No, they don't. The record companies enter into a contract with the recording artist to promote and distribute their next album or X albums. It's more like th

No, they don't. The record companies enter into a contract with the recording artist to promote and distribute their next album or X albums. It's more like the artist is hiring the record company. It may seem like the record company is paying the artist, but really they are paying an advance on royalties. This is much the same as how an author may get an advance for agreeing to allow a publisher to publish their next book. The advance is in some respects like an investment in a startup; the record label fronts some money to the artist to help pay for recording, living expenses, promotional expenses, etc. in exchange for a large percentage of the profits from record sales. If the record doesn't sell well, the artist isn't under obligation to pay the advance back (although it might carry over on the ledger if they owe more albums to the label). The size of the advance is based on the popularity and expected likelihood of success of the record. To continue the analogy with authors, I think Sarah Palin was advanced $7 million on her last book; most tech books authors receive an advance of 4 or 5 figures. This makes sense based on just the size of the market for each book alone. Anyways, that was a long digression, but the record companies certainly do not hire artists to make music for them. The artists hire the labels to promote and distribute their music. Most artists have already written and created demo recordings of the songs before they even sign with a label.