What You Need to Know About Copyrights, Payment, and Royalties
Traditionally, record labels own the copyright of/in the records their artists make, in addition to the master copies - sometimes called "master tapes" in enthusiast/audiophile circles - of those records. An exception is sometimes made when a label strikes a distribution deal with an artist, in which case the artist, their manager or another entity may own the copyright (and masters) while the record gets exclusively licensed to the label for a certain period of time.
Indeed, promotion is the key when it comes to the success of a record, and this responsibility falls largely on the label, along with proper distribution of records…something of a blurred line at times in today's download-obsessed world. 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 potential for profit. Further, recording contracts may encompass opt-out clauses for the label in the event an act's popularity drops or the act/artist releases albums that didn't produce popular hits under the deal. A good example of this is when Mariah Carey was dropped from Virgin Records, and her $80 million recording deal was canceled after her first album released by the label sold poorly.
What's important to keep in mind is that record companies cough up huge revenues to produce, release and promote an album, and this can include recording time, manufacturing, packaging, photography shoots, distribution, marketing and music videos. While the label usually absorbs these expenses, some of this money may end up due back to the label unless otherwise worded in a contract. This is where hiring an experienced recording contract lawyer is of great benefit.