MUSIC INDUSTRY NOTES: A Brief History of the Recording Industry and Record Labels

Published September 10th, 2020 | Kristina Didero

The recording industry has proven itself time and time again of its potential to be very lucrative. Since the 1920s, it has been a major income generator with a straightforward process: put out a record, sell a couple hundred thousand, go on tour, and sell even more albums, and then bask in the glory of your earnings. However, in 100 plus years, a lot has happened for the recording industry. In current times, the business struggles to accrue wealth in the same way it used to for pretty much one reason: consumers aren’t willing to pay that much for music anymore. Let’s take a look at the history of recorded music and see how we got here. The first form of pop music was known as minstrelsy which remained trendy from the 1840s to the 1880s at which point vaudeville took over the center of attention. Both of these styles were performed in conjunction with a variation of theatrics. Whether the music was accompanied by comedic skits or dancers, the main experience of the art was through live show.
In 1877 Thomas Edison produced the first recording device, the phonograph, an apparatus that uses cylinders to record and reproduce sound. In the years that followed, Emile Berliner became intrigued with experimenting with audio technology and in 1887, received his first patent for the gramophone disk, which is what we know today as a vinyl record. Columbia Records was then founded in 1888 and became the first record company to produce pre-recorded records as opposed to blank cylinders. Subsequently, radio became a tool to broadcast recorded music and as film technology advanced, the department for recorded music and sound to accompany film also grew. In 1948, Columbia Records produced a new version of an LP (“long play” vinyl disk) whose technology consisted of a “microgroove.” With this microgroove, it became possible to fit more than the standard twenty minutes of music per side of the disk opening up the potential for a fuller set of music and, in turn, laying down the concept of an album. In the 1950s recorded music suddenly had to share the entertainment market with the rise of television. At the same time, record companies were looking to expand their presence in retail stores. This led to the birth of record stores and consignment deals made with other retailers. As new technology developed, the 1970s introduced a portable means by which to play music: the audio cassette. With the ease of handling its 4” x 2.5” frame, users were able to play music by inserting the tape into their car dashboard, use a boom box, or cassette tape player.
As the 1990s rounded the corner, cassette tapes quickly became a thing of the past and compact discs, or CDs, became the new popular way to listen to and carry music. When the World Wide Web was developed in 1989 the whole music industry changed drastically within the following decade. The expansion of the internet also produced various ways people could listen to or acquire music. Sites like Napster and LimeWire allowed people to download music for free which initiated a new slew of copyright infringement cases. Additionally, YouTube and Pandora, although legal, still allowed people to listen to music for free since they were financially secured by funding from advertisers. At the beginning of the 21st Century and forward, CDs became petite mp3 players that held a number of music tracks in one portable device. Cell phones became multi-functional and resembled small handheld computers that reached access to the internet. Streaming music became possible from not just a computer, but from a cell phone. With so many channels of music listening, the need to pay for a specific song or album has become less necessary for consumers to still find enjoyment in the art. Record labels have had to adapt to frequently changing times, but throughout all the transformation, their basic functions have stayed the same. A record label focuses on administering and exploiting sound recordings, maintaining control in production and distribution, acquiring catalogs, and bringing in artists.
There are a few different types of record labels that serve musical artists. Major record labels are those most known to the public and produce 80% of all recordings sold in the United States. A major label is a capitalized corporation that owns its own distribution network. Independent record labels operate with less funding than that of major labels and are often where new and up-and-coming artists get their start. For this reason, these labels are customarily considered the life blood of the developing stage with their involvement in A&R (scouting of talent). Specialty labels are an option for artists who want to work with individuals dedicated to their specific genre of music. Lastly, the DIY label, or do-it-yourself label, really means exactly that – an artist creating and distributing the music from start to finish. This includes the writing, recording, publishing, marketing, and distributing; in turn, they are due 100% of the royalties. Record labels were historically limited to relying on income from record sales to fund themselves, developing what is termed as mechanical income. As times change and less consumers are interested in purchasing music directly, labels have been looking to generate income through synchronization license income which is the return extended from the use of music in audio-visual productions, such as television and film. Through this route, a label relies more heavily on the catalogs it owns. Similarly, given the market change an artist can neither rely on record sales as their only source of income. Thankfully, artists can collect earnings from tours, endorsements, merchandise, digital sales, TV/film appearances, ringtone sales, and songwriting. In turn, labels have come up with a way to try and close the gap in their income decline by offering 360 deals. These deals mean that the label would be committed to the artist for a longer period of time and act, in a sense, as another manager, continuously looking for more opportunities for the artist in exchange for a larger cut of the profits. As we enter 2021, streaming platforms such as Spotify and Apple Music have brought forth new challenges for recording artists and the recording industry with royalty payouts being a hot topic for many. What can we take from the history of the recording industry to help take us into the next stage of the digital era of music?

Normandie Records Industry Notes is a resource for music industry, and music business topics.


Kristina Didero is based out of Los Angeles. She is a graduate of the University of California Santa Barbara. She loves to dance and read self-enrichment books. She’s happy to sit with you till the wee hours of the morning discussing and analyzing life.