in around $95,000.[5] Meanwhile, Everlasting’s investment in the band now generates returns of $30,000–$50,000 per year for the label, which it puts into other artists and supports the release of between three and five new records per year.

Although the size of investments in artists varies widely across independent labels, this case study is a microcosm of the economic and cultural impacts catalyzed by the thousands of independent labels worldwide, which produce large‑scale aggregate impact. Guadalupe Plata are not international superstars, but, with the support of Everlasting, they have built a career that produces outsized impacts—from drawing audiences into venues in cities and communities across Europe (with all the economic uplift that attracts), to supporting local video directors and creative producers in Spain, and others in the wider live music industry, such as sound engineers, promoters and venue owners.

  • This figure represents the band’s net revenue, after the label receives their share. This total includes recorded music income, publishing, and live.

Deconstructing ‘Do It Yourself’

princeoflove/Adobe Stock

Omar Prestwich/Unsplash

To better understand the role of record labels in the music industry, it’s important to know the alternative ways music reaches audiences. While record labels offer some of the most stable, long‑term, and sustainable support to artists, they are not the only partner available.

Many artists can and do self‑release music, which is often referred to as ‘DIY’, or ‘Do It Yourself’. However, taking the DIY approach requires artists to simultaneously manage many other jobs alongside creating music—from marketing and accounting, to promotion and management—and often means they end up financing and hiring multiple individual experts around them to support these activities.

As outlined above, artist service companies can support artists who choose to pursue a DIY approach. These companies offer services such as distributing music onto a streaming platform without a record label’s support, coordinating tour dates without a booking agent, or managing one’s business without a management company. Unlike record labels, which generally take a percentage of an artist’s copyright in exchange for investment, artist services companies are most often fee‑based, allowing artists to pick and choose specific supports à la carte while maintaining control over their copyrights.[6]

“We create an infrastructure that perpetuates across years and many different artists. When that infrastructure does the same job over many releases and artists, it creates a build‑up of knowledge. You develop best practices that you can't just learn doing it once on your own.”

Justin West, Secret City Records

24.8%

(45.6m) of songs on streaming platforms received zero plays in 2023

86.2%

(158.6m) of songs on streaming platforms received under 1000 plays in 2023

However, the services offered can vary, which can lead to volume being prioritized over connection, and music flooding the market, rather than being strategically introduced. Music industry data firm Luminate reports that in 2023, 24.8% (45.6M) of songs on streaming platforms received zero plays, while 86.2% (158.6M) of songs received under 1000 plays. Many artist services companies tailor their services to both DIY artists looking to grow their professional careers, as well as more casual music creators. To this end, some offer an ‘upload service’ model, which provides distribution of music, but nothing further, meaning the nuance and expertise required for artists to successfully navigate the streaming world, or maximize copyrights, is not offered. Others do offer more comprehensive support—such as promotion—under a more broad ‘artist services’ model, however, they are usually selective about who they work with under such models.[7]

The artist services model is not a replacement for what record labels do. Labels build additive expertise over time; the experience gained from building one artist’s career supports the next signing, as labels develop internal knowledge and learn how best to serve the needs of artists. None of this added‑value is provided by one‑size‑fits‑all services.

In a focus group undertaken by the UK‑based Association of Independent Music (AIM) and published in a UK government report on streaming (p. 90), a self‑releasing artist expressed the dilemma of pursuing an independent career without label support: “I’m constantly torn in my head because I like all the positives of being an independent [non-label] artist but at the same time, I spend 90% or more of my time bogged down in all the admin side and the business side of everything I’ve got to do. I literally negotiate my own contracts, even write my own contracts sometimes[8], and it’s massively time‑consuming.”

Justin West of independent label Secret City Records describes the expertise provided by labels as a framework of support that offers artists the best chance of success: “We create an infrastructure that perpetuates across years and many different artists. When that infrastructure does the same job over many releases and artists, it creates a build‑up of knowledge. You develop best practices that you can't just learn doing it once on your own.” This level of knowledge and support is not replicated in the approaches offered by the services that help artists to ‘do‑it‑themselves’.

  • As a note, independent and major labels do also sometimes offer “artist services”‑style deals for artists. This often happens around the renewal of contracts between artists and independent labels, with new deals reflecting the career success built out of the initial risk undertaken by the labels. In these cases, subsequent record deals often move away from the label requiring ownership or licensing the sound recording copyrights, and towards revenue share deals, with labels offering their full support and services in exchange for a percentage of artist revenues. There are many examples of these types of deals among ORCA member labels. For example, !K7 Music currently has several services-style deals with well‑respected international indie artists like Fat Freddy’s Drop and Crazy P.  It’s important to note here, though, that artist services type deals with independent labels still receive the full long-term focused strategic support that their traditional copyright-based relationships do.

  • See: The Association of Independent Music (AIM), “Distribution Revolution” (2019) report for a more detailed description of the contemporary music distribution landscape.

  • Writing one’s own contracts without obtaining robust legal advice can lead to significant difficulties, including the possibility that such contracts may not be legally binding. Regardless of whether an artist is on a label, it is recommended that they obtain legal advice whenever entering into legal agreements.

Case Study

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Case Study ///////

Secret City Records x Patrick Watson
The collaborative role of independent record labels

Patrick Watson by Lawrence Fafard

Discussing how independent Canadian label Secret City has developed its successful 17‑year collaboration with the artist Patrick Watson, label founder Justin West speaks fondly of the journey from loving Watson’s music, to offering significant investment and developing a long‑term partnership, where Watson’s growth has supported the label’s, and vice versa. West sums up the relationship simply: “The key thing that comes to mind is a lot of mutual trust.”

Starting with 2006’s ‘Close to Paradise’—a record that not only attracted critical acclaim but won Canada’s Polaris Music Prize (the ‘album of the year’ award as voted by journalists) and a Juno Award nomination (the Canadian equivalent of a GRAMMY)—Watson’s journey with Secret City has been about collaborative support and shared success. Off the back of ‘Close to Paradise’, Watson built an early fanbase, and with Secret City’s support, began touring extensively, and opening up new revenue‑ and audience‑generating opportunities.

Watson’s early success and the revenues it produced provided a platform from which Secret City could increase capacity. “It created the infrastructure over time that allowed us to invest in more artists, which created more infrastructure and got us to where we are today,” says West. Building infrastructure meant hiring more staff—they are now at 14 total employees—and supporting internal knowledge and skill development.

Watson’s steady development over his career has also driven economic impacts in the music industry and beyond. Reflecting on the progress achieved since their first album working together, West reveals how things have grown: “All of a sudden from there, he’s hiring tour production companies, renting buses and vans and tour managers… he launched a festival—Lost River—three years ago.” These outcomes all blossomed from the seeds planted by Secret City’s initial investment and enduring partnership with Watson and his manager.

Through consistent releases, savvy marketing, and planning for sustainability, Watson’s acclaimed album releases have reached a global audience. He now performs live to packed theaters worldwide, while his cinematic approach to songwriting has made him an in‑demand film composer.

Contemplating the future, West reflects on the value of his long term relationship with Watson, and the potential of shared belief between independent labels and the artists they support: “Patrick, his manager, myself—we've kind of grown up together. That's what happens when you've gone through thick and thin, learned the ropes, and confronted new issues and horizons together… It feels like the last few years have been our best together, and that the story is only just beginning”.

“17 years and seven albums later, we've believed in and supported him in building his career, and he believed in and supported me in building Secret City… and it’s created so much. It really just spun off into a million things.”

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