The core trade: funding for rights
A label advances the costs an artist cannot carry: recording, marketing, video, radio and playlist promotion, and often an advance the artist lives on. In return the label takes ownership or long-term control of the masters and pays the artist a royalty on earnings, after recouping the recoupable spend.
The label's economics are portfolio economics. Most signings lose money; a few earn enormously; the winners pay for the rest. That is why label royalty rates look low next to distribution fees: the label is pricing the risk of every artist on the roster who never recouped, into the deal of each one who might.
What the departments do with your client's record
Between signing and release, a record passes through a machine worth understanding, because parts of its costs may land on the artist account.
- A&R signs the artist and steers the creative: producers, songs, the finished record. A&R spend on recording is usually recoupable.
- Marketing and promotion buy the campaign: adverts, playlist pitching, radio and press. Some of this is commonly part-charged to the artist account; the deal says which parts.
- Sales and streaming teams place the record with DSPs and retail; international teams and sister companies work other territories, sometimes for an extra margin on those receipts.
- Royalties and finance produce the statements your client eventually asks you to explain.
Majors, independents, and everything between
Three major groups sit at the top with global scale, in-house distribution and the biggest cheques. Independents range from serious internationally distributed companies to one-person operations; their deals are often shorter, the shares more even, and the ownership terms softer.
Between "signed to a major" and "fully independent" sits a spectrum that has become the real market: distribution deals, label services (marketing bought as a service while the artist keeps their masters), joint ventures and profit-share deals. Each point on the spectrum trades funding and reach against ownership and share. Where a client should sit depends on their negotiating position and their appetite for risk, and it changes over a career.
Reading a label from the outside
When a client brings you a label offer, the brand on the letterhead matters less than three structural questions. Who owns the masters, and for how long? What share of which receipts does the artist earn, and after which recoupable costs? And what happens on the way out: reversion, sunset terms, and whether unreleased recordings stay locked.
A label that funds properly, accounts cleanly and reverts rights on fair terms is worth a share of the upside. The lessons linked below walk the deal anatomy line by line.
Figures referred to
- Major-label share of global recorded musicIllustrative
- The three major groups account for roughly two-thirds of global recorded-music revenueIndustry market-share reports (trade press) · as of 2024
Figures marked Illustrative show the shape of the market, not a quoted rate. The lessons keep the maintained, sourced numbers.
Common questions
What does a record label do for an artist?
It funds the record and the campaign (recording, marketing, promotion, video), places the music with streaming services and retail, works it internationally, and runs the royalty accounting. In exchange it owns or controls the masters and keeps the larger share of what they earn until costs are recouped.
What is the difference between a major and an independent label?
Scale and terms. The three majors offer global reach, in-house distribution and the largest advances, priced into long, ownership-heavy deals. Independents offer shorter deals, more even splits and softer ownership terms, with less financial firepower. The middle ground (distribution and label-services deals) lets artists buy reach without selling their masters.
Why are label royalty rates so much lower than distribution fees?
Because the label carries the risk. A distributor charges a small fee and funds nothing; a label sinks recording and marketing money into every signing, and most signings never recoup. The low rate on the winners pays for the portfolio's losers.
Learn this properly
The interactive lessons on this topic, with sourced figures and live simulators: