A label typically enters into an exclusive recording contract with an artist to market the artist’s recordings in return for royalties on the selling price of the recordings. Contracts may extend over short or long durations, and may or may not refer to specific recordings. Established, successful artists tend to be able to renegotiate their contracts to get terms more favorable to them, but Prince’s much-publicized 1994–1996 feud with Warner Bros. provides a strong counterexample, as does Roger McGuinn’s claim, made in July 2000 before a US Senate committee, that the Byrds never received any of the royalties they had been promised for their biggest hits, “Mr. Tambourine Man” and “Turn! Turn!, Turn!”.
A contract either provides for the artist to deliver completed recordings to the label, or for the label to undertake the recording with the artist. For artists without a recording history, the label is often involved in selecting producers, recording studios, additional musicians, and songs to be recorded, and may supervise the output of recording sessions. For established artists, a label is usually less involved in the recording process.
The relationship between record labels and artists can be a difficult one. Many artists have had albums altered or censored in some way by the labels before they are released—songs being edited, artwork or titles being changed, etc. Record labels generally do this because they believe that the album will sell better if the changes are made. Often the record label’s decisions are prudent ones from a commercial perspective, but this typically frustrates the artists who feels that their art is being diminished or misrepresented by such actions.
In the early days of the recording industry, recording labels were absolutely necessary for the success of any artist. The first goal of any new artist or band was to get signed to a contract as soon as possible. In the 1940s, 1950s, and 1960s, many artists were so desperate to sign a contract with a record company that they sometimes ended up signing agreements in which they sold the rights to their recordings to the record label in perpetuity. Entertainment lawyers are usually employed by artists to discuss contract terms.
Through the advances of the Internet the role of labels is becoming increasingly changed, as artists are able to freely distribute their own material through web radio, peer to peer file sharing such as BitTorrent, and other services, for little or no cost but with little financial return. Established artists, such as Nine Inch Nails, whose career was developed with major label backing, announced an end to their major label contracts, citing that the uncooperative nature of the recording industry with these new trends are hurting musicians, fans and the industry as a whole. Nine Inch Nails later returned to working with a major label, admitting that they needed the international marketing and promotional reach that a major label can provide. Radiohead also cited similar motives with the end of their contract with EMI when their album In Rainbows was released as a “pay what you want” sales model as an online download, but they also returned to a label for a conventional release.Research shows that record labels still control most access to distribution.