Why do the labels sign tracks? There's no money in it!

[marvel5]

I still can't get a grip on the economics in the music industry.

For electronic music for example, EDM and its sub genres, house, techno, trance, and so on, labels usually sign by track, not an album and not the artist.

So all these labels, both big and small, why do they sign music? What is the point? There's no money in it!

If they sign a track, the track will get maybe 200 streams on Spotify the first month after release. If the artist is lucky it might go up to around 2000 streams after release. If the artist have a following, that number could double or even triple. (And this is the truth even if the label is a major one! I've checked. Release after release, the same thing over and over again.)

However, we're still talking about pennies here. You need around 200.000-300.000 streams per month to survive and pay the rent, nothing fancy. This would generate maybe $1000-$1500, per month! And that is IF you release on your own.
If you're on a label, which will take 50% of everything, you'll need double that, 400.000-600.000 streams, per MONTH!

So please, forgive me, but why on earth does labels keep signing artists? There's NO MONEY in it!
I mean, for what? $1 / month to the label? $10 dollars a month? It won't even cover their electric bill caused by creating artwork and promo material! Who's paying all the workers at the label? Where's that money coming from? Certainly not from streams! That's for sure.

For sure, maybe there is money in it for 0,1% of the artists, who can sell an album to the label for even $50 million, which is completely INSANE!

But why keeping signing tracks and put in work for promotion and everything, when it gives practically NOTHING back for the "no-mega" artists? Am I an idiot? Am I going insane? What is it that I don't understand? Have I missed something?

[alexis]

Economics is one of my weakest suits, but maybe they calculate it's worth putting money into N new acts in the statistical expectation one of them will turn into a megastar cash cow (Adele, Billie Eilish, etc.)?

[marvel5]

maybe they calculate it's worth putting money into N new acts in the statistical expectation one of them will turn into a megastar cash cow (Adele, Billie Eilish, etc.)?

This does not apply to EDM and it's subgenres house, techno, trance, psytrance etc though...

And we're not even talking about new acts many times. Even known acts does barely get plays. So where does the money come from? Why signing at all?

[James Perrett]

I don't understand your interest in the music business if you are convinced that you can't make a living out of it. All your posts are on the same subject - why the fascination with it?

Labels that know their market make money - we're not necessarily talking millions but enough to keep going.

[marvel5]

I don't understand your interest in the music business if you are convinced that you can't make a living out of it. All your posts are on the same subject - why the fascination with it?

Labels that know their market make money - we're not necessarily talking millions but enough to keep going.

My interest in the music business is that I love to create music. However, my situation does not allow me to work with music unless the same work is keeping me afloat.

And so the questions arises.
To this date, I've not found one single professional explanation for the economics behind the music industry, not least when talking about EDM and especially the subgenres house, trance, techno to name three.
How can this be? How can there be no elaborate information and facts about this, when there's 8 billion people on earth, thousands of tracks released each day, hundreds of thousands, if not millions of artists in the world.

Is no one even interested?

How come labels are signing artists, artists that does barely get any streams, and they do it over, and over again. Labels are supposed to make money, right?
Sure, so if the labels are making money, more precisely about 50% of the total income (a bit of a standard share), then how are they doing that from a few hundred streams per month per signed track? Why even bother? It's not like they're releasing 10.000 tracks / day, so those few streams add up. No, they release only a few tracks per month.

Where's the money coming from?

And where does it go?

People are saying: There's no money in music today, especially EDM. Then why on earth are labels signing tracks and releasing them, if there's no money in it?

Makes no sense.

[Drew Stephenson]

How come labels are signing artists, artists that does barely get any streams, and they do it over, and over again. Labels are supposed to make money, right?

I'm no longer linked to any labels but I'll offer you this parallel from the book-publishing world.
Publishers, via the agent network, will sign people for three* reasons:
1) They have reason to believe that this author will sell a lot of books.
(Getting this right then allows them to do also do the following...)
2) They believe this author writes in a literary style and will win awards or otherwise add credibility and kudos to the publishing house. Literary fiction sells diddly squat by the way, it's completely subsidised by the popular stuff.
3) This author fills a gap in their stable where lots of sales / hype is happening and they think they will sell whilst this bubble persists.

Basically 1) Make Money, 2) Look Legit, 3) Jump On The Bandwagon.

So, to get back to music, when you look at some of the signings that don't initially make sense, ask yourself which category they might fall in.

* Arguably there is a reason 4) which is that the author is a relative of someone important in the publishing business.

[Geoff Modulate]

A lot of labels are actually small holdings run by other musicians/fans who want to do something in the industry, a good percentage of them never make any money. Those that do, they often work on a model of lots and lots of artists selling 'moderate' numbers. Compilations etc. Or they are extremely selective with who they work with and really know what they are doing.

I'm signed to two labels, both of which have 'name' artists whose bigger tracks will get between 1 and 5 million plays, sometimes 10 million plays. If you keep your overheads under control and you have what, 20-30 acts on your label, you pick those acts carefully and don't put a lot of investment in, you can do absolutely fine with a fairly small staff.

[OneWorld]

A lot of labels are actually small holdings run by other musicians/fans who want to do something in the industry, a good percentage of them never make any money. Those that do, they often work on a model of lots and lots of artists selling 'moderate' numbers. Compilations etc. Or they are extremely selective with who they work with and really know what they are doing.

I'm signed to two labels, both of which have 'name' artists whose bigger tracks will get between 1 and 5 million plays, sometimes 10 million plays. If you keep your overheads under control and you have what, 20-30 acts on your label, you pick those acts carefully and don't put a lot of investment in, you can do absolutely fine with a fairly small staff.

That makes a lot of sense. It is no accident that it is called the Music 'Industry' Simon Cowell once made this point, they are a business selling a product/service.

In some businesses, they will have a leader product which is relatively lucrative, that might support other products that are loss-leaders, in business, the wider you cast your net, the higher the possibility of a 'catch' and the whole business model is holistic, greater than the sum of its parts, and within that model there are less apparent value added parts to factor in, all of which play their part in sustaining a profiable business, and every now and againm, if your stars are aligned, along comes an exception artist/song, which means you've hit 'pay dirt'

[merlyn]

It's maybe worth realising that it's not possible to buy or sell music as such. Music is vibrating air molecules. It is possible to buy a CD, which is a piece of plastic, not music. In economic terms, streaming would be thought on more as a service than goods. People buy the service Spotify offers, which isn't music either.

[MarkOne]

The music business is weird. I really can’t think of a parallel.

Right now, I’ve got a playlist going. It’s not stuff I own, I don’t even know what’s coming next. (Ok you could argue this is sort of analogous to radio) but if I like something I can ask Siri to play the whole album and add it to my library,.

20 years ago I could only play things I’d gone to a shop and bought. From a label point of view, the economics were simple. Invest in, develop, productise, market, sell, recoup costs, repeat.

Now as a consumer, I pay the equivalent of a couple lattes to Tim Cooke, and it’s all here for me, more music than I’ll ever to listen to..

From the artist, label point of view, all the upfront costs remain, but the sell and recoup part is much harder, unless you are Adele, The Weeknd, or Ed Sheeran.

I’m not surprised EDM labels take this scattergun approach, put out tons of contend and hope some of it gets traction.

You think EDM has it tough? Try being a Prog Rock artist! (Which is why, prog still is very CD centric. And quite a few prog acts aren’t on the streamers, and rely on Bandcamp)

[Hugh Robjohns]

Right now, I’ve got a playlist going. It’s not stuff I own, I don’t even know what’s coming next. (Ok you could argue this is sort of analogous to radio) but if I like something I can ask Siri to play the whole album and add it to my library,.

20 years ago I could only play things I’d gone to a shop and bought.

It's exactly analogous to radio (but without the 'taste filter'). 50 years ago, I listened to music on the radio. I didnt own it, and I had no idea what would be played next. But if I liked it I could ask my mum or dad to buy it for my tape/record collection.

It was a slower and more involved arrangement, but it worked in the same way with exactly the same result. The tech has made things faster and easier, but I'm doing the same now as 50 years ago.

...and the BBC music library has always had more music than I could ever listen to. (Actually, as time moves on I think the same can probably be said of my own collection!)

[tea for two]

One reason is labels have to be doing something to justify their existence as it were.
It's same similar with most businesses companies organisations.

::

It's maybe worth realising that it's not possible to buy or sell music as such. Music is vibrating air molecules. It is possible to buy a CD, which is a piece of plastic, not music. In economic terms, streaming would be thought on more as a service than goods. People buy the service Spotify offers, which isn't music either.

Even the foremost audio scientists biologists neurologists on earth merely scratch the surface of what is audio, how are we able to hear.
Beyond scratching the surface they are stumped and can only throw their hands up in the air and say it just is.

[merlyn]

Mysticism is a cop out. Not that there's anything necessarily wrong with mysticism, but first we could try to come up with an explanation. We know how sound moves in air; we know how the ear works.

At some point in history the sun rising every day may have seemed mystical. We tend not to think that now.

[marvel5]

In some businesses, they will have a leader product which is relatively lucrative, that might support other products that are loss-leaders, in business, the wider you cast your net, the higher the possibility of a 'catch' and the whole business model is holistic, greater than the sum of its parts, and within that model there are less apparent value added parts to factor in, all of which play their part in sustaining a profiable business, and every now and againm, if your stars are aligned, along comes an exception artist/song, which means you've hit 'pay dirt'

This make sense, but at the same time, it doesn't make sense.
Let me tell you, that even the larger EDM labels sign new tracks all the time and practically none of them come near even 10% of those 200.000-300.000 monthly streams which is needed to even being able to pay the rent and get food for the day.

Only a very small percentage of artists are actually making good money. Many EDM labels doesn't even have artists that can live off their music when you look at the number of those artists streams.

Larger EDM labels may have one or a few artists that does have lots of streams though. But again, like probably 98% of what is signed is still making literally pennies, or barely that. And how that would pay back in the future is beyond me, since they sign per track, not per artist.
So your theory "along comes an exception artist/song, which means you've hit 'pay dirt'" does not really apply to EDM and when labels are signing tracks, as opposed to artists.

There's practically no techno, trance or psytrance tracks (to name a few sub genres of EDM) that alone will make good money for the label. The house genre might be a bit easier, but it's certainly no pop music.

Also, ask almost anyone out there and they'll say there's no money in music unless you're at the absolute top, a position which is not easily reached.
- still EDM labels are signing lots of tracks that barely get any streams at all. What's the point? There'll never be an exception there that'll "pay dirt".

[James Perrett]

Also, ask almost anyone out there and they'll say there's no money in music unless you're at the absolute top,

And that statement is total rubbish. There are plenty of people making money out of their music who aren't at the top - they just have to be more careful to control their costs.

Remember, there are plenty of people reading your posts here who are making a living out of music who probably don't want to be drawn into a discussion with someone who simply seems to want to rant and doesn't seem to want to listen.

[Bob Bickerton]

James is right, that statement is rubbish and suggests an attitude which will not lead to opening doors.

I’ve been working full time in the music industry in a very small country since 1984, that’s 40 years, and have made a comfortable living. During this time I’ve worked as a performer, live sound engineer, recording engineer (using the engineer descriptor colloquilly ), manager, trustee, sound designer and educator.

I am not by any means famous or top of any tier, it’s largely down to hard work, adaptability and temperament.

Bob

[marvel5]

Also, ask almost anyone out there and they'll say there's no money in music unless you're at the absolute top,

And that statement is total rubbish. There are plenty of people making money out of their music who aren't at the top - they just have to be more careful to control their costs.

Remember, there are plenty of people reading your posts here who are making a living out of music who probably don't want to be drawn into a discussion with someone who simply seems to want to rant and doesn't seem to want to listen.

James is right, that statement is rubbish and suggests an attitude which will not lead to opening doors.

I'm sorry, this is really my fault. I mean especially EDM. I don't know how it is with pop, rock, hip hop and so on, maybe it is far easier to make money with those genres?

In any case, I mean specifically EDM in this case.

The thing is, that even many B-list EDM artists do have to have day jobs to live. And then I mean artists that are featured on ASOT, maybe even playing sets in the ASOT studio. ASOT being A State of Trance with 40 million listeners in 84 countries, each week! AFAIK it's the biggest radio show in the world.

Those are artists who've been in the scene for 10, maybe 15 years! Still having to work their day jobs! It is insane.

And now we're talking about the music, not performing live. Performing live is another matter, which of course can bring you money, and most likely far more money than online streaming.

I'm talking only about the music itself. The streaming, downloads(digital track purchases) and radio plays.

In the 90's you could live off selling your music without even performing live. It was sold on CD's, vinyls. Today, you have the whole world as customers, 8bn people! No CD manufacturing costs, no shipping costs of CDs. Just sell, for practically free, Internationally, all around the globe.
Yet, practically no income. No matter if you're playing your tracks on worlds largest radio show ASOT for 40 million people each week.. you'll still have to go to work in the morning

Come on, I'm not making this up.

[Arpangel]

I'd stop dwelling on this, and start making tracks people want to buy.

[Sam Spoons]

I'd stop dwelling on this, and start making tracks people want to buy.

Yup, or start playing live, that is where the AI bot's haven got yet (well apart from ABBA Voyager...).

[Wonks]

Have you asked any of the labels you know about who are signing tracks that don't get many plays why they do it? They may give you some answer. Maybe not good answers, but answers nevertheless.

Historically major labels in the 70s, 80s and probably well into the 90s made money (a lot of money) from maybe 5% of their signings. A bigger percentage made some money, just enough to keep them gigging and recording and on average making a bit more than breaking even, but 80%+ lost money for the label and never paid a penny back of their advances.

But that 5% made it all worth it.

Whilst the labels had A&R people to theoretically sort the wheat from the chaff, most were useless in terms of predicting what the public wanted to buy.

Projecting that forward to today, with a lot of people not listening to albums but single tracks, then it seems like the general practice has continued, just with the signings on a smaller scale. What I don't know is whether the labels you are talking about actually make reasonable money from a small % of the tracks they sign.

If you could consistently pick, by a couple of listens, a track that would get a million or more plays, then you'd be super rich. The fact is, people can't. Some are certainly better than others, but even then it might be picking 8% instead of 5%. Which is great for that label, but still over 90% of the signings aren't going to do anything.

But historically, some signings that started out with poor commercial success turned a corner after a few albums and then made a mega-selling album (or albums), far exceeding their initial outlay.

Basically you are (up to now) dealing with humans who are very fallible at picking what the public want to hear. Often the creators themselves get it very wrong. Maybe AI will be better at it, than people or maybe it won't. But I'm pretty sure that there will still be a requirement for a label to pick/sign far, far more misses than hits.

[alexis]

...

Yup, or start playing live, that is where the AI bot's haven got yet (well apart from ABBA Voyager...).

And Elvis, and Michael, and Rolling Stones.

Whoops, my bad on that last one, easy mistake to make though ...

[amanise]

This thread all makes perfect sense now I know it was about EDM. I was getting mightily confused at one point.

[ken long]

If they sign a track, the track will get maybe 200 streams on Spotify the first month after release. If the artist is lucky it might go up to around 2000 streams after release. If the artist have a following, that number could double or even triple. (And this is the truth even if the label is a major one! I've checked. Release after release, the same thing over and over again.)

However, we're still talking about pennies here. You need around 200.000-300.000 streams per month to survive and pay the rent, nothing fancy. This would generate maybe $1000-$1500, per month! And that is IF you release on your own.
If you're on a label, which will take 50% of everything, you'll need double that, 400.000-600.000 streams, per MONTH!

So please, forgive me, but why on earth does labels keep signing artists? There's NO MONEY in it!

2 things you don't take into consideration in your post:

1. the reach that a label has, no matter how small, increases exposure and that usually translates as sales/streams. Does it increase it enough to make up the 50% it costs the artist is a fair question. But the label should be doing a lot of the leg work an artist might not have time to or want to do (promo, admin, press etc).

2. many of these labels also release on Bandcamp which pays out more. digital is long tail stuff.

This model wasn't unheard of in the days before streaming. Ace records has a huge catalogue of songs which by themselves make very little but as a whole generate a decent income.

[Tudder]

In my opinion exposure, networking, and credibility are key. Being associated with a label can elevate an artist's profile, leading to more gigs, collaborations, and opportunities. Additionally, labels often invest in promising talents, hoping for long-term success. While the streaming economy poses challenges, labels still provide essential resources and expertise that independent artists may lack. In general it's a complex ecosystem where monetary returns aren't the sole metric of value.