5 Things to Look for in a Record Deal

 

After years of hard work, you just landed your first record deal. Amazing. Now the record label sends over the contract and it’s thirty pages long. Yikes. Here are the main points to look for in a record deal and what to avoid.

1) How Long is the Term? This is a good starting point: how long will you be tied to this record deal? For the label, a longer term is more desirable, so they can earn back their investment and make a profit from your music for as long as possible. For you, shorter is better in any record deal. The reason? If things are going great with your label when the term expires, you can always sign a new record deal, likely with better terms. But if things aren’t so hot, you can get out and find a new label (or go back to being independent).  There will likely be “option” periods associated with any term, which allow the label to extend the length of the record deal. Ideally, such options should only be exercised via mutual agreement (i.e. not just the label deciding).

2) What is the Territory? Some record deals apply to a single territory (e.g. the USA), some apply to the entire world. If the former, you can in theory sign different deals in different territories. This can be a challenge in the digital era, where borders are somewhat arbitrary. If you sign a worldwide record deal, try to ensure that if the label fails to release your music in certain territories, those rights revert back to you. This allows you to either self release or team up with another record label in these territories.

3) What is Your Royalty? This is a big one. Many small to mid-size labels offer a “net 50” deal, which means that after they’ve recouped their expenses, you and the record label split profits 50/50. You’ll want to clearly define what expenses are allowed, and include some language that larger expenses (over $1000 for example) require your consent. For major label record deals, a typical artist royalty is in the 12-20% range. This lower royalty is a reflection of the increased investment that comes with a major label. In other words, you make less from record sales, but should be benefitting from a much larger investment in recording and marketing.

4) How Much Will The Label Invest in You? I try to get as much clarity as possible on this topic, in terms of actual budget commitments from the label. This includes dollar amounts budgeted for music videos, tour support, recording, radio promotion, and more. Your label may be hesitant to commit to actual numbers until they see how the records perform, but this is where you need a good entertainment lawyer advocating on your behalf.

5) Does the Label Participate in Non-Record Revenues? This is the biggest thing to watch for in a modern record deal. More and more, record labels are asking for a piece of the pie from non-record revenue streams such as touring, merchandise, and publishing. These are the so-called “360 Deals” that you’ve likely heard of. In many ways, they are a reflection of the modern realities facing record labels and artists. But before you give away a portion of these crucial revenue streams, you need to know what the label is prepared to do to earn their piece. If they want to commission on touring, will they be providing funding for tour support? If they want a piece of publishing, will they be providing publisher services including shopping your songs for film and television placements? Some labels who ask for these commissions do indeed provide these services, but some don’t. And remember: if you’re giving a cut of all these revenues to your label as well as a manager, it might not leave much for you at the end of the day.

These five areas are of course just the starting point. There is much, much more to look for in a modern record deal. If you take your career seriously, you will seek the advice of an experienced, trusted entertainment lawyer who will also help negotiate the best record deal possible for you and your career. As always, email me with questions.

 

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34 Responses

  1. Hi,

    How much percentage should a new artist give the producer form their 50%
    form independent record deal,

    The producer has paid for the recording also,

    Thanks,

    Reply

    2. It varies based on negotiation. Typically, new producers can charge 1% to 3%, and more established producers who draw audiences, and can truly influence the sale of your record can charge 4% or 5%, or more. It can be worth it if your production team helps you get spins, streams, features, and especially live venues where you really make most of your money in music; especially if you sign a recording contract with a major label.

      Reply

  3. Hi Kurt ,

    I have recently started my own label and signed a female vocalist , I got a producer to come to my studio to produce a song for my artist , I organized and paid everything for the session from studio time , food etc … So I am wondering what the percentage splits should be like between the label , producer and artist .

    Reply

  4. My roommate is a vocalist. I’ve been helping him get on his feet and get the plane of the ground for a career in music. At what point should I get a lawyer involved in a business partnership between childhood friends? As soon as income starts coming in? What material should I study? – to be prepared.

    Reply

    1. Read Donald Passman’s book, a great resource. And it’s never too soon to put something simple down in writing, so you both have mutual expectations.

      Thanks,

      Kurt Dahl
      Entertainment Lawyer

      Reply

    2. Yes. Always. You never know the outcome. My childhood friendship involved music. Where i invested a lot and got him pretty far along and signed. Friendships should be mutual but can change no matter how good or long.

      Reply

    3. This is my opinion but I would strike a joint deal in the form of a LLP or LLC in which you and him manage his whole career under the corporate umbrella including getting involved, make sure you both speak to an Accountant as well as a Lawyer of the best state to register!

      Personally if I was eventually looking to advise you then I would say register yourself as a S-Corp as the Artist Management and Vanity Label in Delaware with both of you as Corporate Officers and Shareholders.

      Then have your lawyer set up a separate LLC in the state of Nevada for having your artist friend assign the copyright too and this LLC with 1 share worth $100 is owned by the Delaware Company!

      This then gives you the option of basing yourself in the State of Nevada without moving there! and income is earned State Tax Free!

      Reply

    1. That involves a bigger discussion my friend! And depends on the deal. So many things to watch for, and that’s what a good entertainment lawyer is for! That’s what you’re paying for, years and years of experience to make sure you get the best deal possible.

      Kurt Dahl
      Entertainment Lawyer

      Reply

  9. What usually happens with regards to performing music made during the term after the end of the if the artist leaves the label. Can they still perform these songs live?

    Reply

    1. Yes, most definitely. There may be a re-recording restriction in the deal, but I’d of course have to see the agreement.

      Kurt Dahl
      Entertainment Lawyer

      Reply

  10. Hi Kurt,

    I’m an independent artist myself, small local buzz. I guess I have a label, but I’m the only artist. I’m assuming there is no way to just be an artist and collect income so I started my own indie label since a few hundred a month or so started rolling in; the artist needs to register his/her label as a sole proprietorship correct? Revenue such as checks would be written to my record label and would I just pay myself out? If I am the artist and label, I technically sign myself but how would my pay structure be? Could I make it where I just take 100% even though I’m signed to myself?

    Also, I did more research and got into publishing and started my own as well. Again, I am the only artist but do not plan on signing on other artist other than myself. I know it takes a lot of work to run a label/publishing that is why I do the creation of music and admin for myself only, but can my record label and publishing be under one LLC entity? Would the same apply, can I just collect all my royalties as the artist who is signed to the publisher?

    I guess to both entries, do I need to give myself a contract to keep 100% or do like a 50/50 where I leave half in the company and pay myself the other?

    Reply

    1. I have many clients that start their own label, and it’s mostly for tax benefits and also to create a brand etc for future artist signings. How you split the revenues is really a tax question rather than a legal one, but your suggested setup sounds like it would work.

      Kurt Dahl
      Entertainment Lawyer

      Reply

  11. I have produced many commercials and promotional materials for media and church nonprofits. Currently seeking management and entertainment lawyer.

    Reply

  12. As an agency for getting a record label deal for my artist,The label wants to pay 40% of the royalties to artist..Is it worth it?

    Reply

  13. Hello, I’m not a professional dj but someone wants to sign me into his label as a dj, he’s going to teach me how to dj and he said, we will do the 50/50 deal, where I’d give him 50% of my performance money since he will plug me for big parties and events. I don’t know how to go about it.

    Reply

    1. Whatever you do, I would put something in writing so all the rights/responsibilities are clear, in case there is success. Email me if you have further questions.

      Kurt Dahl
      Entertainment Lawyer

      Reply

  15. Hello Kurt.
    What do you think of song Trade R.com
    ?
    My name is Joe from the DC area. I have over a hundred instrumental tracks. All original all my music I own everything. Looking into Distributing them.
    I have worked with dance companies and done some film scores.
    Thanks for your time Joe.

    Reply

  16. I’m looking for a record deal. The songs today
    Aren’t fun ,love happy good time songs anymore. We as songwriters need to take the music industry back. And have fun again,make love not war. Contact me if you can help with a deal.

    Reply

  17. Is it possible to customize my initial music contract as artist or can I only subscribe to laid down generics?

    Reply
  18. Pingback: Got A Record Deal? 5 Things To Look Out For In Your Contract – Cruisewithhi

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