Major Label vs. An Independent Label July 18, 2007

What is the difference between the more ’mainstream’ artist and the ’not –so- ‘mainstream’ artist? That is a question that some music lovers can’t answer. For some, it is a question that has no importance. They don’t care why T-Pain is getting more spins on the radio and on BET than Hi-Tek. Or, why so many people are only interested in the music that they hear on the radio or television. Many of us have learned the skill of seeking out the music we like to hear. But the sad thing is a vast majority of people believe that if an artist is not played on the radio or TV than they are not really artists. You know ‘outta sight, outta mind’ kind of thinking.

Over the last 2 1/2 years, we’ve all heard the statement: “the state of Hip Hop” as a frequently discussed topic among the Hip Hop sector. Almost all major magazines have written about the ‘state of Hip Hop’. Personally, I thought Hip Hop took a turn for the worst when all you heard was 50 Cent, G-Unit, and Crunk music - pun intended. I personally, am tired of having stupid ass jingles in my head.

I was introduced and explored “conscious” hip hop, seriously, about four years ago. I was familiar with the few artists that made it on to MTV or BET, playing their random singles. The problem with me growing up and listening to music was that I only thought that the music that my friends and peers were listening to was the music that I should listen to. So in turn that was the music that I would go and purchase.

With that being said I guess you can say that I am coming from a familiar place when you think about all the people out there who are not familiar with exploring music beyond what their peers are listening to. The way people crap on underground or grassroots Hip Hop is the same way.

I recently worked for an internet music company and most of the questions that we got from the customers were “ what is independent?”. And so I felt that the question was valid, but how do you answer that question with a simple answer? You can’t. To some extent you have to be familiar with the in’s and out’s of the music business in order to grasp what is the difference between an independent label and a major record label.

For the beginners and intermediate folks who appreciate music but aren’t too knowlegable of the logistics, I’ve listed the key elements of a major record label vs. an independent label a.k.a. indie label.

WHAT IS A RECORD COMPANY?

• A company that manages recording related brands and trademarks.
• Owns their labels, the master recordings, and any other supporting businesses such as DVDs.
• Consists of Manufacturers, Distributors, and Labels
• Can have smaller companies under the Company umbrella, but allows the smaller company to conduct their own business

EXAMPLE OF A MAJOR RECORD COMPANY:
Universal is the BIG Record Company, Def Jam Records is a music label – Def Jam South is a label under Def Jam’s music label, but still under Universal

WHAT IS A MUSIC GROUP?

• Provides distribution for the recording artists.
• There are 4 Music Groups (MAJOR) – Sony, BMG, Universal, and Warner
• Each of the “big four” consists of many less large companies and labels serving under different regions and markets
• Keeps contracts with the recording artists
• Maintain contracts with production companies
• Organizes all marketing, production, licensing, and copyright protection of the recordings and/or videos

WHAT IS A PUBLISHING COMPANY?

• Prepares music to be publicly sold
• Has their own rights to music that is published
• Can be under the Record Companies umbrella, but exists separately, even if sharing the company name or brand
• They represents the rights in the compositions - i.e. the written music, but not the recorded song

WHAT IS A MAJOR RECORD LABEL?

• One that owns its own distribution channel
• Signs, market, publicize, develop, and promote as well as provide sales support to the larger distribution companies for their releases and artists
• May be made up of a Record Group which would be controlled by a Music Group
• If signed to a Major Record Label you will pay for
a) packaging
b) promotion (discounts, free cds, some advertising)
c) overseas promotions
d) music availability (MP3 downloads, SACD, or DVD Audio)
e) breakage (even if there is none)

EXAMPLE OF A MAJOR RECORD LABEL:
Interscope is the Record Company -Aftermath is the Record Label

WHAT IS AN INDEPENDENT RECORD COMPANY?

• A smaller record company
• A company that is not under the control of one of the 4 biggest/ major record companies

WHAT IS AN INDEPENDENT RECORD LABEL?

• Almost any label that releases non-mainstream music, regardless of its corporate structure
• Without the funding of or outside the organizations of a Major Record Label
• Can still be under the control of a large corporation with complex structures
• Can also have Major-Label shareholders
• If a Major Company owns 50% or less of the total shares in
• Can be created and managed by Major Label Artists, but are partially owned by the Major Label Parent (sometimes referred to as Vanity Labels - see definition below)

EXAMPLE OF AN INDEPENDENT RECORD LABEL:
Lil’ Jon’s TVT Records, KOCH Records

**Vanity Labels are intended to satisfy established, powerful artists and/or to give them independence in discovering and promoting new talent. The new talent will usually not be owned or controlled by that major company

WHAT YOU SHOULD KNOW ABOUT INDEPENDENT LABELS:

A. The 1960’s and 1980’s were the most profitable periods
B. Smaller Independent Labels operate different from Major Labels
1) Waive exclusive claims on recordings and other rights
2) Allow artists to retain their recordings rights
3) Profit sharing on projects rather than fixing a royalty
4) Making contracts based on projects rather than a period of years
C. Larger Independent Labels may operate the same as a Major Label
D. Some prefer to use the term “Indie Label”

Additional Facts:

• D-I-Y or Do-It-Yourself companies are also considered Independent
• The difference with profits from an Independent Label & a D-I-Y label is the profits of a D-I-Y label is 100% whereas Independent is 50/50
• A Distributor or Distribution Company is the middleman between the manufactirer and the retailer. After the music is manufactured it is sent to the Distributor who then sends it to the reatil stores. The Distributor has their own contracts with retailers or customer. The Distributor answers the question of how to get the product to the consumer.

So with all these facts and examples of what makes a Major Label and an Independent Label, I hope that you have some questions answered. It really is all techincal mumbo-gumbo.

The benefit of being signed to a Major Record Company/ Label is that as an artist all you have to do is create and perform the music. Because that is mainly your only duty, you lose money, because the Record Company oversees and handles how your music is manufactured and distributed. All of this you pay for of course. The Record Company also gives you advances, sometimes more than what your album will gross in sales. This can be a bad loan, if you do not make good on the payments. And you can end up owing the Record Company instead of them owing you. As an artist I believe you also pay for your videos. And the profits are not 50/50. You receive a negotiated percentage that may or may not work in your favor.

Now with Indie Record Labels, the number of retailers may not be as many as with a Major Company. But you would receive a greater profit. You also do not have any real form of marketing. That would probably be something that you would have to do on your own accord.

There are many differences with the two companies, but I think that what counts the most is the marketing and promotion of an artist and the distribution. The reason being, you can make a great album, but if you do not have the right marketing then no one will think to buy your album. They may not even know that you had an album drop. And the distribution deal is what also matters, because you would want your album sold at as many reatil locations as possible. With a large number of album sales, you would have a profitable pay-off.

And if you have the rights to your master recording copies then you can use that music on other albums, for more profit!

Hope I helped you with this question!!

~f@ke