A record label wants to sign you. That's exciting.
But before you sign any record deal, a few things matter more than the excitement of the moment, and most of them come down to money and control you can't see just by reading the headline offer.
Quick answer: 5 things to understand before signing a record deal
- Masters, who owns your recordings after you sign? This decides who profits from your music years from now, not just today.
- Money, how much is the advance, and what counts as recoupable? A bigger number upfront isn't automatically the better deal.
- Royalties, what percentage of streaming income actually reaches you after the label takes its share?
- Time, how many years or albums does the deal lock you into, and what happens if the relationship goes badly?
- Lawyer, has a real entertainment lawyer reviewed the contract, not a friend, not your manager?
1. Who Owns Your Masters in a Record Deal?
A master recording is the original recorded version of your song.
In most traditional record deals, you give ownership of this master to the label when you sign. Whoever owns the master earns money from that recording for a very long time, sometimes forever, through streaming, sync licensing for TV and film, and any future re-releases.
Own your masters, own your career.
A safer alternative is a licensing deal. You only lend your recordings to the label for a set period, often a few years. Once that period ends, ownership comes back to you fully, and you keep every future dollar that recording earns.[1]
2. What Is a Record Label Advance?
A record label advance is money paid to an artist upfront. It's generally recouped from the artist's future royalty earnings before any additional royalty income is paid out.
Many artists assume this is free money. It isn't, and treating it like a windfall is one of the most common early mistakes new artists make.[2]
3. How Do Artists Get Paid Streaming Royalties?
This confuses almost every new artist, and understandably so.
Spotify generally pays royalties through the rights holder involved in releasing the music, typically a label or distributor, rather than paying the artist directly. That rights holder then pays the artist according to whatever split was agreed in their contract.[3]
The percentage you receive depends on your contract, not on Spotify.
This is exactly why the terms you agree to before signing matter so much, once the deal is signed, that split is locked in regardless of how well the song performs.
4. How Long Should You Take to Consider a Record Deal?
Labels often create urgency, "sign now or we move on." That pressure is a negotiating tactic, not a reflection of how time-limited the opportunity actually is.
Independent artists are doing better than ever. Spotify reported that independent artists and labels together earned half of all royalties paid out globally last year.[4]
Read more in You Don't Need a Record Label in 2026.
The short version: you're not desperate, and you have real options outside any single offer. A good deal today is usually still a good deal in a few weeks, once you've actually had time to understand it.
5. What Should You Do When a Record Label Wants to Sign You? A Realistic Example
Here's a realistic walkthrough. Picture an independent artist in New York City, we'll call them Jordan.
One of their songs starts picking up real attention after being used in TikTok videos. Within two weeks, three labels message them on Instagram asking for a call.
A few hundred to a few thousand dollars in legal fees is small next to what a rushed, bad deal could cost over the following years, especially once you consider that masters ownership can affect earnings for decades.
Try it yourself: Record Deal Snapshot
Plug in real numbers from an offer you've received and see what it could really mean for you.
Simplified educational simulation, not a substitute for reviewing your actual contract with a qualified entertainment lawyer.
6. What Should You Do If Your Song Goes Viral and Labels Contact You?
Going viral feels urgent. It usually isn't, and treating it like a closing window is exactly what leads artists to sign too fast.
This has happened to other artists before: a musician builds a real following on TikTok, and once the numbers get noticed, labels start reaching out directly. In more than one documented case, the artist was close to signing before a trusted mentor or fellow musician encouraged them to slow down first, pointing out that an unreleased artist with no track record has no real way yet to judge what any deal is actually worth.[9]
Read more in Why TikTok Decides If Your Song Gets Big in 2026.
If a label pressures you to sign within 24–48 hours, treat that pressure as a warning sign, not a reason to rush.
7. Questions to Ask Before Signing a Record Deal
- Do I keep my masters, or does the label own them?
- Is this a short deal, one or two projects, or does it lock me in for years?
- Is there an advance, and exactly what does it get recouped against?
- Who controls my social media and release schedule after I sign?
The Most Important Step: Hire an Entertainment Lawyer
Always have a music lawyer, not a friend, not a manager, read any record deal before you sign. A few hundred dollars in legal fees now can protect years of future income.
See how we help independent artists grow →
Record Deal Glossary
Master (master recording): The original recorded version of a song. Whoever owns it earns money whenever that specific recording is used or streamed.
Advance: Money paid to an artist upfront, recouped from future royalties. Not free money.
Recoupment / recoupable: The process of a label taking back the advance from an artist's royalty earnings before the artist sees extra income.
Royalty: Ongoing payment an artist earns when their music is streamed, sold, or used.
Royalty rate (royalty split): The percentage of income the artist receives versus what the label keeps.
Licensing deal: A deal where the artist lends their music to a label for a limited time, then regains full ownership.
Distribution deal: A deal where a company gets an artist's music onto platforms like Spotify, usually without taking ownership of the masters.
360 deal: A deal where the label takes a percentage of touring, merchandise, and other income, not just music income.
Term: The length of time a contract lasts, often measured in albums or years.
Option period: A clause letting the label decide whether to extend the deal, usually the label's choice, not the artist's.
Exclusivity: A clause requiring the artist to release music only through that label during the contract term.
Territory: The geographic regions where the label's rights to the music apply.
Mechanical royalties: Royalties paid to songwriters and publishers when a song is reproduced, such as through streaming or sales.
Performance royalties: Royalties paid to songwriters when a song is performed publicly, played on radio, or streamed.
Publishing rights: The rights connected to the underlying song composition, separate from the recording itself.
Net receipts: The actual money a label receives after fees are taken out, often the base used to calculate royalties.
Cross-collateralization: When a label uses income from one project to cover unrecouped costs from another project of the same artist.
Entertainment lawyer: A lawyer who specializes specifically in music and entertainment contracts, not general business law.
Flat fee: A single fixed price a lawyer charges for a specific task, like a contract review, instead of billing by the hour.
References
- Amuse, "What Does It Mean To Own Your Masters?"
- United Musicians and Allied Workers, "Recording Contract FAQ"
- Spotify Support, "Understanding Spotify Royalties"
- Spotify Newsroom, "From $11B in 2025 Payouts to What We're Building for Artists in 2026"
- ContractsCounsel, "New York Lawyer Contract Review Cost"
- What Entertainment Lawyers Cost, "What Entertainment Lawyers Cost, Worth the Investment"
- Orphiq, "Finding the Right Music Attorney"
- Randy Ojeda Law, "How Much Does a Music Lawyer Cost in 2026?"
- Rolling Stone Australia, "Why a New Crop of Viral Acts Is Shunning Major Labels"