Historically this model made a lot of business sense... it was hard to distribute before the internet. The record company took the product and marketed and sold it to a broader audience than the artist or band would ever be able to reach on their own. The artist in turn collected the money on the live performances which, if there product was successful, would yield good returns.
I don't know if it makes nearly as much sense in a world where you can just upload your music to YouTube and do direct marketing via Twitter/FB/TikTok.
Steve Albini does a good job of breaking it down here: https://thebaffler.com/salvos/the-problem-with-music.
FTFA:
> For the average band, a $250,000 advance (in 1993 dollars) is distributed like this:
> Record company: $710,000
> Producer: $90,000
> Manager: $51,000
> Studio: $52,500
> Previous label: $50,000
> Agent: $7,500
> Lawyer: $12,000
> Band member net income each: $4,031.25