Record labels play a pivotal role in the music industry, serving as the bridge between artists and audiences. Their business model revolves around discovering talent, producing music, marketing, distribution, and managing the careers of artists. When an artist signs with a record label, they enter into a contractual agreement that outlines the terms of their partnership.
Record labels typically provide artists with financial support for recording, production, marketing, and promotion of their music. In return, the label retains ownership of the master recordings and earns a share of the revenue generated from music sales, streams, and other commercial uses.
Music royalties are a crucial component of the relationship between record labels and artists. Royalties are payments made to rights holders for the use of their music. Record labels collect royalties on behalf of artists and other rights holders, such as songwriters and producers, and distribute them according to the terms of their contracts.
Record labels often trade music rights as part of their business operations. They may acquire catalogs of music rights from artists, songwriters, or other rights holders through various means, such as direct signings, acquisitions, or licensing agreements. These music rights can then be exploited for revenue through sales, streams, licensing, and other commercial uses.
Record labels also use their master recordings and music catalogs, as collateral to secure financing. This practice, known as music asset-based lending, allows record labels to leverage the value of their music catalog to access capital for various purposes, such as funding new artist signings, album productions, marketing campaigns, and business expansion initiatives.
