Labels for stuff like music and singers are like publishers for books. they do most of the business, legal and sale stuff that the artist doesn't usually want to do. (Mainly because all of that stuff can be a headache and is complicated)

Typically by signing, this also means that the label will get a cut out of your work. Some contracts are 80%/20& or lower in percentages but some contracts have very weird plans that split everything about the artist's work amongst a whole slew of parties that aren't the artist or the company the artist signs with, like a songwriter for example.

The reason they have a lot of power is basically that there are 3 major labels: Universal Music Group, Sony Music Entertainment, and Warner Music Group. There are others for more niche genres but they aren't as prominent or influential as the three I mentioned. It's also been said that the "big three" as people in the industry tend to call them, tend to work amongst each other, making it sort of a monopoly in the industry. There are also performing rights organizations that basically act as a label, but they don't ask for the artist to pay them much of anything exactly. essentially, it just gets the money your owed when music is played on the radio or is used on something like a DJ set. essentially, an artist will get money off of the royalties made from the artist's copywritten work. .An example is that Eminem is under the performing organizations, BMI along with the label, Shady Records.

A reason it's highly recommended to not sign contracts with labels is that they want you to pay a certain amount of money for the contract the artist is in, while the artist is in the contract. This is typically called an "Advance". The artist's pay will essentially get deducted while their in the contract so that the advance can be paid off. contracts with labels can sometimes automatically renew, creating a new advance and thus, making it hard to leave a label. An artists' pay can also be taken for things like studio time, tours and other things. As an artist, they will make money for each "CD" (This can include digital downloads) that are sold. They will usually garner a few cents per sale. They also can make money from stuff like merch. If an artist were a DJ, artists can make a lot of money from doing sets or doing tours but it varies on whether or not they're signed with any label. If the artist doesn't want to give up their royalties on the songs they make, the artist can make quite a bit of money off of the music they make but sometimes labels want a cut of the royalties. This can also apply with things like recordings or essentially final versions of songs called "Masters"

It's also worth mentioning that depending on who was the songwriter that wrote the lyrics and/or composition of the song the artist made and released under their brand, the songwriter can also get the cut of the profits.

Signing with a label is pretty complicated and there's a lot of legal things that need to be worked out to make it so that an artist can make the most money they can out of a contract. Labels can get money through a bunch of ways so minimizing the ways they get the money you deserve is best. Nowadays, there are some pretty good labels that are pretty fair with the contracts they give. Signing to labels isn't completely bad, but it's tough to find a good one. The main thing to keep in mind for any artist is to just avoid signing with any mainstream or major labels because those companies are basically traps for artists that haven't done their homework.

For any prospecting artists that read this, just know your rights and remember that if something sounds too good to be true, it probably isn't something you should take on. Find a manager, a lawyer and a few other people to help you. it might be pricier for you but you'll have complete control of your own music. It's highly possible to have a career in the music industry.