Music Business Survival Series Pt 5: How Record Labels Work

Promotional photograph of Elvis Presley, taken...

Promotional photograph of Elvis Presley, taken in 1954. (Photo credit: Wikipedia)

 By Julian Harris Gibson

Record labels function like any other corporate machine, their ultimate goal is to make a profit. We cannot put the entire fault on record companies because music is such a subjective field without any real guarantee of success.

A company who sells a product like a car can expect to make a certain profit when the product reaches the market. If the product doesn’t sell on the retail market car companies can then go to the private sector or even government or markets overseas to sell their product at a market value.

However in the music field, the artist is the product and no matter how much money is spent on marketing and promotion, the fans have to respond in order for the record label to reap a profit. Also with the rising threat of online piracy it is an even tougher landscape for the fledgling music empire of today.

The groups of the twenties who made the big band sound tapped into the swinging attitude of the gilded age hipsters who wanted to grab a “doll” and paint the town red. The sizzling sixties were filled with artists like The Beatles, Elvis Presley, Jimmy Hendrix and others who not only protested in spirit but also song. Music can be tied to culture all the way back to the beginnings of civilization and maybe before that.

The jungles of Africa were filled with the sounds of war drums and stick instruments that allowed people across great distances to communicate. Scientists now study the songs of whales to show that these water born mammals may be much more sophisticated than we had ever thought. I bet there is a lawyer right now putting on a scuba suit to try and sign Free Willy to a contract or sue Sea Worldfor copyright infringement for a signature whale sound. But seriously, Copyright, Publishing and Contract knowledge is key to the successful career of any artist.

Cover of sheet music for "The Star-Spangl...

Cover of sheet music for “The Star-Spangled Banner” by Francis Scott Key, transcribed for piano by Ch. Voss, Philadelphia: G. Andre & Co., 1862 (Photo credit: Wikipedia)

Music itself is a tricky business venture because it has always been connected to society’s consciousness at the particular time. At hard times like war, music can inspire a nation. In fact, the Star Spangled Banner was written about the battles fought during the American Revolution. Francis Scott Key was so inspired by the bombs “bursting in air” that he spent all night writing the song and it became an immediate hit on the revolutionary charts. 

  Now at every sporting event we all stand with our hand over our heart and sing along. While this song has been sung by many famous singers, none have sung the national anthem with the emotion and grace as the late Whitney Houston during her Super Bowl Appearance in 1991.  Her performance was so riveting that her record label produced a live version of the performance and it sold over a million records. Whitney’s performance came at a time when America was at war in Iraq and everyone was feeling patriotic. Whitney’s golden voice brought grown men to tears and the nation stood amazed and proud that the best rendition of the Star Spangled Banner ever sung came from a skinny girl from Newark, NJ.


Music Bussiness Survival Series Pt 4: Entertainment Law

Lisa Lopes

Lisa Lopes (Photo credit: Wikipedia)

By: Julian Harris Gibson

Many artists find out the hard way when it is too late that before they plan a world tour, they need to find a good entertainment lawyer. There have been countless horror stories of artists getting the short end of the stick when the profits came to pass. One of the most recent and famous stories was that of R&B super group TLC which sold a whopping 10 million records for their smash album in the mid nineties only to end up broke due to ignorance and shady business practices. Many people asked how in the world a group could sell that many records and end up broke but as a creative genius and lead singer the late Lisa “Left Eye” Lopez discussed it in a VH1 documentary.

During this film the singer explained how the group only received about one dollar per unit sold, which meant that the original pie for the artist was ten million dollars. This may seem like a boatload of cash, but keep in mind that the original retail price of a CD at that time was about 15.99 which meant at ten million copies sold the record label stood to make well over 150 million dollars. TLC’s share was less than 10 % meaning they only had five million to start out with.  After the label billed the group for the cost to produce, promote distribute and package the album, the group was left with a dismal $15,000 per artist, barely 1 % of total sales.

This case was on the extreme end of the spectrum, but is fairly common in the music business. The practice of billing the artist is known as “recouping” for expenses and is standard in many fields of business. However in the music business, many artists get caught up in the glitz and glamour of the bright lights and get hit by the train of reality –hard.

Music Business Survival Series Pt 3: Publishing

These shady practices are mirror images of some of the sub-prime mortgage schemes that first time buyers fell prey to a few years back. In the same fashion that the mortgage mess almost swallowed the entire economy, these shady practices also have far reaching consequences well after most successful careers are done. Many artists end up as virtual slaves to the label and only get pennies for recordings that make the labels multi- million dollar profit share. For the savvy artist who wants to own his own music, there are two major Publishing firms in America BMI and ASCAP.

These two giants handle the bigger artists as well as the garage bands that may never make it big and may not want to. They monitor media formats for an artist’s music and then pay a royalty on a quarterly basis. Even though most artists get the shaft when it comes to publishing, there are a few hero tales like Percy Miller aka Master P who was the first rapper to demand and receive an 85% share of all profits. This mega deal was unheard of at the time even for white rock acts like the rolling stones and Aerosmith. Master P’s leverage was due to the fact that he had a popular following in his home town of New Orleans and all throughout the south.




Many artists are just now learning of ways to position themselves like Master P nearly 20 years later. Master p has sold over 75 million records has owned clothing lines, movie companies even gas stations and one of the most respected businessman in music history

Notorious B.I.G. (song)


By Julian Harris Gibson

Most recording companies are looking to get the most return for the lowest risk. No matter what genre of music the artist creates like rock, rap, country or gospel. This means record labels often will not sign an artist until they have proven viability. In order to prove viability, artists often have to invest in themselves spending their own money for equipment, studio time, promotional materials as well as travel expenses for touring.

However, these tasks are expected to be completed before the struggling artist has even packaged or produced a record. This daunting task often forces the artist to become a self-contained business and handle many areas like budgeting and paperwork and PR that the artist may not be knowledgeable about. Follow this series to gain valuable knowledge about these topics.

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