Recording contracts are commonly referred to as record deals in the recording industry. These deals are legally binding contracts between the artist and the record label. When artists sign up with a label, they commit to certain responsibilities, as does the record label. Record labels can range in size from a major label, which has a large number of sales per year and represents many artists, to an independent label, which is not associated with a major label and usually has a small roster of artists.
Production contracts are contracts with producers as opposed to labels. Producers will make record projects with artists. Once these projects are completed, major labels will make an agreement with the producers to develop the artists themselves. The major label will, however, release the project under its own label. Oftentimes, once the major label releases the projects, producers will split the profits with the artist. The producer may choose to keep the original works themselves.
Distribution contracts are most commonly known as pressing and distribution deals. Basically, these deals are given to artists who, through the press, the Internet or other means, have created a following for themselves. Sometimes independent labels also can receive distribution contracts. The band or label will then receive an offer from a major label, and the major label will be responsible for making the artist’s or label’s work more known and sold in more venues. Major labels can put pressure on retail outlets or online distributors such as iTunes or Amazon. The artist or label generally, however, pays for costs such as promotional materials, videos, equipment, etc. In this deal, the artist or independent label will retain ownership, but the distribution label will take a percentage of the profits. Oftentimes, these types of deals are not profitable for artists who do not know how to promote themselves.
The 360 contact is a sharing contract, where artists will receive an advance from the label, and then the label and the artist will share the profits, including record sales, profits from tours and profits from merchandising. The label will treat the artist as an investment, but this type of contract is very fluid.
The major label deal is basically the holy grail of record deals because the label will be responsible for all costs associated with the distribution, creation and promotion of the artist and record. Plus, most major label contracts provide artists with advances for other costs, such as costumes and equipment. Once signed, the major label will own the rights to the artist's work, and the artist will generally only receive a small royalty on his music sales since he is a new artist.