Útgáfufyrirtæki

Record Label

Record labels manage recording rights – not copyright. Copyright belongs to the creator of the work or their publisher, while recording rights apply to the recorded version of the work. Labels therefore work with the recordings: they invest in them, promote them, distribute them, and sell them.

Record deals usually cover a maximum number of albums or projects, and the label often reserves the right to “pick up the next option” — i.e. to continue the partnership or let it expire after each release. A very common contract involves releasing one album with an option to release more if things go well. This way, labels can secure their investment - or end the collaboration if they do not foresee a return on their investment.

Size and scope of record labels

Record labels vary greatly in size and scope of operations:

The major labels
(Universal Music Group, Sony Music, Warner Music) own dozens of other record and distribution labels and employ hundreds of staff working in promotion, distribution, marketing, and sales. Together, these three companies control around 70% of the global market share.
Icelandic example
‍The majority of Icelandic recording rights, including the recording archive of the National Broadcasting Service (RÚV), are administered by Alda, which is owned by Universal Music Group (UMG).
Indie labels
Smaller companies can range upwards from a single individual . They are diverse in structure but share the common role of investing in recording rights – whether that involves production, recording, marketing, or other activities.

When signing with a record label, the label often acquires the master rights – though in some cases the rights are only licensed for a predetermined period of time. Artists are always advised to seek legal counsel before entering into agreements with record labels.

Financing and Recoupment

Record labels take on financial risk by funding recordings, production, marketing, or by paying advances to artists. These costs are then recouped from the artist’s share of the revenue generated by the recording. However, the debt often expires after a certain period or at the end of the contract if it has not been fully repaid.

In plain terms: if there is a 50/50 agreement and the label invests 1 million ISK, the arrangement would look like this:

When sales reach 1 million, the artist receives 500,000 and the record label 500,000.
The artist’s debt then still stands at 500,000, since only their own share counts toward repaying the debt.
Therefore, sales need to reach 2 million ISK for the artist to be fully recouped. At that point, the record label has already profited by 1 million ISK.
After the artist has recouped, all profits are split 50/50.

Record Labels Today and the Situation in Iceland

Record labels have experienced significant growth in recent years, primarily driven by streaming. Streaming revenues now account for nearly 70% of total label income. This growth is not limited to new music – older catalogues that once sat untouched on shelves have become valuable sources of revenue through streaming.

In Iceland, this trend is partly reflected, but the situation also shows that Icelandic labels face considerable challenges. According to the sales monitoring of the Icelandic Record Producers’ Association (FHF) for 2023, around 80% of music consumption in Iceland was foreign. Only 20% of consumption was Icelandic music, and of that share, Alda Music held the rights to half of the Icelandic music sold that year.

Relative market share of record labels in Iceland in 2023:

Label

Market Share

Universal Music Group

33,09%

Sony Music Entertainment

15,37%

Aðrir erlendir útgefendur

14,05%

Warner Music Group

13,09%

Alda Music