Record labels have long shaped the sound—and business—of the music industry. In the pre-digital era, they controlled everything from vinyl manufacturing to global distribution. They discovered stars, financed albums, and built the careers of artists who might have otherwise remained unknown. While the industry has shifted dramatically with streaming and social media, record labels continue to play a central role in music's ecosystem.
What Does a Record Label Actually Do?
At its core, a record label is a company that supports artists in creating, promoting, and distributing music. Labels manage the logistics that many artists can’t (or don’t want to) handle alone. This includes everything from covering recording costs to setting up marketing campaigns, facilitating sync licensing, and securing playlist placements. Labels also manage copyrights, negotiate deals, and—in the case of majors—invest heavily in international artist development.
Core Functions of a Label
Whether major or indie, most labels fulfill similar roles:
- A&R (Artist and Repertoire) scouts and signs talent. In 2025, this means combing platforms like TikTok, Instagram, and SoundCloud as much as clubs or showcases.
- Creative direction includes advising on visuals, branding, and storytelling. Labels often help shape an artist’s identity, from album artwork to social strategy.
- Recording and production financing—whether through in-house studios or third-party producers—remains a core value.
- Marketing and promotion: Labels develop release strategies, pitch songs to playlists, fund videos, and manage PR campaigns.
- Distribution: They ensure music is available across DSPs like Spotify, Apple Music, Amazon Music, YouTube, and more.
- Licensing and sync: Labels secure placements in film, TV, and ads, which have become significant income sources.
- International growth: Especially for major labels, scaling an artist beyond domestic markets is a key asset.
These roles are still essential, even in an age where artists can technically “go it alone.” As producer Jake Gosling told The Guardian, “You can be really creative but not very good at business and marketing. That’s where labels step in.”
Indie vs. Major: What’s the Difference?
According to a 2024 whitepaper by MIDiA Research, the top three labels—Universal Music Group, Sony Music Entertainment, and Warner Music Group—account for over two-thirds of the global recorded music market, while independent labels collectively represent the most diverse share of genre and regional music growth.
The music industry is dominated by three major label groups: Universal Music Group, Sony Music, and Warner Music Group. These conglomerates operate dozens of sub-labels, offer massive global infrastructure, and often prioritize commercial potential. They are best suited for artists with mainstream appeal or viral
Major labels operate as part of global conglomerates, offering vast resources, bigger advances, and international infrastructure. They prioritize commercial success, and often require more creative compromise and longer contracts.
Independent ("indie") labels range from globally respected players like Domino or Ninja Tune to boutique labels that specialize in niche genres. Indie labels typically offer more flexibility and creative freedom but with fewer financial and promotional resources. For many developing artists, indie labels strike a balance between support and autonomy.
Independent labels, by contrast, typically work with smaller teams, offer more flexible deals, and cater to niche genres or local scenes. While they may lack the scale of majors, they often make up for it with deeper artist relationships and a higher degree of creative freedom. Labels like 4AD, Jagjaguwar, and Because Music have built lasting credibility by consistently championing forward-thinking talent.
Groover’s 2023 breakdown of indie label operations shows that many now act as “creative incubators,” helping emerging artists scale while retaining more ownership over their masters.
How Record Label Deals Work
When an artist signs to a label, they typically receive an advance: upfront money to support their career. But this isn’t free—it’s recoupable, meaning the artist won’t see royalty payouts until the label earns back that advance through sales and streams.
In traditional deals, the label owns the master recording. This means they control the right to license, monetize, and distribute the final recorded version of a song. Artists retain their publishing rights (the composition), unless otherwise negotiated. However, some indie or licensing deals allow artists to retain ownership of their masters—a growing trend, especially for artists with leverage or a DIY fanbase.
Major labels tend to offer higher advances but take a larger cut and take longer to recoup. Indie labels often offer smaller advances but better revenue splits and more transparency.
👉 Want to dig deeper into the economics? Read our full article: A Hard Look at How Record Companies Make Money
Marketing & Partnership associate at Soundcharts