Recording contract

A recording contract (commonly called a record contract or record deal) is a legal agreement between a record label and a recording artist (or group), where the artist makes a record (or series of records) for the label to sell and promote. Artists under contract are normally only allowed to record for that label exclusively; guest appearances on other artists' records will carry a notice "By courtesy of (the name of the label)", and that label may receive a percentage of sales.

Labels typically own the copyright in the records their artists make, and also the master copies of those records. An exception is when a label makes a distribution deal with an artist; in this case, the artist, their manager, or another party may own the copyright (and masters), while the record is licensed exclusively to the label for a set period of time. Promotion is a key factor in the success of a record, and is largely the label's responsibility, as is proper distribution of records.

While initial recording deals usually yield a smaller percentage of royalties to the artists, subsequent (or renegotiated) deals can result in much greater profit, or profit potential. A few acts, such as Madonna, Michael Jackson, R.E.M., U2, and Janet Jackson, among others, have signed multimillion-dollar deals. Whitney Houston signed a $100 million deal with BMG to deliver just six albums, the largest recording deal at the time. Robbie Williams signed an £80m (US$125m) contract with EMI. For many other artists, though, for the millions to become tangible, hit albums meeting or exceeding their previous sales figures must follow. Recording contracts may include opt-out clauses for the label in the event an act's popularity dips or the act releases non-hit albums under the deal. For instance, Mariah Carey was dropped by Virgin Records and her $80 million recording deal cancelled after her first album released by the label sold poorly.

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