"The Role Of The Record Label," or "What Will You Be When You Grow Up?"

With the RIAA causing such a fuss these past few years, a question needs to be answered for everyone. That is:

What do record labels do?

While most people have a general idea (“they record a band’s material and sell it,” being the simplest and least offensive explanation), I thought it would be a good idea to clear up the roles of the record label, show how they’re not being efficient in fulfilling said roles, and point out a major factor in their refusal to evolve.

According to Wikipedia, labels do five things. In temporal order, they are:

1. Production
2. Manufacturing
3. Distribution
4. Promotion
5. Copyright Enforcement

I’d rather not spend too much time on pointing out how each of those is going to be obsolete soon (if it isn’t already). Very quickly:

1. Cheap (if not free) recording and mixing software
2. Costs of $1 or less per CD
3. Tunecore and CD Baby help you get on iTunes
4. Myspace and Last.fm let you promote as much as you want
5. Rampant digital copies will force a reconsideration of copyright laws

Since their old jobs are either cheaper than ever, being done by someone else, or seeing the dawn of a new era, what are record labels doing and why do they keep complaining about needing more money?

Record labels are still around because they did something smart that turned into something stupid: signing acts into long-term contracts. Madonna still has another album on her contract, Prince had a famous contract battle in his past, and Radiohead was only able to do In Rainbows the way they did because they left EMI after Hail To The Thief.

These contracts added to a record label’s value in the old model, but by pledging huge sums of money (often multiple millions of dollars) to their flagship acts, they shot themselves in the foot. The record labels effectively tied themselves to the past and present, hoping that it would continue into the future — and they lost the bet.

The role of the record label has shifted, ironically enough without the record labels themselves. RIAA-member execs, if you’re reading this, I have a quick word of advice to give you:

Get out of any expensive long-term contracts you can, and stop signing new ones.

If labels do that, they can streamline their business, take advantage of all of these technological advances, and turn bigger profits than they could have ever imagined. The infrastructure is here — if other businesses can do a label’s job (or a portion of it) for less and turn a profit, why are we hearing the RIAA complain?

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