Updated: Oct 31, 2022
Having a label working on behalf of you and your music can be the key to worldwide success for most musicians. Because of this reason, landing a record deal is often a major goal for a lot of musicians; whether the deal is with a major or an indie label.
Major labels have a massive advantage over most indie labels; especially when it comes to finances. Despite the decline in music sales and several industry stakeholders attempting to adapt to how listeners purchase and consume music, major record labels still have an edge.
The more money a label has, the more investment your music gets. On top of the industry connections it has, a large label will also be able to spend more on recording, video shoots, promotion material, touring, and more. The label might even be willing to give an advance.
While most musicians tend to go for deals with major labels, indie labels have their advantages too. Where indie labels might lack in finances, they make up for creative control. Whichever option you go for, signing a record deal is a major step in your career as a musician.
Before getting all excited though, you should be careful about what kind of record deal you sign. There have been tons of cases where musicians have signed on with labels only to later find out how raw the deal is. To ensure you know what you're getting yourself into, here are five key things to look for in your offered deal:
1. Length of the Record Deal
This should be the best starting point. You will want to find out how long the record deal is going to last. A long-term deal is more suitable for the label because they have all the time in the world to not only earn back what they will invest in your music, but possibly make huge profits from it as well.
On the other hand, a shorter record deal would be better suitable for you. This is because, in case you are not happy with the deal, you can get out of it early or choose to wait for it to expire since it won't last long. If everything works out great and you are happy with the label, then you can always renew the deal and extend the working relationship.
There will probably be option periods that would allow the label to extend the record deal's length. However, those options should be exercised through a mutual agreement between you or your representatives and the label.
2. The Territory of the Record Deal
This can also be referred to as jurisdiction. Some record deals only apply to one territory while others apply globally. Ideally, a record deal that only applies to one territory would still make it possible for you to sign different record deals applying to different territories. With the digital era we are in however, this can be difficult.
If the deal applies to the whole world, it would be best if you made sure that the rights to your music revert to you if the label does not release your music in particular territories. Owning the rights to the music would allow you to either partner up with a label from those territories, or even release the music yourself.
3. The Royalties You Are Set to Earn
Apart from the length of the deal, royalty is a huge factor to pay attention to. For several small or mid-size record labels, the offer you will get is a 'net 50' deal. A 'net 50' deal means that you and the label will split all profits equally after the label has recouped its expenses. This might seem fair, but you should identify what these expenses are. If possible, include a clause that will have them needing your consent for larger expenses.
Major labels often offer a straight-up percentage share which ranges between 12% and 20%. While this is lower than the 50% offered by smaller labels, larger labels come with increased investment. You might make less, but thanks to the investment you get, you will still be able to benefit from it.
4. What Is the Label's Investment in Your Music?
Though this might be a bit tricky to get a straight answer on, try to get as much clarity as you possibly can in terms of budget commitments or promises the label make to you. Have the, include dollar amount regarding the budget for things like recording, video, promotion materials, tour support, and more.
The sad thing is most people working in major labels are in it for the money. They might, therefore, be hesitant to make you fixed budget commitments until they see how your music performs. One way of navigating this is by getting yourself a good entertainment lawyer to advocate on your behalf.
5. Will the Label Be Included in Non-Record Revenues?
In most modern record deals, more labels are asking for a share of the income generated from non-record sources such as publishing, touring, and merchandise. Such deals are called '360 deals'. While they are slowly becoming the industry standard, you need to have the label state their contributions to such valuable revenue streams before giving them a portion of the income.
If they want a cut from touring income, are they going to provide funding to support the tour? If they're interested in a share of what you get from publishing, is the label going to provide publisher services such as shopping the records for placements in television, film, or video games?
Some labels offer these types of deals that pull their own weight. However, some ask for a piece of the pie without chipping in. You might want to keep in mind that with record sales on the decline, giving your label and your manager a cut from other income sources might leave you with very little for yourself.
Learn More About What to Look for in a Record Deal
There is more information about record deals. Seek the advice of a trusted, experienced, industry stakeholder in addition to the blogs and posts that exist.
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