Musicians and recording companies

magnifying glass enlarging the word 'Contract' on a pile of documents

© iStockphoto.com/Pali Rao

The global market for popular music is dominated by four multinational recording companies (commonly referred to as 'the majors'): Universal, Sony BMG, EMI and Warners. These companies each have a portfolio of smaller record labels within their control through complete or partial ownership and a variety of distribution arrangements. Between them these companies consistently account for between 70 and 80 percent of the global market share for music. Each company forms part of larger multinational media conglomerates that also control a number of large media enterprises such as press, television, radio and electronic hardware companies. In addition there are a multitude of different kinds of independent companies ranging from DIY (do-it-yourself) set ups operating from private and domestic addresses to long established businesses with a track record of chart hits and a substantial back catalogue of recordings.

For musicians who are just starting out, signing a deal with one of these major or large independent companies is often a major objective. There is a common sense idea that a deal will lead to success due to the size of these recording companies. A BBC guide for example, describes record deals as the "Holy Grail of the music business. A deal with a record label that's going to record your music and get it major promotion and a big release" (BBC undated). In reality, the situation is much more complicated than this and a record deal is often only the starting point of a much more complex story.

When a band or musician signs with a record company they are usually given a sum of money as an 'advance' against future royalties. Future royalties refers to the money that will be made from the sales of recordings. Usually the advance is used to pay for recording costs and living expenses during the initial term of the contract and it is linked to the production of a set number of albums. In order for a musician or band to break into profit they must sell enough recordings to recoup this money for the record company. Also the scale of the major corporations means that when a musician signs a contract with a major label the investment in them tends to be substantial. If they are seen as a priority within a particular company the outlay for promoting their music can amount to millions of pounds. In addition to recouping their advance, acts must usually also sell enough music to cover these promotional costs (which can include the making of videos, hiring press, radio plugging, PR and web promotion companies, packaging, free goods, promotional copies and advertising). With this level of outlay it is actually very difficult for signed artists to break into profit and it is estimated that only one in eight acts signed to a major record company ever makes enough money to cover the sums invested in them. This means that a large proportion of record deals are fairly short term with a significant proportion of artists being dropped after a relatively short period of time. Of course many musicians do enjoy long careers as recording artists signed to major record labels. However a significantly larger proportion of musicians do not and many have to diversify in terms of their careers (and of course many musicians do not want or aim for careers as artists signed to major record labels).