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Record companies are frequently referred to as “record labels”, although that often
might not be an appropriate term to use. Technically, a record label is an affiliate of a record
company - a branch, a sub-company that is owned by a record company. Strictly speaking,
a record label either used to be a smaller record company that was acquired by a larger
record company, or is a division of a record company specializing in certain genres, types
of artists, markets, etc. For example, Blue Note Records is a record label owned by the
Universal Music Group, specializing in jazz. Blue Note Records was a record company founded
in 1939. It was acquired by Liberty Records in 1965 and became a Liberty Records label.
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Over the following years, Liberty Records, in turn, changed ownership a few times and
was eventually acquired by EMI, making Blue Note an EMI label. When EMI was acquired by
Universal in 2012, Blue Note became a Universal Music Group label. (Another frequent terminology
practice, if referring to record companies as “labels”, is to refer to their various
sub-companies as “sub-labels” or “imprints”.)
Like the music publishing companies, the record companies are generally categorized by their
size, and ownership/operational structure. There are only three so-called “major”
record companies operating today – Universal Music Group, Sony Music Entertainment, and
Warner Music Group. These are categorized as “major” because they are the largest
in size, operate their own distribution networks, and have global reach and market presence.
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Throughout the history of the recording industry, there have always been a handful of major
record companies leading the market. The first three, over 100 years ago, we already mentioned
in the introduction to this module – Edison, Victor, and Columbia. In more recent history,
since late 1980s, there were: the Big Six (Universal, Warner, Sony, BMG, EMI, PolyGram),
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the Big Five (Universal, Warner, Sony, BMG, EMI), the Big Four (Universal, Warner, Sony
BMG, EMI), and finally the Big Three we mentioned above. The majors today control about 65%
of the U.S. recording industry market. This situation renders the music industry an “oligopoly”
– a market condition where a handful of companies controls most of the industry’s
market.
Independent record companies, or “indies”, are the next rung down from the majors. These
companies vary greatly in size - from relatively large international companies, to small regional
ones – but are all much smaller than the majors and, by and large, do not operate their
own distribution networks. The indies often have distribution agreements with the majors,
but operate independently. Other words, they often contract majors’ distribution branches
to distribute their product, but produce it and promote it independently. For example,
New West Records is a record company established in 1998, operating independently, and distributed
by ADA (Alternative Distribution Alliance), the independent music distribution arm of
Warner Music Group.
In addition to the majors and the indies, there is another category of record companies
operating today, due to the relatively affordable cost of the digital music production equipment
and software, and due to wide accessibility of the Internet commerce - record companies
formed and run by one or two persons, either as a sole proprietorship, a small partnership,
or in some cases as a small Limited Liability Company (or an LLC). I’ll refer to those
record companies as micro indies. Owned by an individual or two, usually a musical artist,
or a music entrepreneur, these micro record companies produce, promote, and sell their
music themselves, often exclusively on the online market, without an affiliation with
any of the larger companies in the industry.
Since micro indies are a phenomenon of our age, and since their number is rapidly growing
today, due to the advances in technology and communication, they are changing the industry
itself, and reshaping its landscape. We will look at some particular methods and practices
related to this issue later in this module, but let’s first look at the standard structure
of a record company as shaped and determined by the past and present mainstream industry
Darko VelichkovskiMusic Industry Program Director
