A record company is a business that controls the rights to audio recordings and makes money through sales of those recordings, licensing those recordings for commercial use like TV or film, and other ways of generating revenue from music. Generally, the label will have a producer, who helps to guide the recording process and may be a key figure in selecting producers, recording studios, additional musicians, and songs for recording sessions. They will also oversee the manufacturing of physical CDs and LPs, as well as negotiating distribution to places like old fashion record stores and mailorder catalogs. The label may be involved in the artist’s promotion through radio, publicity, advertising, and production of music videos. Typically, the record label will fund an advance to cover the costs of producing the recording, and will make those advances recoupable from royalties on the sale of the recording.
Record labels come in all shapes and sizes, from the three big majors that dominate the industry to independent labels that can have a much smaller following. A successful independent record label can create value for its artists by growing a fan base that will help them to generate sales and streams. Many artists start out on an indie record label and then move to a bigger one as their career grows.
There are currently three major record labels: Universal, Warner and Sony. Each of these majors has a number of subsidiaries, including Island, Interscope, Def Jam, Capitol Records, and Verve.
In addition to the main three, there are a number of independent and specialty labels that focus on genres such as country, hip hop, alternative, or indie rock. Some of these have been owned by the big three at some point, but others are independent from them and work on a more hands-on basis with their artists.
The smallest record companies can have as few as 100 employees and operate on a regional or national basis, while the largest have thousands of people worldwide and manage an enormous portfolio of artists. The biggest record companies also have a lot of clout and can provide a lot of opportunities to their artists through promotion, endorsements, and appearances.
In the past, there were hundreds of record labels, but mergers have reduced the total number to a few dozen. Many of these are now defunct or have been bought out by the larger labels. In the future, it is possible that more consolidation will take place and that there will be only a few major record labels. In the meantime, there are plenty of smaller independent record companies that can give a band or singer the attention and exposure they need to succeed. The internet has also made it easier for small labels to launch and maintain an online presence. This allows them to compete with the bigger record labels for new talent and to expand their reach beyond traditional channels of distribution.