What’s in a Recording Contract?

For many artists, signing a recording contract feels like the golden ticket to making music professionally. But before putting pen to paper, it’s important to understand what’s actually in that contract. Recording agreements are full of legal terminology, but at their heart, they’re about one thing: the exchange between the artist and the label. The artist grants them the label the right to work with, and profit from, their music, and in return they receive resources - be it money, marketing, distribution, and industry access.

Let’s break down the key terms in simple, practical terms.

1. Term - How Long The Deal Lasts

The term sets out how long the contract lasts. This isn’t always a fixed number of years - it’s increasingly based on the number of albums or projects delivered by the artist. Historically, deals used to be measured in albums, with the option to extend for more if things go well. However, increasingly the industry is moving towards the number of copyrights (songs) delivered, with a minimum and maximum. Hitting certain parts of the term, be it measured by songs and albums, or length, is often when additional advances are triggered.

Example: A deal might say the initial term covers 1 album, with the label holding 3 separate one-album options. That could keep the artist tied to the label for up to 4 albums if the label chooses to extend.

2. Exclusivity - Who the Artist Can Record For

Almost all recording contracts are exclusive, which means the artist can only record and release music for that label. Even if the artist wants to feature on a song by their friend, they’ll need the label’s permission. It’s the label's way of making sure your creative output benefits them first.

Example: If you sign with a label, you can’t also release an EP independently on Bandcamp without permission — even a feature on a friend’s mixtape might need written approval. This often also refers to side-projects and anything that involves your name being publicly tied to it.

3. Advances - The Upfront Money

An advance is a sum of money a label gives an artist when they sign the deal. It’s not a gift, but rather a loan against your future earnings. The label expects to make that money back (and more on top) from your share of the income before you see any profits.

Example: A new artist might receive a $50,000 advance to cover living expenses and recording costs. They won’t see more royalties until the label has earned back that $50,000 from sales/streams.

4. Royalties - The Share of Sales/Streams

Royalties dictate how the money earned by the music is divided up between artist and label. Royalty rates vary hugely - depending on the label, status of artist, resource put into the project and all sorts of other factors. These rates can also differ depending on region, and also include variations for physical or digital royalties. Look out for clauses concerning deductions for breakages.

Example: A contract might offer the artist a 25% royalty rate on U.S. physical CD sales, but only 20% on international sales, and a different rate again (say, 18%) for streaming revenue.

5. Territories - Where in the World

This defines where the label has the right to exploit the artist's music. Sometimes it’s just one country, but more often it’s “the world”. That means the label controls the artist's music globally, even in places they don’t actively promote it. Often, labels have partners in other territories, who may receive either an automatic license or a first option.

Example: An artist might sign a deal granting the label worldwide rights. If a TV show in Brazil wants to use their song, the request still has to go through the label — even if the label has no team based there.

6. Recoupment - Paying Back the Label

This is one of the most important (and most confusing) terms. All the money the label spends on the artist - advances, studio time, marketing, music videos - comes out of the artist's share of royalties. This means you don’t start earning until the label has recouped its costs. It can take years before artists see actual money in their pockets. Every contract will dictate which costs are recoupable, and often what percentage of those costs. There should also be a term concerning cost approvals, and which of those the artist has to have visibility over.

Example: If the label spends $100,000 on recording, videos, and marketing, and your royalties add up to $120,000, you’ll only get paid once that $100,000 has been recouped — leaving you $20,000. Remember, in a royalty deal, you only recoup at your royalty rate and not the overall earnings of the record.

7. Ownership - Who Owns the Music

In most traditional deals, the label owns the masters - the final sound recordings. That means they control how your songs are used in films, commercials, or re-releases. Some modern deals, especially with indie labels, allow artists to keep ownership and license the recordings instead. Ownership is a major bargaining chip for your long-term career.

Example: Taylor Swift’s original masters were owned by her former label, which meant she had no control over how those recordings were sold or licensed. That’s why she began re-recording her catalog.

8. Creative Control - Who Decides What’s Released

Labels often have a say in what songs go on the album, when the album comes out, and how it’s marketed. Some contracts give artists more freedom, but many reserve final approval for the label. That’s why fights between artists and labels over “the single” are so common.

Example: An artist may want to release a politically charged track as the lead single, but the label might insist on pushing a more radio-friendly love song instead.

9. Options - Future Albums or Recordings

Most contracts give the label the option to keep the artist for more albums. This is good for them; it lets them hold onto the artist if they’re successful. For the artist, it can mean being locked in for years at royalty rates that don’t improve unless you renegotiate; therefore, many deals include a rise in royalty rates as the deliverables progress and options are picked up.

Example: A deal might say “1 album firm, with 2 options.” If the first album sells well, the label can choose to extend the contract for the next 2 albums on the same basic terms.

10. 360 Clauses - A Share of ALL Income

A modern trend is the 360 deal. This means the label takes a percentage of all income generated by the artist - not just music sales, but also touring, merch, endorsements, brand deals, even acting gigs. Labels increasingly argue that since they help build your career, they should share in all the income streams.

Example: If you land a Nike sponsorship worth $500,000, a 360 clause could entitle your label to 10–20% of that deal, even though they had no role in negotiating it.

11. Audit Rights - To Check Financial Accounts

Deals should always include a section concerning how often an artist is entitled to audit the financial accounts of the label that concern their copyrights and the overall spend of a project. When requested, the label or their accountants should be able to deliver detailed accounts showing income and outgoings.

Example: A contract may state the artist can audit the label’s books once per year. If the artist hires an accountant and discovers underreported royalties, the label must pay the shortfall plus interest

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Final Thoughts

There’s a reason that recording contracts are pored over for hours by legal minds prior to signing - they have significant long term implications for artists and labels.

The label provides the artist with money, expertise, and access, and in exchange, they take some level of ownership and control. A solid recording contract can form the foundations of a successful partnership - so it’s crucial that both parties understand what they’re agreeing upon.

Before either party signs anything, they should always get independent legal advice. What costs you a little in the short term can see you miss out on far more further down the line. The excitement of a record deal is huge - but knowing what’s in your contract could be the difference between a long, sustainable career and years of frustration.