The music industry has long been a world of glamour, fame, and fortune, with many aspiring artists dreaming of signing with major record labels to launch their careers. But behind the scenes, the reality is often much darker.

Record labels, despite their power to make or break artists, are notorious for engaging in exploitative and deceptive practices that leave many musicians struggling with financial hardships, creative control issues, and even psychological distress.

In a business where fame comes with a price, new artists—despite all the warnings about shady contracts and unethical practices—continue to sign contracts that often leave them at the mercy of record executives. From outrageous royalty splits to hidden clauses that strip artists of their rights, the relationship between record labels and musicians has been the subject of controversy for decades.

The Power of Record Labels: A Double-Edged Sword

Record labels hold immense power in the music industry. They control the distribution, marketing, and promotion of an artist’s music, which can make all the difference in their career. However, this power is not always used for the artist’s benefit. While labels offer opportunities for exposure and resources, they often demand heavy sacrifices in return.

The traditional record label model operates on a “360-degree deal”, where the label takes a percentage of virtually all the artist’s revenue streams, including music sales, merchandise, touring, and endorsements. While these deals may seem like a golden opportunity for an emerging artist, they often turn into a financial trap that leaves the artist with little to show for their hard work.

Common Scams and Shady Practices Used by Record Labels

Unfavorable Royalty Agreements One of the most common ways record labels exploit new artists is through unfavorable royalty agreements. Typically, record labels offer artists a percentage of music sales, but the amount they actually receive can be far lower than they expect.

The label often covers the production and marketing costs upfront, which is then deducted from the artist’s royalties. This means that even if an album sells millions, the artist might not see a dime until the label has recouped its investment, which can take years. In some cases, the royalty percentage may be as low as 10%-15%, leaving artists with very little after the label takes their share.

Advances That Artists Never Recoup Many new artists sign record deals based on advance payments, which are essentially loans from the label. These advances are meant to cover the costs of recording, promotion, and marketing, but here’s the catch: artists have to repay these advances through their sales.

What many don’t realize is that these advances are recouped before the artist starts receiving their royalties, meaning they must repay the label’s investment from the sales of their own music. This creates a cycle of debt that often leaves artists broke, even after selling large amounts of albums. As a result, many artists find themselves trapped in a cycle of borrowing from their record label and never being able to break free.

Ownership of Master Recordings In most record deals, the record label owns the master recordings of the music an artist creates. This means that even though the artist is the one creating the music, the label retains the rights to the recordings and profits from them, often for years—sometimes indefinitely.

For artists, this is a huge issue. Not only does it mean they lose out on profits from their own music, but it also means they lose control over how and when their music is used. Many artists are unaware of this until they’ve signed the dotted line, which is why some artists later have to fight for ownership or buy back the rights to their music (a process that can be financially devastating).

“Creative Control” is Often a Myth When new artists sign record deals, they are often promised creative freedom or the ability to control their sound. In reality, however, the label often has the final say on the direction of the artist’s music, including the songs they release, the producers they work with, and even their image.

The label’s goal is to make money, and that often means shaping the artist’s sound to fit market trends or the label’s own vision, rather than letting the artist express themselves creatively. This leaves many artists feeling boxed in, frustrated, and disconnected from the music they originally set out to create.

Hidden Fees and Expenses While record labels might promise to handle production and promotional costs, they often sneak in hidden fees that are deducted from the artist’s earnings. For example, costs for studio time, travel expenses, and even management fees can be charged to the artist, often without their knowledge.

In some cases, artists are charged for things like photo shoots, music videos, and even social media promotion, and these costs are deducted from their royalties. All of these expenses can eat into the artist’s earnings, leaving them with little or no profit from their work.

Lock-in Clauses and Long-Term Contracts Another way record labels trap artists is through lock-in clauses and long-term contracts. These agreements can often last for several years and prevent the artist from working with other labels or pursuing other opportunities. In some cases, artists can be contractually obligated to release multiple albums under terms they didn’t fully understand at the time of signing.

Even worse, these contracts sometimes have clauses that allow the label to keep an artist locked into the deal for decades, despite the artist’s lack of commercial success. Once the artist is under contract, it becomes extremely difficult to break free—especially if the label is not fulfilling its part of the deal (such as promoting the artist or investing in their music).

Why Do Artists Keep Signing These Contracts?

Despite all the warnings, the harsh realities of record label contracts, and the shady practices that plague the industry, new artists continue to sign these deals. The lure of fame, fortune, and instant success is often too tempting to resist, and many artists feel they have no other choice but to sign away their rights in exchange for a shot at stardom.

The music industry is highly competitive, and for many emerging artists, getting signed by a major label can feel like their only opportunity to make it. Record labels often prey on this desperation, offering artists the dream of being discovered while hiding the harsh realities of the deal in fine print.

The complex language in contracts, coupled with a lack of financial literacy, makes it easy for newcomers to get taken advantage of.

Famous Artists Who Have Been Victims of Record Label Scams

Over the years, many high-profile artists have publicly shared their experiences of being exploited by record labels. Some of the most notable names include:

Prince: The legendary artist famously fought against his record label over the ownership of his master recordings, even changing his name to an unpronounceable symbol to assert his independence.
Kesha: Kesha’s legal battle with Dr. Luke and Sony Music brought attention to the oppressive contracts many artists sign and the emotional and financial toll it can take.
Taylor Swift: Swift famously re-recorded her old albums after her former label, Big Machine Records, retained ownership of her masters, showing how record labels can maintain control over an artist’s career long after they’ve parted ways.

Breaking the Cycle: Can Things Change?

Despite the systemic issues, some changes are being made. The rise of independent music platforms like Bandcamp, SoundCloud, and Spotify has given artists more power to control their own careers and distribution. Additionally, some new labels and organizations are championing fairer deals, offering better royalty rates and more transparent contracts.

However, the major record labels still hold a significant amount of control over the industry, and for many artists, the dream of signing to a major label remains a top priority—despite the risks.

Conclusion: Fame Comes with a Sacrifice

While the dream of stardom is appealing, the music industry’s dark side is undeniable. Record labels, once seen as the gatekeepers to success, have a long history of exploiting new artists, trapping them in unfavorable contracts that limit their financial freedom and creative control.

Even with the wealth of information available to artists today, newcomers continue to be lured into signing these contracts, driven by the hope of success and the allure of fame. The cycle of exploitation continues, but the conversation is shifting. With the rise of independent music distribution, more transparency, and a growing push for fairer contracts, there is hope that future generations of artists won’t have to sacrifice their livelihoods for a shot at fame.

Until then, the scams of the music industry will remain a powerful reminder that fame, sometimes, comes at a much higher price than it seems.