Arcade Records was formed in mid-1972 by Laurence Myers of the Gem-Toby Organisation.

Myers had previously been a chartered accountant and co-founder of Goodman Myers & Co., who's key client was record producer Micky Most. He later represented, amongst others, The Rolling Stones, The Beatles’ Apple Corp., The Animals, Herman’s Hermits, The Kinks, Led Zeppelin and Donovan. In 1970 he departed the practice and formed a group of companies, managing the likes of David Bowie, Gary Glitter, The New Seekers, Alan Price, The Tremeloes, The Sweet, Sailor, Lionel Bart and others.

Meanwhile, following the split-up of The Seekers, band member Keith Potger was in search of a new venture and created The New Seekers. He became a co-founder of the new group's management company the Toby Organisation, launched in London in February 1969, in partnership with David Joseph a former television producer from Australia. In June 1972 the Toby Organisation joined forces with Laurence Myers' Gem companies to form the Gem-Toby Organisation

In July 1972 David Joseph relocated to California to set up a Gem-Toby office in Hollywood. Glenn Wheatley, an ex musician of Australian bands The Masters Apprentices and Bay City Union and tour manager of The Mixtures and The New Seekers, was selected by Joseph to become joint vice-president of the Gem-Toby Organisation's USA office. Wheatley was joined by vice-president Eileen Bradley, who had previously worked in New York with Connie de Nave before moving to Los Angeles in 1970 to become the West Coast editor of a popular American teen magazine. The skills of Tony Barrow, the New Seekers' publicist in the UK, were also useful in the development of the company. In the early '60s Barrow had been head of the Press and Publicity Division at Brian Epstein's NEMS Enterprises.

By mid-August 1972 Myers' company had formed Arcade Records in the UK. It was the first European record label to employ the power of TV advertising, using a sales methodology already adopted by the Arcade Records' distribution company William Levine Ltd. The first compilation albums on the label reached high spots in the UK charts and over sixty "Best Of" style compilation recordings were produced by Arcade Records, including an Elvis Presley greatest hits album which at the time was the one of the UK's biggest selling single-artist compilation albums ever.

With the Gem-Toby Organisation providing the "GTO" acronym, Myers later formed GTO Films in 1973, sharing in the success of the film 'Fatal Attraction' and created GTO Records in 1974, with a roster of artists including Donna Summer, Heatwave and Billy Ocean. In the eighties Myers also formed Gem Records, the label of archetypal punk band, The UK Subs.

Arcade Records became part of the Benelux company "Arcade" in 1979. Herman Heinsbroek, vice president of CBS Music (Benelux) was hired as director of the newly-formed Benelux company Arcade Music in 1979, which became "Arcade". From 1983 to 1998 Heinsbroek was company chairman of "Arcade", which continued the tradition of compilation recordings, overseeing the company's sale to Wegener in 1995.