the first option is the recommended way.
you can usually get by with the second option if your metatags are well maintained.
If you are just starting with plex and want to reorganize your files anyway I recommend the following approach
Music
Artist
Albumartist - Albumtitle
1. trackartist - tracktitle.mp3
2. trackartist - tracktitle.mp3
...
and for a multi-disc album:
Artist
Albumartist - Albumtitle
Disc 1
1. trackartist - tracktitle.mp3
2. trackartist - tracktitle.mp3
...
Disc 2
1. trackartist - tracktitle.mp3
2. trackartist - tracktitle.mp3
...
do note the distinction between Albumartist and Trackartist.
There are separate metatags for these. You need to fill both.
This then provides a means to deal with sampler albums:
The typical sampler simply uses as Albumartist Various Artists
And that is what you should use too, since Plex treats ‘Various Artists’ a little different. (the standard album sorting mechanism is by release year, descending whereas for Various Artists it is alphabetically, ascending)
If you are on Windows, I recommend you to use mp3tag. It can read and write metatags for all the common music fileformats + mp4/m4v
It also supports deriving metatags from folder/filenames and vice versa, which is excellent for bringing your collection into shape.
