National Lawyers Guild
Soho House
Fractured Atlas

Will I Have to Pay Back the Record Company if the Album Is Not Successful?

So you get a record deal, and the record company pays you an "advance" (monies up front) and pays all of the expenses for the making and distribution of the album. And the album goes nowhere. Does the artist have to pay back the record company for the money they lost in the deal?

The short answer is, no. When you get signed, you contribute your musical talent (and the use of your compositions if you wrote the songs that will be recorded), and the record label finances the production and distribution of the album. It is the record company that makes the financial investment and takes the risk that their investment is lost. (You take the risk that you give the rights of your music to a label that gets you nowhere, and you can't use the song elsewhere until the record company's rights have expired, if they ever do expire under the terms of the deal you sign.)

If the contract you are offered suggests you have to pay back the label if the record is not successful, you are not dealing with a reputable record company and you should walk, no run, away from the deal.

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