With standard major label contracts, the largest share of the initial profits goes to the record label. In addition, after reimbursing the record company, artists are often left with little to no profit. Although the small independent labels started by artists may not offer the same high-profile advertising that big labels can afford, they can help eliminate several of the middlemen that divide the profits.

Profit margins on each CD sold are fairly slim. It is often more profitable for a label to back an already successful act with a developed fan base than to devote expensive promotional efforts to risky new acts.