Verified answer

The money is an "advance" that is recoupable. On top of that, the record label would spend much more than that on the promotions, production etc.

The record labels earn money by SELLING RECORDS, so they take most of the royalties per song. And if the sales doesn't go well, the artist would possibly end up owing money to the label and would have to release more stuff to make up for it.

Ultimately, every artist signed is an investment and risk.