What is "Label Services"?

The genre of a company that's not quite a record label

If you’ve been interested in the music industry for a while, or have even just applying for jobs in the industry, you’ve likely already noticed this specific type of company popping up: the label services company.

Label services companies have gotten increasingly popular as many musicians are becoming more aware of potentially harmful record deals. Combine that sentiment with the fact that independent recorded music has a bigger share of the market than ever before (around 47% as of 2023), and it makes sense as to why label services companies exist.

Label services companies operate differently than record labels, in that record labels usually own the recordings (or more recently, have extended license of the recordings), fund higher budgets for recording, and take a high percentage of the earnings. These higher budgets, depending on the deal, can also include funding for music videos, marketing, and top producers. On the opposite end, label services companies focus mostly on distribution (i.e., getting music to DSPs like Spotify, Apple Music, YouTube, etc.) and collecting royalties on your behalf, rather than the more flashy and luxurious offerings of a traditional record label. Plus, instead of taking up to 90% of some earnings like majors, these distributors usually max out around 20%.

Even though label services companies are more associated with the independent side of the industry, some of the biggest label services companies are owned by the Big 3 record labels. You may know The Orchard and AWAL, which are the label services companies owned by Sony; ADA, which is owned by Warner; and Virgin Music, which is owned by Universal.

Regardless, these major label services subsidiaries can offer more services, such as merch, marketing, sync licensing, audience development, catalog strategy, and much more. This is part of the broader major label ecosystem, where pretty much all three major labels have vertically integrated to have distribution, merch, touring, and other artist services within other areas of their business. For example, UMG leverages Virgin Music to distribute all of their labels’ music (not just indies under Virgin Music, but also Republic, Interscope, etc.). For merch, UMG could also leverage their Bravado division. Big 3 labels have some serious infrastructure to add as services to their label services affiliates, but there are many more of these companies out there.

I’d be willing to bet that at least half of you know of other indie distributors, like CDBaby, Tunecore, Distrokid, and the like. These are all still label services companies to some degree. While they focus on the main sell of distributing music, they still often have other services to provide to artists. For example, CDBaby offers vinyl and CD manufacturing, Tunecore offers mastering services and short-term advances (not sure how to feel about that one), and Amuse offers video and lyric distribution, marketing and creative services, and help in DSP relations to get playlisting. There’s a number of features out there that offer many of the same services as a label (hence the name, “label services”), but offering them in a more a-la-carte fashion than a full-blown record label.

Why do these companies matter? Because even in the past six weeks, these companies are being invested in heavily. In late February, Universal expanded Virgin Music by acquiring another major label services/distribution company, Downtown Music, in late February for $775M. Nine days ago, Warner acquired the independent distributor Revelator for an undisclosed purchase price. Clearly, this is an area that the “capital-I Industry” wants to invest in, which means that there will likely be an increased number of jobs for these label services companies.

I can’t imagine that the work is functionally very different than a traditional record label (for example, a marketing campaign for an artist who’s paying for it under AWAL is not functionally different from an artist under Columbia). That said, it already seems like the attitudes of some label services companies differs from record labels. Even in just the distribution area, a music distributor has less incentive to collect royalties from DSPs when they’re only getting a 15% cut than a record label who’s collecting their 70% share from a DSP that they have massive leverage over. I’m not saying either are 100% pure, but that’s just some food for thought as we seem to be shifting towards this more label services landscape.