The biggest difference comes down to one question: who owns your music when the deal is done?
Distribution deal: you keep ownership
In a distribution deal, you keep your masters. You're simply paying a company to get your music onto streaming services and stores, and sometimes to help market it. The distributor keeps a share of the income, and you keep the rest. Splits around 80/20 in the artist's favor are common, though fees vary.
There's usually little or no advance. You're funding your own rollout, so you carry more risk, but you also keep more of the money and all of the control.
Best for: artists who value ownership and longevity over a big upfront check.
Record deal: money up front, ownership traded
In a traditional record deal, the label pays you an advance, which is an early payment of royalties you're expected to earn later. In exchange, the label usually owns your masters, either outright or for a long period. Some deals lease the rights for a set term instead, anywhere from about 7 years to 15 or 20, so read the term carefully.
Traditional deals often pay an artist royalty of roughly 15% to 20%. Some newer deals split net profits 50/50 instead, after the label recoups its costs. Either way, your advance and the label's investment get paid back out of your share first. How good your terms are depends almost entirely on your leverage going in.
Best for: artists who are already building success on their own and need financing to scale their business and their rollouts.
The deals in between
It isn't only two options. You'll also see joint ventures, press-and-distribution deals, label imprints, publishing deals, admin deals, and sync licensing. Each splits ownership, money, and control differently.
Which one should you choose?
If you don't need the money yet, a distribution deal keeps your options open. If you're already proving yourself and need serious funding to grow, a record deal can be worth it, as long as you understand exactly what you're giving up.
This post is general information, not legal advice.