What Is a Record Label?
There is no such thing as a typical record label. They are all different. There is, of course, a spectrum, which at one end has the “major” labels like Sony and Universal, and on the other end, is the one-person dorm room operation, pressing up CDs for their friend’s band. In between, there exist the majority of labels. Most are smaller than the majors but bigger than the guy in the dorm room. These labels are often collectively referred to as "indies,” short for “independent” labels.
Any label that is not distributed by a major distribution company is considered an indie. Within this large category, it is important to distinguish between established, professional indies and those dorm-room labels, which are really hobbies. This is not to say that the latter aren’t important or relevant. They are, and in fact, some of the majors of today were started in settings not much more grandiose than a dorm room. Some of the most successful labels out there now actually were started in dorm rooms.
There are four major labels: Universal, EMI, Sony/BMG, and Warner Music Group. Underneath each of these parent companies are many labels that are distributed (that is, have their records put in stores) by the above companies’ proprietary distribution arms. For instance, Capitol records is owned and distributed by EMI (which is a British company). RCA (home of Elvis Presley) is owned and distributed by Sony/BMG, which is a German company. Columbia, which released, among many others, records by Miles Davis and Bob Dylan, is owned and distributed by Japan-based Sony. Even Reprise, which was started by Frank Sinatra, and releases records by great artists such as Neil Young and Green Day, is owned by Warner Music Group. It’s all a bit complicated, and kind of irrelevant. The majors all compete for the greatest market share. They try to be the one that sells the most records, and trade the title of "holder of greatest market share" back and forth every couple of years.
The majors are similar in that they are all multinationals (meaning they run their businesses in countries throughout the world), they all have their own distribution companies, they all have their own publishing companies, and they all have massive back catalogs of titles that they continue to sell into the marketplace. These individual elements combined under one company's roof are very potent and ultimately distinguish the label as a “major.” Any record company that does not fit the above criteria or is not distributed by a label that fits the above the criteria is said to be an "independent" or an "indie."
Not very long ago, there were more than four of these companies, but through consolidation, we have arrived where we are today. More than likely, there will be further consolidation. One of the majors will be bought by one of the others, and we will have three majors. Or perhaps some company outside the entertainment business, such as Apple, will buy one of the majors, thereby radically changing the landscape.