This is why, by the way, I’m generally quite unsympathetic to artists belly-aching about how unfair their labels are. Is it unfair that all of the artists who don’t break through are not compelled to repay the labels the money that was invested in them? No one begrudges venture capitalists for profiting when a startup IPOs, because that return pays for all the other startups in the portfolio that failed.
In fact, this gets to the first reason why labels are still relevant: although the distribution function has gradually gone away (although, CDs still made up over 50% of all album sales in 2014), the venture capital function of record labels remains. Apple, Spotify, et al are not interested in discovering and speculatively funding new artists; it’s a difficult and specialized job and the labels are quite good at it. And, like the best sort of VCs, record labels don’t just provide money but also guidance in both an artist’s sound and their business dealings.Ben Thompson
Interesting analogy: music labels invest in a wide range of artists in the hope some (maybe even one) will become the big breakthrough that will cover the costs for the rest.
Later in the article we find a counter-example: Macklemore, who
made it to the top of the charts – multiple times – and won multiple Grammys without the help of a label. The way I see it though, Macklemore is more an exception than the rule, a talented musician who also happens to be a good businessman. The majority of artists would rather focus on what they do best, their art (be it music, painting, photography or writing), and leave the routine business details to someone else. Maybe in the future that someone will no longer be a traditional music label, but rather smaller, independent labels or managers. The Internet will certainly enable people to connect and interact more directly, changing the business in ways that are hard to predict.