It seems the function of a record label has changed over the years. So many record labels, and each is slightly different.
Before modern technology, making an album was much more expensive and out of reach for most musicians. So if you wanted to record an album, a company (record label) would give you the cash to record your album, agreeing that you share the profits from the sales. The record label would also share a percentage of the profits from tours and merchandise. The record label, in most cases, would recover their costs before giving the artists their share.
Record labels are similar to banks. If you walk into a bank and ask for a loan, they perform a credit check to evaluate their risk of lending you the money. In other words, the bank wants to ensure you can pay them back. Record labels would do similar things but differently. There would be an AR (artists and repertoire) department whose job was to scout out talent. Essentially, the AR department would evaluate the artists’ recorded demos and fan base and attend shows to assess the artist. The fundamental question would be if the label invests the money in this artist, can they generate enough business to make a profit? If yes, the record label may approach the artist with a deal. Hence the artist being “discovered” by the record label.
This deal was a trade-off; the artist would receive money and services from the label to grow their fan base in exchange for profit sharing. Sometimes these deals were great; other times, they could have been better. Some artists were happy with this arrangement others were not. It depended on the artist, the agreement and the label.
Now there are so many types of record labels it takes a lot of work to keep track. Some record labels only provide some services, whether distribution, merchandising, touring, or all. Now whatever sort of agreement you can think of, there’s a record label for it.
In the end, artists have to remember that a record label is nothing more than a business trying to generate profit, using the artist as the product; in turn, the artist uses the record label’s services to increase their business. Somewhere in these business dealings, some art’s created. Thanks for reading; I’m just a music teacher having fun; catch ya on the next one.