How and Why Major Labels and Independent
Labels Work Together
By Christopher Knab,
The following article is an edited and updated
version of the introduction to a chapter on major
label and independent label relations published
in the book "The Musicians Business and
Legal Guide, 3rd Edition" by Prentice-Hall.
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Major labels and independent labels have
a legacy of exposing and discovering all the great
music of the last century, but the role these two types
of record labels have played over the decades has changed
as much as the music itself has changed. Defining the
roles these different kind of record labels have in
today's marketplace, as well as understanding the reliance
they have on each other, is important for anyone who
wishes to start their own label or develop an existing
label. The independent labels and the majors realize
that to maximize their marketing efforts in an increasingly
competitive environment, working together to achieve
their mutual goals can be quite beneficial to both
A 'major label' is the name given to those
labels that currently control over 80% of the records
sold every year in this country. These labels have achieved
such a high profile over the last couple of decades by
operating their own distribution companies that sell
directly to the many music chain stores, sub-distributors,
and mass merchandisers across the country. Examples are
Sony, BMG (Bertlesmann Music Group), UMG (Universal Music
Group), WMG (Warner Music Group), and EMM (EMI Music
'Independent labels,' in the purest sense
of the word, are those record labels that distribute
their records through what are called independent distributors,
and are not usually connected to the major's distribution
systems. But of course it can't be as simple as all that
now, can it?
In today's popular music environment, there
are more records being released every year than ever
before. The cost of recording and manufacturing records
over the last two decades has decreased dramatically,
so there is more music being recorded and competing for
the attention of a consumer than ever before. However,
when it comes to exposing any of this music, the ownership
of and the relationships with the media that plays and
hypes popular music is now controlled for the most part
by the Majors and/or their parent companies.
Without access to the essential media outlets
of radio, TV, internet, magazines and newspapers, an
independent label might have a difficult time today without
the assistance of a major label. (There are, however,
more and more independent labels that have learned how
to find a niche and through unique marketing efforts,
have been able to thrive.)
Recently, the high cost of major label
mergers and buyouts has put pressure for the major labels
to return a profit on all the investments they've made
in controlling the lucrative music marketplace. The time
when a major label could slowly build an act over several
releases has come and gone. Any act signing to a major
label these days must impress the label with significant
CD sales on their initial release, or they run the risk
of being dropped by the label. What we have now is a
scenario in which the major labels and the independent
labels do rely more on each other than ever before.
Independent labels, which find and champion
most new trends in popular music, do the artist development
work for the majors, in many cases. This is not unlike
the situation in baseball, whereby some AAA team develops
the talents of an outfielder who someday gets promoted
to the major leagues. The independent label of today
can be a label started by an artist/band or an entrepreneur
businessperson who has the talent, finances, and determination
to build projects to a point where they fill a particular
music niche or realize that they can only grow so far
without the power or clout of a major label.
Possible Reasons For Major Label Affiliation
Major label affiliation can provide
the independent label with a substantial cash infusion,
which eliminates the need to continually focus on day-to-day
survival issues and allows more effective operation.
The major label may also take on such responsibilities
as manufacturing and promotion. These factors may in
turn permit the independent label to expand and/or
upgrade its artist roster, or enter a mainstream genre
where developmental and promotional costs are much
higher than for niche market music.
Independent labels affiliate with majors
to increase their artists' exposure in commercial media
and to expand their distribution networks by increasing
their access to major retail record chain stores and
rack jobbers. Affiliating with a major label can
maximize the likelihood of the independent getting paid
for records sold. Independent labels, using the traditional
independent distribution system, have always faced the
risk that an independent distributor will go bankrupt
and not pay them.
This risk is drastically reduced (if not
eliminated) when an independent label distributes through
a major label distribution system. These distributors
have the financial backing of their multinational parent
companies and are able to weather the financial storms
of the music industry. They also have more clout than
independent distributors to collect from retail and wholesale
accounts, and are better able to implement strict controls
over how many records those retail and wholesale accounts
are allowed to buy on credit.
Issues to Consider
When an independent label is considering
an affiliation with a major label, there are many issues
to consider. Here are some specific questions that
will help to focus research and analysis:
* What are the independent label's present
sales volumes and what are they likely to be in the
next few years (i.e., with major label affiliation
versus without major label affiliation)?
* Will the major label distribute to the
mom-and-pop stores, which formerly carried the independent
* Will the major label be responsive to regional demands
and the demands of niche markets?
* What kind of reputation and support does the independent
label have among its fans?
* Will a major label affiliation jeopardize this?
* Will the independent label's core fans be best served
by the major label's distribution system?
There are other issues to consider as well.
* Will an affiliation with a major label
create an unhealthy pressure on the independent label
to sell more records than it can comfortably or realistically
* What is the present financial status of the independent
label and what is its access to additional resources
without major label affiliation?
* Assuming affiliation, what will the cash infusion
(if any) be used for?
* How can the independent label's existing staff-promotion,
marketing and administrative-be best utilized after
* How will the long-term business objectives of the
independent label be served by affiliating with a major
* Do the owners of the independent label really want
the responsibilities and financial burdens of operating
a fully staffed record company and overseeing the promotion
and marketing of records?
* Are they only interested in the creative process
of signing artists and producing records?
* What is the personal style of the independent label's