Major Labels vs Independent Labels

Posted on 30/06/2020 (Last updated 31/07/2020) by TeenStar

Are you an aspiring singer or musician keen to climb the industry ladder and release music? If so, signing a record contract will be high on your agenda.

There are many differences between major and indie record labels. It’s worth educating yourself on these before committing to either model. Decide on your priorities as an artist and understand the pros and cons of major labels vs independent labels.

This article will enable you to identify and ascertain which type of contract will help accomplish your career goals. You’ll also learn more about how the music business works.

You’ll need to develop a fanbase before you sign to any label. Record labels rarely invest in an artist unless they can prove they have fans and potential to make a profit. If an artist is ready, signing to a label can be very beneficial for everyone involved. You will be able to focus more on your music and live performance. Meanwhile, you will have a team behind you taking care of the marketing side of things.

Signing a contract will also provide financial backing – you’ll be able to work with a budget set by the label. They will likely have someone managing this and be booking studios and shoots on your behalf. Each label offers their own version of these services but you need to know about the general difference between major and independent record labels.

Major vs indie record labels

Securing a record deal is a major goal for many aspiring musicians. Most imagine themselves signing with one of the three major labels: Sony, Universal and Warner Records – or one of their affiliated sub-labels. However, these organisations actually represent only a tiny percentage of the global musician population.

Independent record labels are amongst the top record labels in the world and offer different benefits to a major. There are advantages and disadvantages of signing to an indie. We’ll cover the pros and cons of independent record labels so you can work out what contract is best for you.

Independent labels vs major labels

The term ‘indie’ (independent) is applied to any music label that operates outside the sphere of the major corporations. Indie labels differ dramatically in size and capacity: from professional teams working in slick premises, to self-trained individuals using their home computer to run the business.

Many artists who are now with major labels started their careers with indie labels. These artists have been able to develop and grow their fanbase at their own pace in less pressurised environments and have then made the jump to majors when they were ready.

And it’s not necessarily an either/or situation. Some indie labels will even release music for their successful artists in partnership with major labels. This is because some independent artists become so successful on a small label that both parties sign an agreement with a major to expand the team and maximise success.

Difference between major and indie record labels

Universal, Sony and Warner are the three major labels operating today. They are huge organisations that operate across the whole entertainment industry. They are exceptionally well connected across the music industry because they dominate the mainstream and international market.

Signing to these labels can be seen as a huge accomplishment but you need to be completely ready as an artist. This is because the competition is fierce and it is a results-based business. When you first sign you might feel like a small fish in a massive ocean so confidence, self-belief and a strong core fan base are essential to have any chance of successfully getting a deal.

Pros and cons of major record labels

While the pros of a major record label may amount to a small list, bear in mind the value of each of these pros is immense.

Pros

Established powerful connections and influence.
Vast funding for top-quality recording facilities.
A global promotion and distribution capability.
High-quality music-video shoots and large-scale world tours.
Because a major label has bigger budgets, you could end up with a more comprehensive line of merchandise – some major artists have even gone on to start their own fashion lines after signing with a major label.
Access to top TV and radio interviews and appearances.
Clout with international festivals and major bookers.
Large advances for artists to write and record.
Potentially larger earnings overall, taking into account the global reach of major labels.
You’ll be part of an elite ‘club’ of artists, making valuable connections and mixing with the stars.

Cons

Major labels usually claim the rights to the music of their artists and will collect the profits from any licencing fees, so the musician receives just a fraction of the profits.
A massive roster of artists can make it difficult for individual acts to get the attention from the label that they need to succeed, especially if their music isn’t immediately drawing a significant profit.
The artist has less creative control over music and image, which can be a major issue for those who prioritise their credibility as a musician over financial success.
Musicians often receive a smaller portion of any royalties they generate.
Most contracts offered by major record labels do not include publishing rights, since major labels normally have affiliated publishing companies for their artists to work with.

Pros and cons of independent record labels

pros and cons of major record labels

If you’re offered a contract with an indie label, it’s probably because they believe in your unique brand, not because they want to funnel and mould your image to fit the mainstream market

Pros

Deals that are more artist-friendly often with larger royalty percentages for the musician, and generally giving artists better value for their work.

More creative freedom and potentially personalised development for the artists.
A closer team that can give you more attention – Indie labels have far fewer musicians on their books than major record companies, so they can usually afford to assign each of their artists a dedicated representative, who will work closely with them for as long as they’re signed with the company.
Co-publishing deals are common amongst indie labels; this is where the artist and the publisher co-own the copyrights, and the artist receives an agreed percentage of the income generated from their song. Normally, the artist is offered fifty per cent of whatever income the publisher receives from licensing fees, in return for the label owning the publishing licence.
Indies are also more likely to request the merchandising rights because it’s more of a priority for smaller productions to start making money back from their artists as quickly as possible.

Cons

Much smaller budgets compared to majors.
Small – or no – advances.
Less influence and connections with the global music industry.
Won’t be capable of promoting anywhere near as much as a major label.
You’ll have less expertise from industry specialists at your disposal.
Smaller labels have less commercial influence in the industry.
Less sway with media publications, who are capable of granting artists much sought-after exposure.

A major benefit to working with an indie label is that artists often get to keep the rights to their songs, which is especially significant given the increasing potential to monetise music by ‘syncing’ it in other forms of media. But, you must own the full rights to a song to be able to claim the profits from any licencing fees.

Because indies are smaller corporations run by fewer individuals, unlike major record companies, they are not beholden to the agenda of a large board of directors, motivated simply to churn out music that will perform well in the charts, and rake-in large profits.

The major drawback of using an independent label is that it is more likely they will have a much smaller budget for recording, production, distribution and marketing. This means that artists often have to invest more time and energy into self-promotion if they want to get adequate exposure.

Record label roles and responsibilities

Record labels employ members of staff across all of these departments:

Artist & Repertoire
Sales
Marketing
Promotion
Product Management
New Media
Production
Finance
Business Affairs / Legal
International
Sync licensing

Some artists may feel that they don’t need a record label. But having a team covering all of these areas can make a massive difference in global success. Overall, although we live in a time where record labels may not be as essential, they still provide talented specialists and vital services to help artists achieve massive success.

Labels have to give away records to retailers as part of promoting the album before the release. It’s important to consider the impact of free-goods arrangements because artists do not receive any royalties from records given away for free.

Major labels wield enough influence to limit the number of free-goods they’re expected to provide, but smaller record companies will need to give away more records to promote their artists – reducing the potential profit a musician can earn in royalties.

Indies sometimes want to include their artist’s individual songs on compilation CDs to create a showcase of their musician’s work. These compilation CDs are also given away as promos for free, so artists can’t expect to receive any financial compensation for their work to be used in this way.

What is a record advance?

Major labels have the potential for far more advances. Advances are effectively loans: the artist receives a sum of money from the record company at the beginning of their contract, but this sum is recouped by the label from the royalties earned by the artist before any royalties are passed on the musician.

Major record labels are naturally going to offer bigger advances than smaller indie operations, but the size of advance will differ dramatically depending on the size and affiliation of the particular label. Rather than offering an advance, indies often agree to cover a portion of the recording costs but this production loan is still recouped by the label before the artist receives any royalty income.

The advantage of having a small, or no advance, is that artists can start profiting from royalties more quickly. However, since there are so many costs for the label to recoup before an artist sees any profit, sometimes an advance is often the only financial reward the artist will receive for a long time.

Using alternative record labels

The traditional structure of major record labels has caused them to struggle against the rise of social media, as well as digital music retail, and the subsequent decline in the popularity of radio and physical album sales.

Therefore, the companies that once monopolised the industry are currently in a state of flux, as they transition towards the more modern methods pioneered by indie labels.

The rise of online digital distribution has also helped new indie labels gain prominence. Previously, the only way you could get your music in stores, physical and digital, was through large distributors or major labels.

There are now plenty of digital aggregators, such as Distrokid and Tunecore, that anyone can sign up for and will put your music on platforms like Spotify and Apple Music in exchange for royalties or a subscription fee.

Major Labels vs Independent Labels | Differences Between Major and Indie Record Labels