Record Companies

Music is art, but to record companies, it’s about money. Keep in mind that it’s a business. Keep in mind everyone is out to make money. The minute people believe that you will not make money for them, you will be dropped and these same people will turn to seek other new artists that they believe will make them money. Unfortunately, the record business doesn’t believe in grooming people. If your first CD isn’t a success, you are out. There are rarely second chances. There are always other talented people behind you who what their shot at fame.

Most major retailers such as Tower records will not carry a CD unless the record has a distributor. A strong distributor ensures that your CD will be available in enough places so your CD will sell to ultimately make money. Major labels use large distributors who are better able to get record stores stocked. After years of consolidation, there are only 5 major national wholesale distributors in the US who are owned by conglomerates who also own major record labels. They are  BMG (distributes Arista, BMG and RCA), EMI (distributes Capital and Virg.), Sony Music (distributes Columbia, Epic and Sony), Universal Music Group (distributes Interscope, Island/Def Jam, and MCA) and WEA (distributes Atlantic, Elektra and Warner Bros.)

Distribution via the Internet Record labels and artists are increasingly using the web to distribute their music, however, unknown artists will still have to work hard to get the buzz going about their music. Ultimately, signing a contract with a major record label is the way to go. The major record labels have the financial muscle and people to give you a good shot at becoming famous.

Let’s face it. It’s all about money! Yes, the entertainment industry seems fun and exciting, but people are in it to make money. As an artist the most important contract in the music industry is the record contract. The royalty is a portion of money from record sales paid to the artist for his/her music. The record contract which is a negotiated legal agreement between the record label and artist will state how much royalty an artist is entitled to among other things.

When money is made for the record sales, these costs are deducted from the artist’s royalties. This is called re-coupment. Therefore, if the artist’s record isn’t successful, the artist may never see a dime. If the royalties are less than the deductions, they artists may well owe the record company money by being in the red! This negative cost maybe carried over to the next album release. A good record contract will not allow a negative cost from one album to be carried over to another album (cross collateralization). If there isn’t another album the record company generally eats the loss.

There are many other costs that the record company will not charge the artists. This includes marketing and in-house promotions (free CD give away, etc.)..

Of course because of the Internet, the rules royalties are changing. Many people now buy their music via the Internet. Just think, no packaging required and no distribution to traditional retail stores needed. Some websites allow customers to buy individual songs as oppose to an album. Changes are currently taking place on how royalties are calculated because of the Internet. Many attorneys are pushing to have royalties be based on each song sold as oppose to each album sold. So stay tuned!

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