Broadcasters

Most major label artists earn a 10-15% royalty rate. However, before a band is able to receive any of their royalties, they must clear their label for all of their debts, known as recoupable expenses. These expenses arise from the cost of such things as album packaging and artwork, tour support, and video production. An additional part of the recoupable expenses are the artist's advance. An advance is like a loan. It allows the artist to have money to live and record with until their record is released. However, before they can gain any royalties, the advance must be paid back in full to the record label. Since only the most successful artists recoup production and marketing costs, an unsuccessful artist's debt carries over to their next album, meaning that they see little to no royalties.

Major label advances are generally much larger than independent labels can offer. If an independent label is able to offer an advance, it will most like be somewhere in the range of $5,000-$125,000. On the other hand, major labels are able to offer artists advances in the range of $150,000-$300,000. Instead of offering an advance, some independent labels agree to pay for a certain amount of the artist's recording costs. This money is recoupable. There are advantages and disadvantages of an advance. If an artist gets no advance, that means they owe their record company less money, thus allowing them to earn royalties more quickly. However, since the label recoups so many costs, an artist's advance might be the only money they are able to make for quite some time.

In a contract, options are agreed upon. Options allow the label to renew their contract with the artist and release more of their albums. Options lie with the label, and the label has the choice whether or not to record more with the artist. Some artists consider this unfair because the label has the right to not distribute an artist's project and extend their contract by one more album if they deem the music as commercially or artistically unacceptable. Record labels effectively own the artist's product for the duration of their contract.

Independent label contracts

Independent label contracts typically resemble contracts offered by major labels because they have similar legal liabilities to define before representing an artist. There are slight differences, usually with regards to royalties. Independent labels typically offer higher royalty percentage because production costs are usually significantly lower than those of a major label. For example: most independent labels tend to focus less on marketing than major labels.

It is becoming increasingly more common for independent labels to offer a profit-sharing deal in which as much as 40-75% of the net profits go to the artist. In this type of contract, the net gain after all expenses have been taken out are split between the label and artist by a negotiated percentage. However, deals in this form can take longer for an artist to gain any profits since all expenses – such as manufacturing, publicity, and marketing – are also taken into account. As an independent artist becomes more popular, deals of this type are more advantageous.

Independent labels can rely on "word of mouth" to expose their artists. This of course is to attract a distinct audience. Independent labels tend to avoid high budget marketing, which is usually criticized as "over kill" and attracts an audience commonly found following major label artists. This of course contributed to the lack of production cost, and helps artist to receive royalties sooner.

Publishing

If a band or artist writes their own material, publishing can be one of the best ways to earn a profit. It is one of the few guaranteed ways to earn revenue for artists. Even touring is not a sure way to make money because it is possible that no one will attend the shows. Basic copyright law protects songwriters by giving them exclusive rights to grant or deny the reproduction, distribution, or performance of their work. The majority of a band's publishing income comes from its mechanical and performance rights. Mechanical rights cover the reproduction of a song on a record. In the standard contract between a band and a label, the label is required by law to pay the composer a fixed rate per song simply for the right to use the composition on commercially sold recordings. The mechanical licensing rate in 2006 for the U.S. and Canada is 9.1 cents per song. With the performance rights, a song's copyright covers every time it appears on radio and television.

Increasingly the internet is making new methods of publication accessible to independent musicians. Services have been set up to distribute independent music over the internet with many different types of payment models. This often allows artists to reach a much wider audience than would normally be possible as a local band.