If you’re reading this right now, it might be reasonable to assume you have an Internet connection and nothing better to do on a Wednesday night. If you’re somehow reading this without an Internet connection, color me impresssed that someone liked this so much as to copy/paste it and then print it for you to read. The point of this is that if you have an Internet connection you are in a unique position in the world because you have a playing field that is uncharacteristically level compared to almost all of human history that came before this point in time. You may not have anything personally in common with such diverse figures Randy Blythe, Jeff Bezos, Studio Ghibli, or even The Royal Family but you can go and find the places they interact with people and share the same space as them just by virtue of having access to the infrastructure that facilitates the 1s and 0s flowing into your computer. Do you need black tie and blue blood to make a comment about Prince Harry that could reasonably reach his attention? Hell no! Just an Internet connection! Crazily still, you can create your own digital stage as it were and directly compete for the attention of people who may also fall into one or more of these figure’s audiences which is positively unheard of, even uncouth to some were it to happen in the before time. Perhaps most meritocratic of all, you start in just the same way as they did then, luck and knowhow prevailing, you can surpass them in number of followers and online influence.
Unprecedented as this is and temporarily disregarding the Pandora’s box of new problems this new environment creates, we as musicians find ourselves in an interesting place in the world. On the Internet we can grow our following starting from the same place as everyone else no matter how auspicious but, it’s also the place where the fundamental product we create can be duplicated indefinitely and can be traded with others without seeing a cent of what we’re owed. This we must admit, however bleakly, means a shift away from the older record sales model and into the social media fueled touring, advertisement monetization, and merchandizing models. Some even seem to think that it’s a shift from the concept of a shadow of meritocracy to an out and out popularity contest. * Suddenly people have the option of bypassing a record label entirely, which was not something that was viable before the advent of the Internet.
This has had the record labels quaking in their boots for some time but, despite the new landscape, there are still record labels that are successful and you’re a lot more likely to cross paths with them than you might think. More importantly, if you’re approached by a record label with a deal what can you expect and should you take the deal? Well I just so happened to be looking through some notes I took in my Legal Aspects class while I was at Berklee and found a whole section on just these questions.
*In as much as such a thing ever existed. It’s a little disingenuous to say that music used to be a meritocracy but it’s an opinion I’ve heard more than once by people who know even less than what they’re really dealing with than me. The band that was signed was rarely the band with the most talent; it was the band that would make the label the most money and there’s a definite trend line of fabricated bands from The Monkeys to One Direction. It’s not so much a meritocracy, more of a popularity-based oligopoly. (Which now is changing)
I won’t comment on the relevancy of these deals in the modern world, or whether Record Companies are a good thing or a bad thing because as with most things, the answer is nuanced and will depend on your situation. This is just to shed some light on how deals tend to work, and how you should decide on your answers to the aforementioned questions.
Lets look at the main types of deals that you can see:
Traditional Deal:
This is the record deal that record labels have used since the concept was formed. These encompass all the deals made from 1889 (yes they really are that old) to 2006-7. This is the point where the big three labels “stopped offering” those sorts of deals and you’ll see exactly why in a moment. Naturally deals similar to these are still made today but they are usually structured differently and are far less robust than they used to be.
In these deals it’s all about the music; the label gives you a number of “options” (read: albums) that the deal is good for and they give you a sum of money called an Advance. They also give you access to their considerable network for people in all areas of the music industry, as well as their prodigious promotional reach. The purpose of the Advance is to give you the monetary means to make the record, and prepare for tours. If you’re careful about it you can use it as a per-diem during the time period you’re making an album but it’s generally best practice to touch it as little as possible.
In exchange for this money and these benefits, the label takes the money from all sales of your music. This means CDs, vinyl, digital copies, and digital streams and you don’t see a cent of that money until the amount of your advance plus a percent of interest (traditionally 20% of the original sum) has been paid back to the label. This means it’s an investment on their part; they spend money on you so you can recoup it for them and then some. Let me repeat myself in plain English and louder so everyone can hear: If you get an advance of $1,000,000,
THAT MONEY IS NOT YOURS AND YOU HAVE TO PAY IT ALL BACK! DON’T SPEND IT ON A FERRARI.
As if that weren’t shaky enough, the label usually has control of when you can work on your options and they issue deadlines for when these options should be started, completed, and submitted for promotion and release. They also reserve the right to hold or cancel one or all of your options if they feel you aren’t doing well. Aside from the sales of your music and your work schedule, typically, these deals didn’t touch anything else so you get the revenue from merch, touring, publishing, royalties, and appearances in full so that you can pay your team and most importantly, yourselves.
It doesn’t take a genius to see why these sorts of deals aren’t offered in their original form anymore. The advent of commercially available recording technology, music piracy, and infinitely duplicable music making micro pennies on the dollar sent the industry into unmitigated free-fall and the only solution was to sink or swim. That means smaller advances and a trend towards the second type of deal:
The 360:
Made infamous in recent years, this is a deal where the label gets a percentage of all streams of revenue you make. The representative will more than likely say a 50% split when they first pitch it but it is your duty to negotiate him down to retain some of your basic rights and at the very least, find a split that you benefit from. Not only because 360 deals are rarely (if ever) written in the artist’s favor on the first draft but also because most modern record deals are modified 360 deals that a lawyer (or particularly savvy band member) has managed to hammer out and, for reasons we’ll get into later, if they really want you they will probably give you what you want.
These are most common among independent labels (aka indie labels, translation: not one of the big 3) and despite some horror stories that could’ve been avoided by some mild negotiation, aren’t as bad as they sound when modified in an amicable way. The term Indie is reminiscent of the rebellious nature they had in the 60s and 70s but now chances are they are just as corporatized as their enormous competition. Don’t let the aesthetic fool you, most will go out of their way to trap you in a terrible version of this deal unless you stick up for yourself. Again, you’ll see what to do about that later.
Digital Only Deal:
Rather than call it a Digital Only Deal, I prefer to think of it as a DOA deal. As the name implies, this is a record deal that only applies to the promotion of your music on digital platforms. There are two problems with this: first of all you can achieve the same thing yourself with a few friends and some ingenuity, secondly physical isn’t dead by any stretch of the imagination and to lock you out of possible merch sales would be.
Needless to say, this doesn’t happen anymore at reputable labels as it lost traction and was rendered obsolete almost immediately. However it has stuck around among sketchy small labels, as it’s a great business model to scam people. My teacher was quick to stress that in her career 50 of such deals had been offered, but only 2 artists signed them. The first was because it was more like an artist friendly experiment and they didn’t stand to loose too much. The second was, in her words “odd,” and she implied her client had not listened to her advice not to sign. With this being said, the best thing to say about this sort of deal is that it has to be exactly the right label, right style, and right time.
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So with these basic types of deals established, the question ceases to be “what does a modern record deal look like?” and starts to become “If I am offered a deal by a company, what’s the best kind?” Well, the best kind of deal is simple: It’s the best deal for you! No deal is above or below negotiation of some kind and the more comfortable you get with that the better. So how do you know what you want in a deal so you can go in there and negotiate?
The first questions to ask are the “what’s:” What are you trying to get out of the deal? What do you need at this point in your career? When you answer these questions, you can start asking yourself the logical follow-up questions. For instance: a common issue for bands is they want as much reach and publicity as possible. Yes a label could get you that but would it be in your interest to hire a publicist instead of signing that deal? The publicist doesn’t have nearly the same network of studios, producers, or photographers the label does but they might be able to get you what you need at less of the cost. Weigh your options and see where you stand.
Next question to ask are the “why’s:” Why am I seeking a record deal? Why am I considering signing this deal with this company and not any other one? This plays into the “what” questions a bit but there are a number of answers that aren’t necessarily healthy for you. For instance, an answer that sounds like “it’s the normal progression of things in our career” is not a good answer for your career because it’s demonstrably not. If you can do it yourself why would you make giving up the right to make money off the sales of your music part of the natural progression of your career? Again, it’s a record deal. It’s a give and take. If you don’t know where you’ll be, or what you want, it’s hard to draw a map to get there. For this to be productive you need to think about the value they give you as well as the value that you’d give them. It may help to envision a balancing scale to see who is higher or if you work out about equal. You have to take the time
Once you’ve answered these questions in a manner that is logical and satisfactory with a general compromise hammered out within your band, you can start the process of prioritization. What are your outright deal breakers that you absolutely will walk away from the deal if you don’t get? Common ones include lack of or unfavorable publishing deals, percent of copyrights to give up too high, recoupable interest percent being too high, advance amount too high or too low. Once these are established, go further and decide what you’d like/would be nice to have in your deal. This means you aren’t going to walk away immediately if you don’t get it. These might include more or less options depending on your needs, renegotiating as needed, leeway to start your own publishing company, etc. etc. Again, don’t be afraid of negotiation. Read some books on it and try your best to build a friendly rapport with your A&R rep.
So, after all this, what does a good deal look like? Well in short some version of this:
Album plus 6 opt
20% net revenue
Advance of $75,000
If you don’t have a publishing arrangement we’ll give you a full publishing deal.
All this and all the specifics are expressed in 65-100 pages, unless there’s publishing to hammer out in which case it’s more like 150-200 pages. Indie deals are generally less, 45-65 pages. It’s also a good ideal to push for separate contract as well as the deal so that you get all the verbal salesmanship codified in writing. It might just save your ass. This is called a deal memo, which is a grossly simplified contract. Once you agree it goes into the long form contract. Terms aren’t negotiable after that point, (for instance if the original terms specify a $100,000 advance and afterwards you say $200,000 you won’t get it). New information is the only thing that you can renegotiate the terms of the deal memo (for instance we want you to work with x producer and pay them this much money. This is surprising but yes, the label can tell you to do just this).
Conclusively, I hope this has shed some light on the subject of record deals and how you go about deciding if you need one. It should also be said that if you get presented with a deal it might be a good idea to lawyer up especially if you get two or more competing deals. After all, I’m just a guy on the Internet who happened to listen closely to his teacher who’s a quite successful lawyer. If there’s one thing I hope you take away from this it’s that you shouldn’t be afraid to turn down a deal even if they fly you out and buy you dinner. Chances are that they need you a lot more than you really need them and your time is equally if not more important than theirs.
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