Extended Play: The impact of major labels on the modern music industry | MN2S

Are major labels a detriment to the music industry? Do they shift the focus within the industry away from creativity and towards commercialism? These debates are as old as time and immensely complex.

Simply put, there are two sides of the debate: those advocating in favour of major labels and those against. In this edition of Extended Play, we’re exploring how major labels affect the music industry as a whole, and whether they’re propping it up, or pulling it down.

Major labels such as Sony, Universal Records, EMI and Capitol are first and foremost major corporations with hundreds of millions (if not billions) of dollars in financial backing. Independent labels, including the most successful ones such as Domino Records, Sub Pop and XL Recordings, are far from being major corporations and often have a significantly different approach to the curation of music. Major labels often emphasize the importance of mass production and mass distribution in their approach to business. This essentially means that major labels want to sell and popularize as much content as they possibly can. Whilst it cannot be said that independent labels are not interested in financial success or notability, it can be argued that their priorities are focused on the creation of original and quality music. Like any other industry, a smaller company size equates to less bureaucracy and complications. In this example, independent labels often require less of their artists whilst giving them complete artistic freedom. Thus, the difference in size inherently impacts both the artists and the consumers.

It’s important to clearly define the differences in size between major labels and independents. As we previously noted, major labels are massive enterprises that can take in billions of dollars in revenue; they usually own their own distribution channels, and work with artists on every aspect of their career, from touring to merchandise. By contrast, indie labels can vary from ultra-small businesses run from the inside of a bedroom, to (in the case of the most successful ones) what are known as SMEs – small to medium-sized enterprises. Due to their size, and various factors at play within the industry, many independent labels can struggle to stay afloat financially, while major labels typically remain financially secure.

For example, let’s take the largest music company in the world; Universal Music Group (UMG). UMG is an overarching entity but contains over 15 different subsidiaries, including The Island Def Jam Group and Interscope Records, to name a few. UMG itself is owned by parent French media conglomerate Vivendi, which is worth over 16 billion euros.  According to its parent company, UMG turned over an impressive $1.14 billion in recorded music streaming revenues in the 3rd quarter of 2020 – all the more impressive considering the economic climate created by the global pandemic). In addition, UMG’s physical music sales similarly soared by 14.1% in that same quarter. By comparison, Domino Records (considered one of the most successful independent labels), amassed a revenue stream of $249.76 million (still a considerable amount of money, but only a quarter of UMG’s revenues). Another stunning comparison to note is that UMG employs around 5,000 employees, while Domino Records a mere 45 people. 

These figures demonstrate how major labels have an acute resource advantage compared to the independents. In terms of the impact on artists, although they would benefit more financially from working alongside a major label, this also comes with numerous artistic restrictions that we will explore later on. For us, the consumers, labels with more resources will often produce more material that is accessible on all platforms (with large amounts of promotion across all platforms). In order to consume and remain aware of all material released from smaller independent labels, it takes much more curiosity and time. Often, independent labels will not even release much of their music on platforms such as Spotify due to the lack of financial incentive and extra costs. Therefore, not only do artists have a smaller stage to spotlight their music on, but we too, are due to this often unaware of quality content from smaller labels due to the difference in financial abilities and company size. Additionally, most major labels end up using their financial might to acquire up and coming independent labels. Independent label founders can hardly refuse massive checks and this way, major labels, end up having an abnormal amount of sub-labels under their control. 

Music distribution is an area in which the the significant impact of major labels on the music industry is most evident. In 1999, Napster, the first successful file-sharing internet platform was created, enabling people to share digital audio files freely. Although Napster was soon shut down after record labels began taking legal action, this transformed the music industry indefinitely. Today, platforms such as Spotify, Apple Music or Soundcloud are regulated and generate revenue streams for artists (though these are often relatively insignificant for all artists but especially for the lesser known).

There was a time where artists and labels would rely on sales of physical media, but the market has now shifted to a heavy reliance on digital platforms and marketing. In today’s world, the digital market share accounts to about 77.5% of the music industry (10 years ago the digital market share only made up around 26% of the music industry). This impacts lesser-known artists significantly. An up-and-coming artists cannot rely on streaming platforms as a sufficient source of revenue. The lack of financial incentive will have its toll on the number of aspiring artists out there wanting to make music for the love of music. The major labels (UMG, Sony, Warner etc…) own the largest market share of music distribution platforms. Due to this, major labels yet again have a dramatic impact on the survival of creativity and innovation in an already saturated market. 

The implications of this are clearly negative for independent labels that do not have the budget nor the employees to compete against them. Thus, even up-and-coming artists signed to the major labels find it easier to gain exposure and thus have an easier path to stardom. The imbalance is equally notable on the promotional side of music. Major labels have the financial ability to promote their artists through an array of methods. Whether that’s a billboard in Time Square, live performances on popular television shows, partnerships with streaming platforms (Spotify, Apple Music), exposure on online platforms (YouTube, TikTok) and other means. In this respect, major labels have access to a broader platform than any artist could ever have had before. Although the promotional opportunities afforded by the internet has given all artists and labels the chance to gain worldwide exposure, these spaces are often dominated by the major labels, who have the financial might to give their artists levels of exposure that smaller labels may not be able to afford. 

Another key difference between the majors and the independents is the way they do business with their artists and the contracts they use to formalize these relationships. On the one hand, independent labels have a more flexible manner of doing business with artists. As independent labels are smaller in size, communication and negotiation are handled B2B. Often, contracts will be drawn up primarily to avoid time, money and attention being given to an up-and-comer before they leave to a major label after the release of their first album finds success. Indie labels often only advance money on the basis of covering costs and expenses of any future projects. On the flip side, majors often advance a bonus range that varies enormously, as well as covering the costs and expenses of music production.

A notable example is the case of SoundCloud rapper Lil Pump: he signed with Warner Bros and was advanced a whopping $8 million. His contract was based on a multi-year collaboration with three albums to be made over the course of his contract. It is worth mentioning that at this point Lil Pump had only released a series of singles on SoundCloud. As opposed to independent labels (who issue contracts that often include a buyout clause), majors often create binding contracts which force artists to generate albums on a regular basis. An example of this is Kanye West’s contract with EMI, which firmly stated that “At no time during the Term will you seek to retire as a songwriter, recording artist or producer or take any extended hiatus during which you are not actively pursuing Your musical career in the same basic manner as You have pursued such career to date.”. 

This leads to the true question of the impact of major labels on the creativity and independence of the artists they rely on. How can artists produce their best music when all that is forcing them to make music is a contract? In Frank Ocean’s ten plus year career, he has only released three albums… Albeit frustrating, would we, as fans, not prefer it this way than seeing him forcefully releasing albums yearly? Lauryn Hill only released one solo album in her career, but The Miseducation of Lauryn Hill is a pioneering project that brought an innovating twist to the hiphop scene. In addition, the roster of a lot of the major labels are always topped by the most popular hit artists that include Justin Bieber, Ariana Grande and Dua Lipa.

Pop music is based on easily singable melodies, with a heavy repetition of the chorus, verse and bridge used as a transition within a song. Independent labels bring new material, material that usually has never been heard. For example, the impact of Seattle-based Sub Pop Records created in the late 80’s is still seen to this day. Sub Pop Records brought to the public what we now recognize as the Grunge movement with bands such as Nirvana, Soundgarden and Mudhoney as central players of the movement. Controversial artists such as the Sex Pistols would never have had the permission to release singles such as “God Save the Queen”, which were widely recognized as being responsible for initiating the Punk movement in the UK and simultaneously captivated and appalled a nation. 

An example of an innovative independent label is Group BraCil. Founded by producer Morriarchi, Group BraCil prides itself on a limitless creative scope. Their latest project, a collaboration with H-owl Project, is a futuristic jazz track accompanied with dreamy visuals. Labels such as Group BraCil are a dying breed and push boundaries to present projects all along the genre spectrum. Amongst labels like this, artists are given free reign to pursue whichever creative venture or idea they choose. Originality is praised and prioritized. 

It would be an overstatement to claim that major labels don’t enable artists to produce great music. However, as we have explored throughout this piece, the majors maintain an overwhelming majority in the market share within the industry. As of 2020, Universal Music Group (32% market share), Sony Music Entertainment (20% market share) and Warner Music Group (16% market share) make up a combined 68% market share within the music recording market. Sadly, although majors contribute greatly to certain aspects of the music industry, it could be argued that their approach suppresses creativity and innovation in favour of pure economics. In an ideal world, music wouldn’t be about the money and fame, but rather about connection and artistic expression. But the truth is that you can still find a wealth of passionate and innovative music out there, if you are willing to look hard enough. A sadder truth still is that due to the dominance of major labels and their influence on today’s music industry, most of these artists won’t get nearly as much recognition as they deserve.

Words: Theo Laviale

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