The main types of record deals are traditional recording agreements, label-services and licence deals, distribution-only deals, and deals that share more than recordings. They differ in who funds the music, who holds the rights and how long the artist is tied in.
Where each deal sits among labels, publishers and royalty flows is mapped in how the music industry works, and this page narrows in on the contract itself.
The main structures at a glance
A record deal is a trade of money, rights and time. A label or service provider funds some or all of the making and release of music, and in return it takes control of the recordings for a period, a share of the income, or both. The UK Competition and Markets Authority grouped the options open to artists into broad structures: traditional recording agreements, service deals with artist-and-label (A&L) providers, and distribution-only agreements with do-it-yourself platforms.
| Deal type | Upfront investment | Who usually holds the recordings | How the provider is paid |
|---|---|---|---|
| Traditional recording agreement | Significant, often a recoupable advance | Often the label, sometimes for an extended period or in perpetuity | A royalty on revenue, or a share of profit |
| Label-services or licence deal | Smaller, with smaller advances | The artist, who licenses the recordings | A share of revenue, with higher royalties for the artist |
| Distribution only | Typically none | The artist | A fixed fee, with all revenue going to the artist |
| Deal covering many income streams | Funding tied to a wider share | Depends on the contract | A cut of earnings wider than recorded music |
The table summarises structures described in the CMA music and streaming report and the Arts Law recording agreement fact sheet; individual contracts vary and the boundaries between structures blur.
Traditional recording deals
In a traditional deal the label provides high-touch A&R, marketing, promotion and distribution. The CMA notes that these deals typically involve significant upfront investment by the label, which means higher advances for an artist who risks being unrecouped if the music does not succeed. The artist is asked to make long-term commitments and sometimes to assign the copyright for an extended period or in perpetuity.
The artist is usually paid a royalty. Arts Law, an Australian legal service for artists, says the label will usually expect exclusivity, meaning it is the only source of the artist’s recordings for a certain period, and will typically insist on owning the copyright in the recordings it funds. Recording agreements also commonly give the label a series of options to extend the deal for another album. Independent labels often favour a “net receipts” arrangement instead, which Arts Law describes as essentially a profit share after agreed costs come off the top.
Money arrives as an advance. Arts Law explains that an advance is a “loan” against the artist’s royalties, recoupable only from recording royalties and neither repayable nor interest-bearing. Recoupment shapes everything an artist sees: the CMA states that only when the upfront commitment is fully recouped does the artist start to receive earnings directly from their royalties. Its footnotes list the usual recoupable costs as advances, recording costs, video costs, television advertising costs, support of tours and legal fees.
Headline royalty rates are not take-home pay. Using data from the major labels, the CMA report found the average royalty rate before recoupment for UK artists signed to majors increased slightly from 25.0% to 26.3% over the period it studied, and that figure is calculated before the advance and recoupable costs are taken back out.
Label-services and licence deals
A middle path has grown up between a full label deal and going alone. In the CMA’s description, service deals with A&L providers let the artist retain, or license, their copyright while receiving marketing and A&R services that were historically available only in traditional agreements. These deals typically involve smaller advances and less risk for the provider, but they tie artists in for shorter periods and give them, as the copyright holder, higher royalties from the revenue earned, according to the regulator’s report.
The same idea appears in label contracts as a licence. Arts Law notes that in independent deals, and increasingly with online-based labels, an artist can negotiate to keep the copyright and recordings and instead license them to the label, so that if the label falls over or the agreement’s term ends, control of those recordings comes back to the artist. Whether a deal assigns ownership or only licenses it is a question of music copyright, and it is usually the most consequential line in the contract.
Distribution-only deals
A distribution-only agreement is the lightest structure. The CMA says these deals offer distribution to streaming services plus low-touch, technology-driven marketing, and typically involve no upfront investment, so the provider carries no risk. All revenues go to the artist, with the platform charging a fixed fee, on an annual or monthly basis, for its services, as set out in the CMA analysis.
The trade-off is that nobody funds recording, video or promotion, so the artist carries those costs and the marketing work. Contracts that decide who gets paid from a stream sit alongside separate models that change how listeners pay in the first place, such as stream to own music.
Deals that share more than recordings
The CMA describes how some traditional deals are set up as a 360 deal, where the label takes a cut of all the artist’s earnings, wider than recorded music. It adds that income from live performance and merchandise can sit outside the label deal or be included in these 360 degree deals.
Arts Law traces the idea to the digital era, when several labels tried to move to a 360-degree standard deal, funding recordings and tour support in return for a share of touring, sponsorship and endorsements, and possibly even publishing. It adds that artists have generally resisted these attempts, and that labels may also seek exclusive rights to monetise an artist’s social media channels. Each extra income stream handed over should be weighed against what the label actually provides in return.
Terms to check before signing
Whatever the type of deal, the same questions apply. How long does the term run, and how many extension options does the label hold? Arts Law notes that labels generally want to sign artists for the world, although territory-by-territory deals are sometimes possible, and that labels usually insist an artist agrees not to re-record tracks released on the label for a period. Which costs are recoupable, and against which income? Who owns the recordings at the end?
For artists in the United States, the US Copyright Office explains that the Copyright Act permits authors or their heirs, under certain circumstances, to terminate the exclusive or nonexclusive grant of a transfer or license of copyright, long after the original grant, to regain the previously granted rights. Rules differ elsewhere, and work made for hire is excluded.
This page is general information, not legal advice. The specifics depend on the contract and the territory, and Arts Law notes that these agreements usually require extensive negotiation and competent legal representation, so a qualified music lawyer is worth consulting before signing.
Frequently asked questions
What is the difference between a record deal and a distribution deal?
A record deal usually involves the label investing in recording and promotion and taking rights or a revenue share in return. A distribution deal only delivers finished music to streaming services for a fee, with the artist keeping the revenue and the costs.
What does recoup mean in a record deal?
It means the label gets its upfront spend back from the artist’s royalties before the artist is paid royalties directly. Advances and certain recording and promotion costs are typically treated this way.
Do artists always give up their masters?
No. Traditional deals often put ownership with the label, while licence and label-services deals commonly leave it with the artist, who grants the provider rights for a limited period.
Why would a label want a share of live and merchandise income?
Labels argue that funding recordings and tour support builds an artist’s career across several income sources, so they ask for a slice of those too. Artists decide whether the extra support justifies the cost.
