Recording and Distribution Agreements: Labels, Distributors, and How Artists Get Paid

By Hank FasthoffJuly 6, 2026

A recording agreement determines who owns or controls the master recordings, who pays for recording and marketing, who makes release decisions, and how the artist receives recording-side revenue. A distribution agreement usually has a narrower purpose. The master owner delivers finished recordings, and the distributor delivers them to digital services, collects revenue, issues statements, and deducts the agreed fee or commission.

Writing and recording an original song gives rise to two copyright interests. The musical work copyright covers the music and lyrics, while the sound recording copyright covers the recorded performance, often called the master. A recording or distribution agreement deals primarily with the master. Publishing, co-publishing, and administration agreements govern the composition side unless the recording agreement contains separate publishing or expanded-rights provisions.

Artists often focus on the advance because they may receive it before the recordings earn revenue. An advance may be paid at signing, in installments, upon delivery, or through a recording fund. Its value depends on the terms that follow. Master ownership determines who controls and licenses the recordings. Recoupment determines which revenue the label keeps before paying additional artist royalties. The royalty base determines what the artist's percentage means. Reversion determines whether the artist regains control of the masters. Expanded-rights provisions determine whether the label receives income from touring, merchandise, sponsorships, publishing, or other parts of the artist's career.

Label Deal, Distribution Deal, or Aggregator

Traditional label agreements combine recording services, financing, marketing, distribution, and master rights. A label may pay an advance or recording fund, approve budgets, select release dates, control marketing, and own the masters for the copyright term or receive an exclusive license for a stated period. The artist usually grants exclusive recording services and receives royalties after the label applies the agreed recoupable costs.

Distribution agreements generally leave ownership with the party that delivers the recordings. That party may be the artist, an artist-owned company, a label, or another master owner. Your agreement should grant the distributor only the rights required to deliver and monetize the masters within the stated territory, term, services, and media. Some distributors also offer advances, marketing, radio promotion, playlist pitching, synchronization services, neighboring-rights collection, or other label services. Those additions can justify a higher fee or broader exclusivity, but the agreement should identify each promised service.

Aggregator agreements offer standardized digital distribution on published terms. As of the date of this article, CD Baby charges a one-time release fee and retains 9% of download, streaming, and SoundExchange revenue, 15% of revenue it collects through the MLC, 30% of social-video revenue, and 40% of synchronization revenue. DistroKid advertises annual plans, unlimited music distribution, and 100% of store earnings. TuneCore offers subscription and pay-per-release options and retains 20% of revenue from listed social platforms. UnitedMasters advertises 100% royalty retention on its paid DEBUT+ and SELECT plans, while services such as YouTube Content ID may involve separate charges and revenue shares. Review the current plan, renewal terms, add-ons, commissions, payout rules, and removal terms before choosing a service.

Master Ownership

Copyright protection begins when the sounds are fixed in a tangible medium. Under Section 201, copyright in a sound recording initially belongs to its author or authors unless the recording qualifies as a work made for hire. Performers and producers may contribute copyrightable authorship to a sound recording. Your agreement should identify the intended owner and document every transfer required to reach that result.

Section 204 of the Copyright Act requires a transfer of copyright ownership, other than one by operation of law, to appear in a writing signed by the owner or the owner's authorized agent. A label agreement should contain a present assignment or an exclusive license that identifies the covered masters and rights. A distribution agreement should identify the master owner and grant only the rights required for distribution and any additional services the parties agreed upon.

Read work for hire language carefully. Section 101 recognizes a work prepared by an employee within the scope of employment and a specially ordered or commissioned work that satisfies the signed-writing requirement and fits one of nine statutory categories. Sound recordings don't appear as a separate category for commissioned works. A particular recording may qualify as a contribution to a collective work or compilation, depending on the project and the facts. The Copyright Office has explained that the parties' agreement alone can't make an ineligible commissioned work a work made for hire. When the recording qualifies, Section 201 treats the employer or commissioning party as the author and owner unless a signed written agreement provides for different ownership. A label seeking ownership should include a present assignment in addition to work for hire language.

Classification affects copyright duration and statutory termination. Under Section 302, a work made for hire receives a copyright term of 95 years from first publication or 120 years from creation, whichever expires first. Section 203 excludes works made for hire from its termination provisions.

Advances, Recording Funds, and Recoupment

Labels customarily treat recording advances as recoupable payments against the artist's royalty account. The artist usually keeps the money if the account never recoups, unless the agreement creates a separate repayment obligation or the artist breaches a condition tied to payment.

A recording fund combines the artist's cash payment and the recording budget in one amount. Recording costs reduce the balance available to the artist. An agreement may instead pay a separate advance and let the label pay approved recording costs directly. Identify the payment schedule, budget authority, delivery conditions, and treatment of any unused recording funds.

Recoupable costs may include recording, producers, mixing, mastering, videos, tour support, independent promotion, artwork, radio campaigns, marketing, sample clearances, and other specified expenses. Some costs are 100% recoupable from the artist's royalties. Others may be shared or charged only to a particular revenue stream. Your agreement should identify each recoupable category and exclude general overhead, unrelated expenses, affiliate markups, and unapproved spending.

Cross-collateralization permits revenue from one recording or income category to recoup a balance attributed to another. Album-by-album accounting allows a successful release to earn royalties after its own account recoups. A broader clause may apply revenue from one album against another album's deficit or combine recording, video, touring, merchandise, or publishing accounts. Define which recordings and accounts are combined.

Royalty Base and Accounting

A headline royalty percentage means little without its royalty base. A 20% artist royalty produces different payments when calculated from gross receipts, net receipts, a wholesale price, or a label-defined base after deductions. The agreement should define the base for streams, downloads, physical sales, synchronization licenses, direct licenses, user generated content revenue, neighboring rights, settlements, and other master income.

Older forms may contain packaging, container, breakage, free-goods, and reserve provisions written for physical records. Apply physical-product deductions only to the transactions they describe. Digital revenue provisions should state every permitted deduction, including distributor fees, payment processing charges, taxes, actual third-party collection costs, and approved marketing expenses.

Profit-split agreements require a precise cost definition. A 50/50 split after recoupment may produce more income than a traditional royalty, but overhead, affiliate charges, executive time, unapproved marketing, and unrelated costs can eliminate the amount described as profit. Define gross receipts, approved costs, excluded costs, accounting periods, reserves, and the point at which the split begins.

Accounting provisions should state how often the label or distributor provides statements and pays undisputed balances. Include audit rights, a useful lookback period, access to records held by affiliates and subdistributors, an underpayment threshold for reimbursement of audit costs, and a deadline for objecting to statements. If you accept a short objection period, you may lose the right to challenge an accounting error before receiving enough information to evaluate it.

Streaming Money

Interactive streaming generates recording and composition revenue through separate licensing relationships. Spotify states that roughly two-thirds of its music revenue funds recording and publishing royalties and that it calculates royalties through streamshare rather than a fixed per-stream rate. Spotify pays recording royalties through the licensor that delivered the music, usually a label or distributor. It pays publishing royalties to publishers, performance rights organizations, and mechanical agencies according to the territory and applicable licensing system.

Your Spotify dashboard and your recording agreement answer different questions. Spotify calculates and pays the licensor. A label or distributor then accounts to the artist under its contract. An unrecouped label may apply the artist's royalty share to the recoupment balance. A distributor generally deducts its agreed fee or commission and pays the balance to the master owner.

Separate organizations collect composition revenue. The Mechanical Licensing Collective administers blanket mechanical licenses for eligible U.S. streaming and download services. Performance rights organizations license public performances of compositions and distribute royalties under their systems. Your recording agreement should separately identify any publishing or expanded-rights participation instead of folding composition revenue into a general definition of recording income.

SoundExchange and Letters of Direction

SoundExchange administers statutory sound recording royalties for eligible noninteractive digital transmissions, including certain internet radio, satellite radio, and cable music services. On-demand streams operate through negotiated licenses and fall outside that statutory license.

Section 114 allocates 50% of statutory royalties to the owner of the sound recording performance right, 45% to featured artists, 2.5% to a fund for nonfeatured musicians, and 2.5% to a fund for nonfeatured vocalists. Because SoundExchange pays the featured-artist allocation directly, a featured artist may receive that share even when a label owns the master.

A SoundExchange letter of direction instructs SoundExchange to pay part of a featured artist's allocation to a producer, mixer, or sound engineer who participated in the creative process. It doesn't instruct a label or distributor to pay contractual producer points. Recording and production agreements should address label payments and SoundExchange payments separately and require the paperwork needed for each.

Expanded Rights and Publishing

An expanded-rights or 360 agreement pays the label a share of income beyond the masters. Touring, merchandise, sponsorships, endorsements, fan clubs, VIP packages, name and likeness income, and publishing may appear in the covered categories. Define each category, the label's percentage, permitted deductions, excluded income, and the services the label must perform in exchange.

Handle publishing as a separate transaction. Songwriting income includes mechanical royalties, performance royalties, synchronization fees, and other composition revenue. If a label affiliate seeks publishing ownership or administration, require separate terms for the grant, advance, recoupment, services, accounting, audit rights, and reversion. Recording costs shouldn't reduce publishing income unless the agreement creates that result and the artist accepts it.

Touring and merchandise provisions require usable definitions of gross and net revenue. A percentage of gross touring receipts may be calculated before venue rent, crew, travel, production, commissions, and taxes. A percentage of net revenue depends on which expenses qualify, who approves them, and whether both parties can verify the calculation.

Term, Delivery, and Release

Recording terms often begin with an initial commitment and give the label options for subsequent periods. Define the number of masters, album or EP requirements, minimum playing time, technical specifications, producer approvals, sample clearances, and other delivery conditions. A subjective delivery standard can let a label reject commercially usable recordings and postpone payment or the start of an option period.

Option language should identify who may exercise each option, the deadline, the required notice, the advance or recording fund for the option period, and any increase in the royalty rate. The artist should know the maximum number of recordings and years the agreement may require.

Release commitments determine whether delivered recordings reach the public. Define the territory, commercial release standard, deadline, minimum marketing commitment if negotiated, and remedy for failure to release. A reversion right provides little value if the label can satisfy the release obligation through a nominal upload without meaningful exploitation.

Distribution terms should match the delivered catalog. A distributor may require exclusive distribution rights for specified recordings within an agreed territory and term. Broader rights over future recordings, direct-to-fan sales, synchronization licensing, neighboring rights, or catalog acquisitions require separate language and economics.

Reversion and Statutory Termination

Contractual reversion returns rights under the conditions stated in the agreement. The parties may tie reversion to a fixed date, recoupment plus an agreed return, a period without meaningful exploitation, failure to release, or expiration of an exclusive license. Address takedowns, continuing licenses, sell-off periods, metadata, ISRCs, UPCs, artwork, videos, stems, platform claims, and redirection of revenue after reversion.

Statutory termination follows a different process. Section 203 applies to qualifying exclusive or nonexclusive grants executed by the author on or after January 1, 1978, other than grants made by will, and covers U.S. copyright rights in works other than works made for hire. The five-year termination period generally begins 35 years after execution. When the grant includes the publication right, the period begins at the earlier of 35 years after publication under the grant or 40 years after execution. The author or eligible successors must serve notice between two and 10 years before the effective date and record a copy before termination takes effect. Contractual reversion may return rights earlier and may cover territories beyond the United States.

Metadata, Platforms, and Catalog Exit

Digital delivery depends on accurate metadata and complete release materials. Identify the required masters, artwork, credits, songwriter and producer splits, sample clearances, lyrics, territories, release dates, ISRCs, UPCs, and ownership data. Inaccurate metadata can delay a release, direct revenue to the wrong account, or create conflicting ownership claims.

Define who controls distributor dashboards, artist profiles, YouTube channels, Content ID claims, social-platform monetization, pre-save pages, takedowns, and account credentials. Require access during the term and a documented transfer process after termination.

Samples, interpolations, beats, loops, and other third-party material may require permissions before release. Allocate responsibility for identifying the material, obtaining composition and master clearances, paying fees and royalties, responding to claims, and replacing material that can't be cleared. A distributor's acceptance of a file doesn't establish that the release has every required permission.

What You Should Negotiate

If you're signing with a label, focus on master ownership, present assignment language, the work for hire provision, advances, recording funds, delivery, options, release commitments, royalty base, recoupable costs, cross-collateralization, accounting, audit rights, expanded-rights provisions, publishing carveouts, reversion, and statutory termination.

If you're signing with a distributor, focus on ownership retention, the precise grant of rights, services, fees, commissions, term by release, exclusivity, territories, advances, reserves, payment timing, dashboard access, takedown rights, marketing obligations, synchronization authority, neighboring-rights collection, and catalog transfer after termination.

If you're using an aggregator, read the current terms for ownership, subscription and renewal fees, commissions, add-ons, social monetization, YouTube Content ID, cover-song licensing, payout thresholds, tax withholding, takedowns, removal charges, and what happens to the catalog when the subscription ends.

A recording agreement can finance a release or a career, but the artist pays for that financing through recoupment, ownership, exclusivity, or some combination of those terms. A distribution agreement can preserve the master owner's control when its grant and exit provisions are properly limited. Your contract should identify who owns the masters, who controls exploitation, how every revenue stream is calculated, and when the rights return.