Why do record labels still exist?

Question

I've had a song stuck in my head all day. I went on to Spotify (for which I pay and rightly so) to find it only to find that it wasn't there (it was before). After a bit of research I found that the artist (and a load of others) had pulled the album from Spotify.

[Fun fact: I now won't pay for that song, as I have no interest in running two music streaming services.]

It seems that artists are getting annoyed with not being paid fairly for their work and are making a stand. After a bit more looking around, it seems labels are taking an unfair portion of artists' money.

So my question is this:

In the age of the internet - a platform in which you can be exposed to millions at once, why do record labels still exist?

For bonus points (because I'm curious):

1) Are labels etc. really that greedy or are artists making a fuss?

2) Why do they hate spotify so much? From what I can see, Spotify seems to have paid considerable amounts of money out to artists compared to some other mediums, such as YouTube or Radio.

Answer 1

In the age of the internet - a platform in which you can be exposed to millions at once, why do record labels still exist?

Record labels are basically your management staff and a bank. They pay advances, money to help you record your songs. They also help with publicity. There are hundreds of songs published everyday on SoundCloud and other sources that really, you'll get lost, you WON'T be exposed to millions. They help book big stadiums that you might not be able to do by yourself.

A record label can also help you get on the radio (which won't give a random musician play time). A record label helps with distribution of CDs (which are still a big money maker). Basically, they do the behind the scenes things and let you focus on your music, your social media presence, and connecting with your fans.

Are labels etc. really that greedy or are artists making a fuss?

Labels typically take 100% of revenue until your advance it payed off, then split 85/15 with the artist (that, of course, depends on your contract). Take that how you will.

Why do they hate Spotify so much? From what I can see, Spotify seems to have paid considerable amounts of money out to artists compared to some other mediums, such as YouTube or Radio.

While Spotify does pay more than YouTube and radio (radio pays only the songwriters), it's not so much hate about the service it's self, but their model ("freemium"). Artists and labels would like to have more people on the paying platform because they get more royalties from paying accounts than from free accounts, (but they'd much rather have people use the free accounts on Spotify than have them pirate the content). But when Pharrell's "Happy" made $2,700 with 43 million streams on Pandora (Source), you can see why they are mad. Streams and downloads do not make up for the lost revenue of physical sales.

Answer 2

Completely agree with much of @Jacob Swanson's answer to why labels exist: the need for actual human beings promoting, distributing, marketing your music doesn't go away with technological advances (on the contrary one might argument).

One note from me that might answer Bonus Q #1 is about the royalty split mentioned: thousands of labels do 50/50 splits on net profits (also on streaming income) which is substantially more fair to artists than in a 85/15-scenario (even though advances or services might be so substantial that a 85/15-split is fair too).