A recording company is a company that manages music recordings and music videos. A recording company coordinates the production, manufacture, distribution, marketing, promotion, and enforcement of copyright protection of sound recordings and music videos. In addition, a recording company conducts searches for and helps develop new talent. Normally, a recording company maintains contracts with recording artists and their managers. Recording companies vary from small independent labels to huge corporations and large international media groups.
In the music industry, recording artists mainly rely upon recording companies to market and project themselves and their albums, expand their audience base and market their work and make it available to the masses. A recording company enters into a recording contract with an artist to market the artist’s recordings in return for royalties on the selling price of the recordings. Established artists have a higher hand in negotiating the terms of the contract to make it more favorable to them. Rights in the sound recording and the master recordings belong to the record company, because the contracts are deemed as employment agreements by recording companies. This makes the sound recordings a ‘work made for hire’ under U.S. copyright law. ‘Works made for hire’ give the hiring party, or record company, the rights in copyright.
Independent labels are mostly owned by artists. Usually, established artists, create their own independent label once their record contract has expired. Having an independent label provides an advantage of name recognition and more control over one’s music along with a larger portion of royalty profits. However, recording companies usurp a major share of the work of the music industry because they sign, develop, record, promote, publicize and sell music, all at the same time.