Music Knowledge
How Do Record Label Deals Work?
Record label deals explained: advances, royalties, recoupment and ownership — everything artists need to understand before signing.
A record label deal is a contract where a label invests in an artist in exchange for a share of income and usually ownership of the recordings. Understanding advances, royalty rates and recoupment is essential before signing.
How deals are structured
Labels advance money for recording and marketing. That advance is 'recoupable' — repaid from your royalties before you receive income. Many artists are surprised how much must be earned back first.
Royalties are then paid as a percentage of income, calculated after various deductions negotiated in the contract.
Advance and recoupment
An advance is a loan against future royalties, not a gift. Marketing costs and packaging deductions often also come out of royalties, delaying actual payments.
Understand which costs are recoupable from your share and which the label carries.
What you're giving up
In traditional deals, the label owns the masters during the term, and you grant them exclusive recording rights. Termination and reversion terms determine when you get your music back.
Compare with modern alternatives: distribution deals and licensing agreements can give you funding and reach while keeping ownership.
Key Points
- Advances are recoupable loans
- Royalties are percentage-based
- Labels often own the masters
- Understand reversion terms
Frequently Asked Questions
What is a good royalty rate?
Rates vary widely by deal type and platform. Compare across deals and have a music attorney review terms.
What does recoupable mean?
Costs are recovered from your royalties before you're paid. Only after recoupment does the artist typically see income.
Can I keep my masters in a label deal?
Increasingly, yes — negotiate licensing instead of transfer, or schedule reversion after a term.