What's A Record Deal All About?
By Christopher Knab, MusicDish.com
It is my experience that most musicians think they want a record deal,
but know nothing about these ominous 75-90 page, single-spaced recording
contracts. Recording Contracts are legally binding agreements between
solo artists, or individuals who make up a band and a record label,
which is usually a corporation.
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Record labels are attracted to acts that have built
a strong following and have proved to the industry that they are
a solid investment. When a record label signs an act to a recording
contract, they expect to make a substantial return on the financial
investment they have made in that act.
The following information is provided to you as a
basic outline to the key parts of a recording contract. Please be
advised that should any such contract ever come your way, never
sign anything without consulting your entertainment law attorney.
INDIE LABEL VS. MAJOR LABEL
INDIE LABEL: By the purest industry definition,
an independent label is a record label that is not affiliated in
any way with a Major Label, and uses independent distributors to
get their releases into stores.
Note: For an in-depth article on the types
of relationships that exist between independent labels and major
labels, see the chapter I co-wrote with entertainment law attorney
Bartley F. Day in the excellent resource book, "The Musicians Business
and Legal Guide," 3rd Edition, published by Prentice Hall.
When you think about pursuing an independent record
label deal, think about the following issues:
Make sure the label has a solid distribution deal
on a national level. Be sure to check on the relationship between
the label and their distributor(s). Ask some questions like:
* How many records has the distributor sold of the
* Did the label have any problems getting paid by their distributor?
* What kind of working relationship do they have with their distributors
on their new releases?
* Does the label have a budget to pay for some Coop ads, and in-store
promotions through their distributor?
Make sure the label's roster isn't too big, or else
you won't be given the attention you deserve. Also, make sure the
bands on the roster match the type of music you play.
If the label has an affiliated Music Publishing division
and wants part of your publishing, don't be surprised, but be sure
your attorney protects as much of your publishing royalties as possible.
Never allow a label to recoup any monies advanced to you for the
recording of your record from your mechanical royalties. (This is
the money owed to the songwriter and music publisher of the songs
you wrote on your record, for the sales of your record.)
Merchandise deals are deals made by your attorney
outside of your recording contract, for your likeness to appear
on t-shirts and other clothing and objects. If the label wants a
percentage of the income from such a deal, you may have to negotiate
how much they get.
Find out how many options the label wants. Since "options
= number of records," you don't want to agree on too many options.
* Indie Promoters and/or In-House Staff
Find out if the label works with independent radio
and/or retail promoters. It's a good sign when they do; this raises
the chances that your record will be seriously and effectively promoted.
Find out if the band has an advertising budget for
* Tour Support
Find out if and how they support you on your tour
(financially, morally, etc.) and how much of any advances for touring
* Points/ Percentage of the list price you receive
Find out how much you get paid for each record sold.
A new act usually gets somewhere between 10-15% of the suggested
list price of a recording. (Remember, too, that out of your percentage,
you must pay your producer their percentage, for producing your
MAJOR LABEL: By industry definition, a major
label is a label that commands a high percentage of the annual sales
of records, and has their own distribution system (the Big 5 distribution
companies currently are: WEA. BMG, SONY, UMVG, and EMD).
When pursuing a major label deal be absolutely sure
that this is what you really want. Here are some points that might
help you determine if this is the right thing for you to do:
A major label often signs artists for six to eight
records (not years).
Research the A&R person. Know whom they've signed,
whom they've worked with, whom they've worked for, and how long
they have been employed.
. Number of Releases
Find out how many records the label releases per year.
You don't want to sign with a label that releases too many records.
Remember, they only have so much time and enthusiasm to put into
the promotion of each record. Many major labels have between 12-25
releases coming out each month.
Here are some clauses that you will encounter (and
sometimes have to watch out for) in a contract with a record label:
Every record contract includes a provision stating
that the deal is "exclusive." In other words, during the term of
the agreement, you can't make records for anybody else. Therefore,
an exclusivity clause in a contract refers to the fact that you
may only contract with this record company (you are "unilaterally
married" to that company). I strongly recommend that your attorney
define the extent of exclusivity.
The duration of the contract. (How many records? Any
Who will control the amount of product and the quality
of the product? You always want as much creative freedom as possible;
the record company often maintains a veto power when letting a band
choose the producer, engineer, studio, etc.
* Recording costs
How much (recoupable) recording money will you get?
Don't overdo it! Remember, you will have to pay it back from your
royalty rate as applied to actual sales.
How much (living) money will you get that is recoupable?
What about other advances, such as videos, and touring? Remember,
you will have to pay back that amount to the label.
The money paid for your service as recording artists.
Outside of U.S. is calculated differently. (Canada: 75-90 % / UK,
Japan, Australia: 60-70 % / Rest of the world: 50 %-of U.S. rate.)
Who controls the music video and how the costs are
apportioned. Try to have only 50% of the cost recoupable.
The label will need your permission for name, likeness
and voice in order to publicize your record. Also, ownership of
your website URLs may also be a point of negotiation.
Same as with Independent labels
Your promise to join a union (AFTRA, AFM).
Your right to audit the books. Make sure this clause
is included in the contract.
The label's responsibility is to report financially
to you (reports to artists usually occur every six months; i.e.,
if an accounting period lasts from January till June, the label
will report to the artists approximately in September).
The record company's right to sell the contract. Majors
sometime shuffle acts around from one affiliated label to another
within their family of labels.
* Controlled composition
How the label will pay mechanical royalties. Standard
practice is that the label will only pay on 10 songs on your record,
and at 75% of the current statutory mechanical license fee. (As
of 2003, 8 cents per song, per unit sold) This rate changes every
This clause specifies the songs you may not be allowed
to record for a set time after the ending of the contract.
* Sideman's clause
You might want to consider including a sideman's clause.
A sideman's clause allows an artist to do studio work. The artist
still needs permission from the record company; they however, can't
say no unless they have a very good reason. Under normal circumstances
-- without such a sideman's clause -- you would be prohibited from
performing for any other band/label under the terms of an exclusive
contract. If you have a sideman's clause in your contract, make
sure all members of your band sign the document.
* Key man clause
If a significant label executive resigns, or leaves
the company, you may terminate the deal. The label may also put
such a clause in concerning a band member.
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