The music business operates by finding and exploiting talent. This happens in many different ways. Money is made from selling records, videos, merchandising and concert tickets. Money is also collected and paid to the writers each time their music is played on the radio or television or performed live in public.

Record companies make their money by selling records. They also collect royalties when their records are played.

There are thousands of record labels throughout the UK, however, only five major International companies: BMG, EMI, Sony, Warner and Vivendi-Universal. Each have a range of smaller labels, they also license independent labels to provide and cater for niche markets. Occasionally artists sign with smaller labels to remain independent and largely in control of their affairs only to find that a major company has bought controlling shares in the label that they signed to.

The record company deals almost exclusively with the master recordings of songs made by its signed recording artists. The artist is entitled to two royalties when working with a record company: the record sales royalty and the performance royalty.

No record sales royalties will be paid by the record company until those sales have paid off the recording advance.(See Tipsheet – What is an advance)

A large record company will have various departments:

Artist and Repertoire (A&R)

A&R is responsible for finding, signing, recording and developing artists signed to the label. The A&R person is the initial point of record company contact for the manager. A & R departments receive hundreds of demos, read reviews; watch dozens of bands live, and are contacted by several managers, agents and lawyers every week. Their job is to check out all of the above and predict the most successful candidates to fill gaps in the company's roster of artists. After discovering an artist, they sign and develop this talent for the company working closely with the act in its early stages and planning production and recording.

Marketing

Also known as PRODUCT MANAGEMENT this department is responsible for developing an image for the artist. Oversees video production, photo-sessions, artwork and media promotion. Overall responsibility for marketing the artist includes building public awareness and finding customers for the products.

Business affairs

This department negotiates all contracts and agreements on behalf of the record company.The Manager will  be required  to discuss, negotiate and agree terms of record contract, recording budget, advance, tour support, etc.

International

Given that British talent accounts for a large proportion of American and worldwide sales, UK companies put a great deal of time and effort into international liaison, deal-making and promotion.