Record companies have always made money selling recordings, but it’s a high risk business. Approximately 90% of the records that are released fail to make money.
Record labels make money when their music is purchased or licensed for use. When an artist gets signed to a label they get an advance to make a record. The record is released by the label who keeps all the money until they have recouped their costs: the advance, recording costs, promotion, and legal fees. After costs have been covered, the label then keeps a percentage of record sale profits.
As an artist, getting signed means you now have capital and support to build your album. It’s not the end of the story. Work hard and make sure your record is in that successful 10%.
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