This agreement is between the recording artist and the record company. It allows the record company to exploit the rights in the recording of the artist's performance.

The artist usually receives an up front payment known as the "Advance" and an ongoing royalty based upon the number of records sold.  The type of record deals available differ hugely depending on the types of artist and record company involved.  The type of agreement that you would expect to see if you were contracting with a major record company such as Sony compared to a small drum n' bass label will be considerable.  The principles however are the same.

The Duration Of The Agreement

You are contracted as a recording artist to the company for a period of time known as 'the duration'.

The duration of the agreement is tied into the commitment clause - this sets out how many albums or singles you will be expected to deliver to the record company.

The company will expect you to assign all your rights in the recording to the company. The company will own a;; the rights to the recording, as this is how they make their money.

The Advance

The advance that is paid to the artist will be set against record royalties earned under the contract, therefore the artist will not receive any money until his advance has been fully recouped.  This is known as 'recoupment' and the advance is usually referred to as a 'recoupable advance'. 

The advance should only be recoupable from the artists record royalties.  There should be no liability on the artist to repay the advance if the artist does not generate enough royalties to repay the advance payments. In other words, the advance is non-returnable.

Recoupment Explained

The record company will pay all of the recording costs for the recordings to be made but the costs of recording are recoupable, (i.e. they have to be paid back) out of the artist's royalties as if those costs were an advance.