Claiming to be the first CD-only independent record label in the United States, Rykodisc was founded in January 1984 in Cannes, France,[1] by Arthur Mann, Rob Simonds, Doug Lexa and Don Rose.

The name "Ryko," which the label claimed was a Japanese word meaning "sound from a flash of light," was chosen to reflect the company's CD-only policy.

In the late 1980s, however, the label also began to issue high-quality cassette / vinyl and MiniDisc versions of many releases under the name Ryko Analogue.

[1] The label subsequently saw notable successes in the CD reissue industry, as artists such as Elvis Costello, David Bowie, Yoko Ono, Frank Zappa, the estate of Nick Drake, Nine Inch Nails, Sugar, Robert Wyatt, and Mission of Burma allowed Rykodisc to issue their catalogs on CD.

In 1998, Chris Blackwell left Island Records and bought Rykodisc for a reported $35 million as a means of acquiring music marketing and distribution expertise for his new venture, a media company called Palm Pictures.