Finally, the moment has arrived. You and the band have worked their asses off in the live circuit, grinding and grinding away, until you’ve built a decent following. Perhaps you can sell out a local mid-size venue (around 1000 tickets would be pretty good) and you’ve picked up some traction with different blogs, and most importantly, a couple of playlists on your favorite streaming platform.
It’s not uncommon for a record label to enter the picture around this time. You’ve generated significant enough buzz for a record label A&R to check you guys out, perhaps he caught a live show, and now they have approached your band for a record deal. This is it, the holy grail. But, what exactly are you supposed to look out for in a deal like this? What kind of deals are you getting offered anyway?
It’s important to note that it’s always a good idea to seek out a professional to look at your deal, be it a lawyer or an experienced manager. For a small fee they can often tell you what’s good or bad in your deal, and even negotiate the deal (for a higher fee).
First of all, let’s find out what kind of deal you are being offered right now. In many cases this depends on what kind of label is making the offer in regard to what kind of deal you will be getting. Most indies are known to be a little more relaxed with their terms and conditions while the majors are known to play hardball, but it can always be the other around, so be aware.
Type of deals
Every deal is unique, but we can try to categorize them, as a guideline, into the following categories.
Master / artist deal
This can largely be seen as the ‘standard’ deal. It often means the record labels buys the artists’ master, and the artist gets a royalty. They sign an artist “completely”, so to say. The label buys the master tapes and has the artist under contract for a certain amount of time. This means that the artist is also restricted creatively, the label has input on all creative choices and must approve the artist featuring and so forth on other people’s records. This is a very old-school type of deal. Often the label will have many options after the first product.
My favorite kind of deal. In this deal you license the masters to the label for a set amount of time, after which they revert back to you again. The split on these deals is often a lot better as well, I’ve seen 50/50 splits, but also even 70/30 in favor of the artist. Of course, the label is less invested in you as an artist so I can be a little harder to be top of pile this way. And these deals don’t include advances as much as a master deal for example.
Joint Venture deal
Sometimes, an artist has potential, a lot of potential. And by that we mean they can make the record label a lot of money. Very rarely, but it does happen, will a record label agree to a Joint Venture deal. This is a construction whereby all costs are paid from gross revenues, and the remaining money is split between artist and label evenly. Since each joint venture is a unique agreement they can contain all kinds of clauses and agreements, so there’s no real standard to speak of. Most often it’s a 50/50 split after costs. But what costs are eligible, budgets, duration of the JV etc. are all up for grabs.
At some point labels started to realize that when they built big artists a lot of people were profiting off of that. So they decided to acquire a stake in every revenue stream of an artist. The reasoning being this is that those revenue streams would never reach the heights they did without the label, so therefore the label should have a piece of these revenue streams as well. This agreement is already a bit old fashioned but still occurs. Think twice before signing this, they might promise a lot, but you are also signing away a lot, especially money. Make sure it’s worth it.
Sometimes all you need is a partner in (digital) distribution and perhaps some minor services in addition. Then of course you can also go for a distribution+ deal. This basically means that the label will distribute your music digitally and physically for a low percentage. You can often tack on some promo services for a slightly bigger percentage or even a small fee. This is of course a very B2B model where the label is not invested in you as an artist at all.
What to look out for
So you might have a vague idea of what kind of a deal the record label is offering you. It might not be a bad deal at all, but what exactly are you supposed to look out for in the fine print? Let’s take a look at a little checklist.
Often there will be a clause stating exactly what materials are being signed over and in what way. Is it a license for X amount of years, or are you transferring ownership? It’s important to have clear for yourself what you are signing away, and how.
Term of contract
How long is the deal for? What obligations will you have and for how long? Make sure you don’t get stuck to a contract for too long! Also make sure the record label can’t extend the contract. For example they will use unrecoupment as a reason, or certain other milestones.
Term of license
If you are not signing away ownership, it’s important to define when the masters will revert back to you, in the case of a licensing deal for example. It could be that the term of your agreement with the record label has a much shorter duration than the term of the license, so always double check.
In some deals it might be possible to exclude certain territories, so you could eventually license the excluded territories to a different label or party.
Let’s talk money. How much of an advance are you getting? Is it based on previous records you might have done with the label and how well they performed? Will it be payable in one go, or are there certain conditions you need to fulfill as an artist? What revenue can they use for recoupment?
The advance you get has to be recouped of course, but what other costs can the record label basically ‘charge’ against your account? Try to define this as clear-cut as possible, and make sure to add a clause that any costs not mentioned in the contract can only be recoupable by mutual agreement between the artist and the record label.
So you know what costs they can recoup, but exactly how much money are they planning on spending on you? It’s good to define this in the contract as well, so you can legally force them to spend the money to promote you, the record and your career.
I often try to get a marketing budget, black on white. This way if they refuse to spend any money on marketing it gets a little easier to break up the contract. You can also specify by each territory what they are expected to spend.
And finally, options! If the record is a great succes, the record label will want the option to continue working with you. In that case they will include options in the contract, this could be anything from the next album to the next 5 (!) albums or even more. The more options they want to higher the advance should be, or the better the deal should be. The best option for an artist is no options, because if the record label wants to continue a new deal will have to be negotiated, which gives the artist more leveraging power.
Hopefully this article has given you a bit of insight into the various record label deals you might come across. As I’ve said before, it’s important to note that legal and business professionals should always be consulted if you are in talks with a record label.
Of course not a single deal is the same, and sometimes the circumstances outside of the deal can sweeten it. For example, being part of an amazing roster, which can give you touring and collaboration abilities, or the expansion of your existing network can make it worth to bite the bullet a bit, perhaps, and accept a deal that’s less than ideal.
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