Business-to-artist: record labels and sub-labels in the digital age

The history of recorded music has been marked by profound and continuous change – not just recording technology, but also musical form, style, technique and beyond. From the late 19th century until the present, technical change has been omnipresent – wax cylinders gave way to 78 rpm records, then LPs arrived and were surpassed in turn by CDs, downloading, and now streaming.

The evolving technology and shifting economics of the music industry have coincided with the emergence of major labels, which in turn have built diversified portfolios of sub-labels. From a marketing point of view, they’re intended to build brand equity, defined as “the added value a brand gives a product” (Farquhar, 1989). Having a better understanding of brand equity can help explain the abundance of labels and sub-labels in today’s digital world.

Psychological and economic approaches

When considering brand equity, there is the approach grounded in cognitive psychology, generally associated with Aaker’s work (Aaker, 1991) that encompasses brand associations, brand awareness, perceived quality, brand loyalty and other assets such as patents. There is also the economic approach dating back to Stigler (1961) and Stiglitz (1987) suggesting that branding and multiple brand development are related to decreased information costs and decreased risks from the consumer perspective.

Aaker (1991)

Major labels do not necessarily behave as traditional umbrella brands because their sub-labels do not always share the same musical identity or genre. Sub-labels benefit from their parent label’s financial and marketing support – artist recruitment, product development, promotion and distribution.

Let’s consider Sony, Warner and Universal as the three dominant major labels concerning economics based-theory, as well as Motown (Universal’s sub-label today) regarding the psychology based theory.

Sony Entertainment

Sony Music Entertainment Japan and other independent national companies are not included. discogs.com

Universal Music Group

Does not include all national companies. discogs.com, Author provided

Warner

discogs.com, Author provided

Tracking sub-labels’ history can be difficult. For example, DefJam is currently a sub-label for Universal Music Group. It was founded in 1984 by Rick Rubin at New York University with early artists such as LL Cool J and the Beastie Boys. The label was distributed through CBS Records in the 1990s, went through some financial difficulties, then had several major owners including Sony, Polygram, and Universal Music Group (see a timeline of Def Jam history).

Today, Motown is a sub-label of Universal music Group, but was originally founded by Berry Gordy and became the Motown Record Company in 1960. The label has always benefitted from a strong, reputation for bringing together African-American musical genres and pop music featuring artists as Smokey Robinson, Stevie Wonder, The Supremes, Marvin Gaye, The Temptations, The Four Tops, and The Jackson 5 (see a timeline of Motown’s history). Certainly, the Motown roster boasts strong consumer awareness, loyalty and brand associations (Aaker, 1991).

From marketing to risk-management tools

While pricing, promotion, product quality and brand credibility are important factors for major labels and sub-labels, risk reduction by portfolio management is now one of the key motivations for major labels that manage sub-labels as separate assets.

Non financial risks are those that may threaten the image or the operations of the company. Today, the importance of the music label to consumers is less evident, and they primarily act as financial and marketing organizations. In this sense, we observe a shift from the label as having a highly visible business-to-consumer (B2C) function to something closer to business-to-business (B2B) or even business-to-artist (B2A).

We define B2A as the relationships between a company (or label) and an artist (a musician or a group) requiring financial support for recruitment, production, product distribution and promotion. We interpret the proliferation of sub-labels primarily as a risk-aversion brand strategy. Record labels know that brands’ rate of mortality has always been high, with an uncertain return on investment. A closer look at labels’ management practices in our current digital age does question the reason beyond taking such risks.

Music labels benefit from the profitability attached to their selling music to consumers. The artist benefits from having resources to make their music known to the market. In the past, consumers recognized the label-artist connection. Today, the brand is the artist, and the label as a brand in and of itself is vanishing. This disappearance is reinforced by digital technologies, and what remains is the label’s support for the artist. What is new is that labels and sub-labels stand in the shadow of the artist so that an artist can be managed as a personified global brand.

B2A and the artist’s value chain in the digital era

An artist’s value chain once involved business and tour managers, label representatives, marketers, and executives, and promotion and distribution specialists. Nowadays, small independent labels are embedded in the artist’s digitalized and simplified value chain.

Besides basic career or business functions, an artist’s manager can coach the artist in multiple dimensions of her or his identity, leveraging social media to distribute music and promote aspects of the artist’s existence, including lifestyle and performance and practice skills (Cartwright, Küssner and Williamon, 2019). The key is to spin online popularity and create meaningful experiences within a virtual community of consumers, fans or experts. The promise is a long-term instant online conversation. Our B2A concept is also linked to the stream of research called consumer culture theory, which explores the world of consumer tribes and shows how they pursue common consumption interests and ways of life.

By creating strong interactive experiences with their fans, artists can keep fans engaged. A group like Umphrey’s McGee has stayed successful in this way, experimenting with many genres since the band’s first studio album released in 1996 up through their most recent album in 2018. Their website even allowing fans to record their own personal shows and leave reviews on the band’s performances.

Author provided

When it comes to digital sales today, generally there is no obvious display of the labels on the cover artwork of albums. The gap is extremely plain when comparing the original LP of the Beatles’ album Meet the Beatles, released in 1964, with how it is currently presented on Amazon. On the LP, the label name is extremely present, particularly above the song list. As now presented on Amazon, the label’s logo is in small type on the original cover, but not in the listing at all.

The Beatles, Meet the Beatles. Amazon.com

Compare this to Beyoncé’s I Am Sasha Fierce, released in 2008 by Columbia Records and Music World Entertainment. Here, the label isn’t visible at all.

Beyoncé, I am Sasha fierce. iTunes

B2A thus serves labels’ and sub-labels’ identity shift inside the ever-changing digital music marketplace. They exist as brands that have become removed from the consumer awareness and now mainly serve as financial and marketing companies.

Ultimately, the artist is the brand, pushing labels to focus on the management of financial and non-financial risks via a proliferation of sub-labels that belong to a broader portfolio management strategy.