CMU:DIY Guides Record Industry Library

Record Deals Explained

By | Last Updated: January 2023

Here we go – find out how record deals work and the different options artists have when releasing recorded music – in five easy steps.

You can also download the slides that accompany the lecture version of this guide and download the free ‘Deals Guide’ from MMF and CMU. Plus check out more record industry resources available elsewhere in the CMU library.

#01: As a frontline artist’s career progresses they will start to work with more business partners.
Frontline artists – also sometimes called ‘featured artists’ – are the musicians who are up front on stage, who build a brand and release music under that brand, and who seek to grow and monetise a fanbase.

Every frontline artist sets up and runs their own frontline artist business, through which they build that brand and manage that fanbase. Frontline artists who are part of a band or group basically form a partnership business with their bandmates.

During the early stage of their career – what we call the DIY Phase – a frontline artist doesn’t usually have any focused business partners, meaning they are responsible for running all aspects of their artist business. Although that doesn’t mean they have to do all of the work.

Task one is usually to find some creative collaborators, probably other DIY Phase music-makers and creators who are growing their own artist or creator businesses. Artists and creators who collaborate in this way can share the workload, utilise each other’s skills, and access each other’s audiences.

When it comes to recorded music, today frontline artists usually initially release tracks via their own artist businesses. Which means that – among many other things – that artist business is now operating as a label.

The artist then hires the services of what we call a DIY distributor which will get their recordings onto all the digital music platforms. The distributor either charges an upfront free or takes a commission on any monies paid by the digital services, or a combination of the two.

Getting the music onto the digital platforms is actually the easy bit – the challenge is getting people to play the music. That requires some clever marketing – which, at the DIY Phase, usually involves a combination of live activity, digital activity and collaborations.

There are music marketing tools, platforms and agencies that an artist can utilise to help with this process – although there is usually a cost associated with accessing those services, so realistically most DIY Phase artists can only afford to use some basic tools.

Getting people listening to the music – and the wider fanbase building process underway – during the DIY Phase is the single biggest challenge for any aspiring frontline artist. But – with the right tools and tactics, and a bit of good luck and support from the right people – it can be done.

As the frontline artist’s career progresses and their frontline artist business starts to grow, they are going to want to access the support, resources, expertise, contacts and – possibly – investment of focused business partners in the music industry.

The key business partners will work for free in return for involvement in the artist’s rights and revenues. Though to do that, the business partner has to be excited about the artist and their music and believe that together they can achieve some commercial success.

Among the business partners that can help with putting out recordings, running release campaigns and growing the fanbase are artist managers and higher level distributors that also offer marketing support. The other option is to sign to a record label.

#02: Artists work with labels to access a wide range of services and support.
Traditionally a record label was a frontline artist’s primary business partner in relation to their recorded music – although the label’s investment and marketing can also help grow the wider artist business and therefore boost all of the artist’s activities and revenue streams.

What support and services a label brings to the table depends to an extent on the specific label and the specific record deal. However, most labels will support their artists in the following ways.

A cash advance. Labels usually provide artists with some upfront cash. How much money varies greatly, depending on the specifics of the deal and how much cash flow the label itself has access to.

For early career artists in particular, this cash injection is really useful for helping to grow the wider artist business. It might also be what allows the artist to give up the day job and focus on their music full-time.

The recording process. Labels usually take the lead on the recording process, ie getting the artist into the studio; hiring producers, sound engineers and session musicians; possibly connecting the artist with songwriters; and inputting on the creative process.

The label will also put together a plan for releasing the music that has been recorded; and will create and manage all of the visuals, branding and data that accompanies the release.

Artists and their managers will also be very involved in this process too, of course, and the specific role of the label will depend on the expertise, resources and preferences of the artist and their management team.

Indeed, in some cases, the music will already have been recorded before the label even gets involved. When that happens, the label’s role may be more about covering some costs and managing the actual release of the record.

Distribution. The label will distribute the artist’s recordings to all the digital platforms, including download stores, streaming services, user-generated content and social media platforms, and so on.

As noted above, artists can access basic distribution via a DIY distributor and the label will be delivering the music to all the same platforms. However, the label might have better deals and stronger relationships with those platforms which will benefit the artist.

If there are going to be any physical releases, the label will arrange the manufacture of the discs, and then also get those to market, ie into record shops and onto mail-order sites like Amazon. The label may also oversee any direct-to-fan sales of physical product.

Marketing. This is perhaps the most important role of the label. As noted, getting music onto the digital platforms is easy, getting people to listen is much harder. Labels will provide a range of marketing support – utilising either in-house marketing teams or hiring (and paying for) external marketing agencies, or sometimes a bit of both.

This work includes pitching music into the digital platforms and playlists; creating content for social media; planning and paying for social media and other digital advertising campaigns; and pitching the music to radio, press, podcasts, TV, clubs and so on.

It might also involve things like working with online influencers, buying ads in media or on billboards, and just generally seeking support from media, industry, brands and elsewhere.

Some labels have strong brands themselves and their own loyal fanbases, and any artist they sign then gets the benefit of that. So, the label’s audience – as well as key people in media, industry and elsewhere – will check out the artist’s music just because it’s being released by that label.

Data and analytics. The is very much linked to marketing. Today the music industry receives a flood of data – from digital platforms, social media, direct-to-fan sales, marketing emails, and so on – that tells us how fans are interacting with artists and their music.

We can use this data to profile the fanbase, test the effectiveness of marketing activity, target fan messaging and, sometimes, profile the individual fan.

Artists should have access to lots of data about their own fanbase. However, a label has access to data from across its roster. Which means each artist benefits from lessons learned and audiences built via all of the label’s other artists and marketing campaigns.

And given that digital marketing is basically a trial and error game – ie you create some content, do some communications, maybe spend money with the social platforms, and then check the data and see if it worked – labels often have a head start, because they already know what kind of activity worked for similar artists in similar markets on their most recent campaigns.

Sync and other opportunities. Beyond getting people streaming and buying records when music is initially released, there are – of course – other ways to generate money from recordings, in both the short and long term.

And that includes persuading TV, film and gaming companies, and brands and ad agencies, to synchronise the music into their audio-visual productions, and in doing so buying a sync licence. A good label is always looking for other ways to get recordings used and to generate more income.

#03: A label will want a number of things in return for its investment
The label usually provides the advance and all of these services free of charge. So what does it want in return?

Again, that depends on the specific label and the specific deal, although most labels will be looking for similar things from each artist.

Exclusivity. A label is usually an artist’s exclusive business partner when it comes to their recordings, which means the artist can only make and release recordings with that label.

The exclusivity arrangement usually runs for a certain number of releases, so for example the artist may be obliged to deliver three albums to the label and can’t release recordings with anyone else until that is done.

The label isn’t committed to release all three albums, but the artist is committed to provide them if the label wants them.

The exclusivity arrangement may only apply to certain countries, although global deals are now very common.

If the artist wants to make and release recordings with other artists and labels while they are still bound by the terms of their record deal, they will need to get their label’s approval and likely share any income generated.

Copyright ownership. Record labels are traditionally copyright owning businesses, meaning a label wants to own the copyright in any recordings it releases (though not the songs contained in those recordings).

It might be the copyright owner for life of copyright, so it will control the recordings for as long as they are protected by copyright. Or it might own the copyright for a set time and then the rights transfer to the artist.

Not all labels insist on copyright ownership. An increasing number do licensing deals where the artist owns the copyright in the recordings, but grants the label an exclusive licence for a set time period. During that time period, the label acts as if it is the copyright owner.

Whereas in the past record deals generally involved the label owning the recording rights for life of copyright, today fixed-term deals and licensing deals are much more common, especially when negotiating with indie labels, but also now with the majors too in many cases. 

Revenue share. Once a recording has been released, the label will seek to monetise that recording in as many ways as possible. Any money that comes in will then be shared between the label and the artist.

Quite how this works will depend on the deal. Under conventional record deals the artist would usually get a minority share of any income. Today that might be 20-25%, though in the past it would have been less.

However, some indie labels do a 50/50 split and there are some deals where the artist actually gets a majority of the money.

The rate may also differ depending on revenue stream, so an artist might get 25% of streaming income but 50% of any sync income.

The label will usually be able to recoup some of its upfront costs out of the artist’s share of future income. That will nearly always include the cash advance, but possibly some other costs too.

Some indie labels do simpler profit share deals, where all the costs are recouped out of future income – though all the income, not just the artist’s share – and anything that comes in after that is then split between the label and the artist, usually on a 50/50 basis.

Ancillary revenues. Traditionally record labels only got involved in an artist’s recorded music and therefore only shared in the artist’s recording revenue streams – even though the label’s investment and marketing might boost the artist’s wider business and therefore their other revenue streams.

However, some labels will also seek involvement in some of the artist’s other revenue streams as well. This might mean the label actively getting involved in those other revenue streams – so they also become the artist’s publisher or merchandiser – or the label might simply take a cut of monies the artist generates with other business partners.

This became more common in the mid-2000s when – during the initial shift from physical to digital – recorded music income across the board was in decline and labels said they needed to share in other revenues to justify their upfront investments, especially with new talent deals.

As recorded music has gone back into growth since the mid-2010s, many artists and managers have tried to remove ancillary revenues from record deals, though there can still be reasons why including them in a record deal makes sense for both parties.

As you can see, there are many different elements to a record deal. Any artist negotiating a deal that involves a multi-year commitment and/or sees a label take control of any copyrights should always seek formal independent legal advice before signing anything.

#04: Artists have a number of choices when picking a business partner to work with on their recordings.
As we noted above, today most new artists initially release their own recordings, which basically means the artist operates their own label and then hires the services of a DIY distributor to get their recordings onto the digital music platforms.

As the artist’s career progresses they are going to want to secure more support around their releases and marketing, which makes working with a label an attractive option.

Though some artists continue to release music via their own label instead, usually looking to their management and a higher level distributor to provide the kinds of services a label would otherwise provide. Some distributors will also offer cash advances.

Some labels – including all three majors – also operate distinct distribution or label/artist services divisions which work with artists who are releasing music in this way. And some labels themselves work with some artists on more of a distributor basis – or might form a joint venture with the artist’s own label and then collaborate on their releases.

And even when an artist has a more conventional relationship with a label, there are different kinds of record deals. Working with a major label versus an indie label will usually be a different experience, as will working with a big label versus a small label.

A few years ago CMU Insights worked with the UK’s Music Managers Forum on the ‘Deals Guide’ which identified at least ten different options for artists when it comes to how they release their recordings, from the DIY distributor option through to signing with a major record company.

#05: The basic rule is that the more services and support you access the more rights and revenues the label will want.
When it comes to how artists work with business partners on their recordings, there are more choices today than ever before. Which is a good thing. Although it also means that artists – usually guided by their manager and lawyer – have to decide which options are best for them.

The key two questions an artist should ask when making that decision are as follows: what do you need from your recordings business partner? And what are you willing to give up in terms of rights and revenues?

Some artists prefer to release music through their own labels – working with a distributor – because it means they can keep control of all the copyrights in their music. Though, as noted, many labels will now also work on a licensing basis, or take copyright ownership but then allow the rights to transfer over to the artist after a number of years.

The general rule in this domain is: the more an artist wants from a business partner in terms of advance, marketing and other support, the more they are going to have to give up in terms of rights and revenue.