SIGNING A RECORD DEAL:
Signing a record deal for most of my fiercely Independent crew feels like it might be far off in the distance. However, for some of you this will happen at some point. So let me take some time to help you understand some of the Key Terms.
First let’s define what signing a record deal is:
To a Major:
- It could be a long term deal,
- it could also be just a distribution deal.
To a Independent Label:
- It would most likely be a masters deal
- Masters Deal when a group owns your masters.
HERE ARE SOME TERMS YOU NEED TO BECOME FAMILIAR WITH:
Territory: Where the label controls the rights to your music. In other words this is where you will distribute your music. For example you might have the territory of Canada. Most times record labels will prefer to give you GLOBAL territories.
Term / Exploitation Period: How long the label controls the rights to your music. This sounds simple to understand but terms are really something you can negotiate up front. It really is a timetable on how long they will own or control the rights of your music.
- THE INITIAL PERIOD: it’s the time it takes to make the product.
- EXTENSIONS: The time it takes to try to recoup anything that needs to be recouped if the music hasn’t turned a profit. This is very common to create an extension.
- OPTIONS: are something that only record labels can create.
- Examples might be keeping an artist on a certain project for a while.
- Committing artist to so many recordings… etc
Rights: The different things the label can legally profit from, use, and/or control. In other words everything that a record company has the rights to make money from. Could be publishing, videos, logos, cover songs, Syncs, touring, etc…
Recording Commitment: The # of songs or projects you have to deliver. This could be the # of songs or collection that would be involved in the contract or agreement.
Release Commitment: The minimum product(s) that the label has to formally release. The time that the artist will deliver X amount of products to the label.
Advances: Recoupable cash payments (aka future earnings) you can spend freely
- So if you want to go buy a house or car this is important
- Don’t forget you have to take out the feels to pay your management from this.
- If you get 100,000 you still have to pay your Core Four Advisors out of this. Take home might only be $80K.
- Often times its 50% up front and %50 upon delivery of the product.
Budgets: Recoupable cash reserves usually used for specific things, e.g. recording
- Usually you don’t have a say in these budgets and you must stay within them to keep everyone happy.
- These can also be for marketing your music.
- All of this must be approved before you spend it.
- Sometimes these act as a loan that you have to pay back so be careful how you spend it.
Royalties / Revenue Share: The % of revenue you keep v.s. the % the label keeps
- With major labels this can be around 15%
- For Indies it could be as high as 50% just depends on what you work out with the label.
- Royalty rates can also vary by territories. International rates are much less than domestic royalties.
Here are additional terms and things to keep an eye out for as you are reviewing contracts and deals:
Related / Connected / Collateral Entertainment Activities: Essentially a 360 deal, this legal language lets music companies take cuts of different artist revenue streams:
- including merch,
- fan clubs,
- endorsements, etc.
First Right of Refusal / First Look / Matching: Lets music companies make an initial offer or competitive offer to support (and profit from) an additional portion of your business,
- e.g. a music company striking a deal between you & their merch division, or securing additional music rights, e.g. having digital release rights to your work with a “first look” guarantee on physicals.
Min-Max Floors / Ceilings: Pre-agreed advance-budget combo ranges that ensure artists receive no less than X dollars for a future project, and ensure labels pay no more than Y dollars for that project if they choose to pick up that option.
Bumps / Escalations: Automatically triggered boosts to royalty rates, bonuses, advances, and budgets in the event of a pre-agreed achievement,
- recouping an initial advance,
- winning a Grammy,
- or scoring a Top 10 hit.
Controlled Composition Clauses / Reduced Mechanicals: Lets label pay a fraction of the mechanical rate ($0.091), usually 75%, to artist / songwriter(s). Also lets label only pay mechanical royalties on a pre-set number of songs per project, e.g. paying 10x the rate for all LPs you produce, even if you make an LP with 15 songs, which would otherwise warrant 15x the rate.
Key Persons Clause: Lets artists leave a deal if the designated label person leaves.
Holdback Periods: Ensures music company a window of exclusivity in which the artist cannot release other music within a stretch of time, e.g. a singer agreeing to not release a non-LP song within six months of that LP’s public release.
Cross Collateralization: Lets the label cover the losses of one release by an artist with profits from another release by that artist. In 360s, labels can also take money from additional revenue streams, e.g. merch or touring, to cover music losses.
Accounting / Audits: Let’s label control when, and to what extent, you can examine their reporting statements and pursue legal action if something is fishy.
Third Party Obligations: Makes artist or label responsible for handling accounting of certain costs, e.g. featured artist royalties or sample clearances.
Look a Record Deal can be awesome but it can also be the very thing that holds you back from being in control of your future. I can tell you story after story of artists who never got passed their first deal because the record label controlled them to death. You need to understand what you are getting into.
- BE WISE
- SEEK COUNSEL FROM YOUR CORE FOUR ADVISORS.
- LOOK FOR THE WIN WIN IN THE DEAL
If you follow these three things an artists will emerge in control, as they should be.
Additional Links and Resources for Signing a Record Deal:
The Ins and Outs of Signing a Record Deal
Are Spotify, Apple Music and YouTube the new record labels? https://musically.com/2019/06/04/are-spotify-apple-music-and-youtube-the-new-record-labels/
The first four things to do if you want to make money in music – The Verge
Music Publishing 101: How To Make More Money With Your Music