Why Do Record Labels Keep Granting Sub Record Labels? And Why Do Artists Sign Other Artists To These Labels?

The music industry is no longer as profitable as it once was. Think about it.
Let’s take the record label G-Unit Philly as an example; founded, owned and run by Tony Yayo. G-Unit Records Philly operates under G-Unit Records, which operates under Shady Records, which operates under Aftermath Entertainment, which operates under Interscope Records, which operates under Interscope Geffen A&M, which operates under Polydor Records, which, finally, operates under Universal Music Group.
There’re SIX different record labels between G-Unit Philly and Universal. SIX. What is the point? Why do major record labels grant sub labels to their artists? Sub labels keep being created down the chain, and the further you go, the less money the actual major label makes. If, for instance, Tony Yayo was to sign an artist to G-Unit Philly who, just happened to go viral on the internet, dropped a debut album and pushed a million units in a week, Tony Yayo would be rolling in green, 50 Cent (owner of G-Unit) would be rolling in green, a few more people further up the chain might make a healthy return but, Universal would only make a penny (sarcasm).
If you look at the G-Unit Philly roster, he’s (Tony Yayo) signed a bunch of no-bodies. No one knows who they are, no one has ever heard their music, they probably don’t even a YouTube channel let alone radio spins.
Even if you take bigger examples. If you look at Rick Ross and his Maybach Music Group; he’s got a pretty relevant roster – Meek Mill, Wale, French Montana and Omarion. Meek has a million plus downloads on his mixtape, French has singles in the million plus unit shift range, Wale is doing a lot of projects with a lot of other up and coming artists (Chief Keef, for example) and Omarion had a pretty healthy run a few years ago. But if any one of those artists was to drop an album, not a single one would push more than a 100k in the first week, or more than 350k by the end of a 12 month period.
So, if you think about the running costs for a record label plus the advance you’d have to pay per artist you sign (also taking to consideration the fact that the advance is usually 500k to about 1million; the sort of money which is almost never re-accumulated by the artist through record sales), why do major record labels dish out sub labels like it’s something to be proud of, business-wise? There’s no money in it from what I can see.
From what I understand, money accumulated through tours are mostly diverted into the artists’ pocket, (which is why they tend to tour a lot) and the actual agency which organised the whole tour. Also, sales through merchandise, books, films and other business ventures, don’t go to the major label as the major label only has royalty rights to the actual audio content that the artist produces.
Thank you for your time.

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One Response to “Why Do Record Labels Keep Granting Sub Record Labels? And Why Do Artists Sign Other Artists To These Labels?”

  1. MCXD *New Mixtape* says:

    so they can do what they want and still be part of the big label, money isn’t everything man.

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