Record Labels

Major record labels do still market and promote many of the successful acts in the UK charts but independent music sector is growing and increasing its market share. DIY is also changing how artists ‘sell’ music and challenging the traditional routes to market. Some established artists feel they no longer need a record label and establish their own but ‘breaking’ a new act usually still requires external expertise and investment.

What Is a Record Label?

Record companies are the main investors in musical talent in the UK and globally. Around 23% of label revenue is poured back into the signing and developing of new talent through their A&R (artist and repertoire) departments. On top of manufacturing and distributing the recordings (to both physical and digital retailers), record labels provide an essential promotional and marketing role. This includes developing and executing ad and marketing campaigns as well as promoting and plugging the acts to media.1

The Record Label Market

Despite the negative impact of file-sharing and commercial piracy, the UK has managed to weather the sales storms better than many other markets. This is partly down to the fact that UK consumers buy more music per capita than almost anywhere else in the world. Even with the global recession factored in, album sales dropped a mere 3.2% in 2008 despite early projections that the drop could have been in double figures.2

Record Deals

There are two basic alternatives and types of deal:-

  1. The License (see 3.3.6)

  2. Exclusive Recording Contract - more investment and commitment from record company but also therefore more ‘ownership’ and control.

Restraint Of Trade 

all exclusive recording agreements have elements of this but disputes tend to be about the degree to which it restricts. Examples of disputes are Holly Johnson ZTT3 /and the Stone Roses Silvertone4 deals were ‘set aside’. A prudent record company will strive to ensure there is a genuine negotiation and that there is evidence independent advice has been taken.

Major Label ‘Royalties’

Royalty Rates - Most now calculated on dealer price which is obviously not as large as retail. 18% of dealer price calculated on 100% of records sold ‘acceptable’5 for a major.

Independent Label ‘Profit Share’

The majors not really interested in profit shares but this is the basis on which many independents operate. A 50/50 profit share common on independent deals .The label will deduct costs first then divide the profits between ‘partners’. These costs will include recording, remixing, manufacturing, artwork, marketing and distribution.

For more information on record companies contact:

 

1 http://www.bpi.co.uk/music-business/article/what-is-a-record-label.aspx

2 http://www.bpi.co.uk/music-business/article/the-market.aspx

3 Ann Harrison Music: The Business 4th Edition – Virgin Books Chapter 3 pg 66

4 http://www.musiclawupdates.com/articles/ARTICLE%2003restraintoftrade.htm

5 Ann Harrison Music: The Business 4th Edition – Virgin Books Chapter 3 pg 77