Only about 1 in 10 signed bands make money for the record labels.
What does that mean? How can they possibly continue to operate with that astronomical failure rate?
It’s simple: they use a complex system of charges and counter-charges to bleed the successful bands of mo
ney to cover their losses with the unsuccessful bands.
Why is this allowed? Because artists are inherently random and disorganized and unconcerned about the legal implications of the agreements they sign with the record company.
And if you ever hear an artist say they are completely satisfied and happy with the deal they have signed you can be reasonably assured that they don’t understand it.
Not one bit of it.
See Tom Petty.