How To Negotiate A Record Deal

Getting signed by a record label can feel like hitting the jackpot in the music world—and for good reason! As an indie musician, you juggle everything from marketing and promotions to performing and collaborations, and it can become overwhelming fast. The music industry is as much about the business as it is about the music, isn’t it? Thus, getting backed by a label can help you take care of the immense pressures of the music business and focus on what you want to create. But before you start writing your Grammy speech, there’s one big thing to sort out: The Record Deal.

We’ll be taking a look at the following:

1. What are the Various Types of Record Deals?
   
   
2. How Important Is The Contract?
   
   
3. What are Advances and Royalties?
   
   
4. Why is the Duration Important in the Deal?
   
   
5. What does Exclusivity mean in a Record Contract?
   
   
6. Is the Deal Ensuring You Your Creative Freedom?
   
   
7. How are Copyrights Crucial in a Record Deal?
   
   
8. Final Thoughts
   

What are the Various Types of Record Deals?

In the past, major record labels were the gatekeepers to fame, managing everything from production to promotion for artists. They invested heavily in the potential of musicians or a new genre. They played a pivotal role in launching The Beatles’ and Elvis Presley’s careers into superstardom. Today, record labels still play a major role in an artist’s growth, offering opportunities and resources that are hard to come by on your own. But remember, record deals are written with the label’s interests at heart. So, before you sign anything, weigh the pros and cons, do your research thoroughly—and negotiate like your career depends on it!

A record deal is a contract between the label and the artist(s), which states the obligations and demands of both sides. A good record deal involves a mutual agreement, negotiable terms, and an equal division of revenue. However, you must know the different types of Record Deals as well.  

• Traditional Record Deal:
  This type of deal has been around forever in the music world! The label gives the artist a big advance in exchange for ownership of their masters and 80% of the royalties, with the artist paying back the advance. While it can be seen as exploitative, if used wisely, the advance can actually benefit the artist.
  
  
• Single Deal Recording Contract:
  This deal focuses on the release of multiple singles rather than an album as the consumption and sale of singles are better than albums currently and is also cost-effective for the label.
  
  
• EP Deal:
  This deal is wherein the label backs the artist with advice and direction in terms of promotions, contacts, and so on but does not promote the artist as its own. However, if the artist’s release is successful (on the substantial terms mentioned in the contract), the label will have the prospect of officially signing the artist.
  
  
• Licensing Deal:
  In this deal, the artist gives a record company permission to use their recordings. The label will then make, distribute, and sell the records. The labels are often open to negotiations of royalty shares in such deals.
  
  
• Profit Split Deal:
  This deal can occur if an artist has a project ready for release and approaches the label with a Profit-Split deal by which the label invests in the project's marketing. 
  
  
• 360 Deal:
  This deal is quite controversial. The label handles production, recording costs, marketing, sponsors, promotion, tours, branding, merchandise, and licensing but takes a percentage of all forms of income like touring, and merchandise, from the artist.
  
  
• Upstreaming Deal:
  This type of deal is popular with indie musicians. If an artist achieves a certain level of success under an indie label, a major label (which has a distribution deal with the indie) can step in. It’s like a hidden production deal that kicks in when the artist takes off. The advantage? Artists can grow without the pressure of labels, create music freely and level up when they hit that success point. The terms are usually pre-negotiated so that everyone is on the same page.

How Important Is The Contract?

The contract and paperwork might feel very technical and overwhelming because of the constant corporate jargon and incomprehensible way of writing. But, never, and I mean NEVER, sign or agree to anything without getting it on a written contract. 

A verbal offer may seem attractive, but it is meaningless unless it is written. A documented contract is more than just a formality; having everything written down allows you and the label to check all the terms and conditions and ensure that you're on the same page. 

Take your time and study the contract thoroughly; don't let anyone pressure you into signing right away. As you read, make a note of any sections that appear unclear, statistics you want to double-check, and crucial clauses you want to go over again. Having these notes ready, you can negotiate effectively, and you’ll also appear to be more professional when you point those clauses out. 

Look at the process like it is a soundcheck before a gig. Not doing a soundcheck or rushing through it might be faster but it can ruin your performance later. 

Pro-tip: It’s always better to lawyer up when you are reading the contract as it might contain some terminology and might be confusing. Getting a lawyer also helps you to get some help understanding the contract better and make a well-thought-through decision.

What are Advances and Royalties?

This part can get technical because it is all about the money! If you're new to the music industry, navigating the world of royalties might feel similar to learning a new instrument—difficult at first but rewarding once you understand it. Royalties, simply put, are the percentage of income and sales that your music creates. This percentage can be specified or negotiated, depending on the terms of the contract and the success of your music. 

As an Indie Musician, any kind of money coming in is welcome, isn’t it? But, it’s better if the money keeps flowing in. A contract typically has two payment options for the artist: A lump-sum amount known as an “Advance” and steady “Royalties” based on sales. Consider the advance to be a loan from the record company- you invest that money into your music and you have to pay it back with the sales your music makes. 

The standard rate for royalties is 12%-15%. However, it is strictly set by the record label. These royalties can be continuous if you make sure you’re getting a fair percentage from digital streams, physical sales, and sync deals. Do put in a fair amount of research to negotiate and agree to the royalty rates.

Why is the Duration Important in the Deal?

One of the most crucial aspects of negotiating a record deal is the contract duration. The length of a recording contract determines how long you'll be associated with a label, and trust me, you want to be in charge of that timetable. Contracts typically span from one to five years, but shorter arrangements (1-year term) with a chance of renewal are better. This allows you to make changes if things aren't working out, rather than getting locked in for too long and risking the label gaining too much control over your music.

Record companies frequently include a minimum commitment in their contracts, meaning you’re obligated to deliver a particular number of tracks or albums over that term. If you have not accomplished that obligation by the conclusion of the contract period, they may keep you on board until you do. 

Also, keep a look out for ambiguous language like "commercially acceptable." This could imply that the label has the authority to force you to re-record tracks until they believe they have a hit on hand. This can play out in multiple ways with marketing strategies, touring, merchandising, and many more things that labels are involved in. For instance, Halsey’s ex-label, Capitol Records did not allow her to release a new song that was ready for release for a month with a music video included because she couldn’t garner a “viral TikTok moment” surrounding the song. 

To avoid these risks, ensure that you fully understand the contract's agenda and any creative obligations you're making. Flexibility is vital—just as with your music, you want room to grow and adapt. Negotiating shorter periods with renewal choices puts you in charge of YOUR music!

What does Exclusivity mean in a Record Contract?

Most record label contracts include an exclusivity provision, which binds you to that particular label alone for the term of the agreement. In other words, you are the exclusive focus of their performance. You will be unable to offer your skills as a recording artist to any other label, so be sure you sign with the right label. You never know which trivial thing could land you in troubled waters, contractual breaches, and lawsuits. It is critical to thoroughly check the contracts and then make a decision. 

Exclusivity also means that you will be unable to feature on other artists' records unless the label grants permission. Some contracts take it even further, demanding you to work with the label to prevent unauthorized recording and sale of your concerts. It essentially limits your freedom—if they decide they don’t want you to collaborate with others or release certain content, you’re bound to follow their guidelines since you’ve signed the contract.

The notorious 360 Deal is an accepted practice. In this arrangement, the label not only receives a portion of your album sales but also diversifies into other revenue streams such as touring, retail sales, and even endorsements. While a 360 deal gives the label authority over many elements of your career, you still have some negotiating power. 

The more popular you are, the higher your chances of negotiating a favourable contract. If you have a loyal fanbase or a viral hit, you can modify the terms to maintain more control over your money streams. It's all about finding the appropriate balance between artistic freedom and commercial collaboration!

Is the Deal Ensuring You Your Creative Freedom?

Look, you stepped foot in this business because you wanted to express and do that freely. All of the songs you’ve made are because you have your own space to experiment and express. This is your creative freedom and I’m sure you’ve heard of a lot of instances where the artists have “sold their soul” to a label and didn’t get a whole lot in return. 

When signing a record deal, you should ensure the label will not interfere with your sound, image, or even your collaborators. After all, the audience fell in love with your distinct style and not with an image made by someone in a boardroom. Ensure that your contract allows you to stay committed to your creative goals or at least have a significant influence on how your music and identity evolve. You can negotiate creative freedom via termination clauses and ownership of your master recordings, exclusivity, and anything that you aren’t comfortable with as part of your contract.   

There are some decisions where the label’s input helped the artists grow significantly, achieve a new sound, or get rid of an obsolete image and build a new one. For instance, Def Jam Records was instrumental in Rihanna's transition with Good Girl Gone Bad. They advised her to move away from her Caribbean-inspired sound and towards a more edgy, pop-oriented style. This transformed her image, expanded her following, and propelled her to global celebrity. 

However, there is the instance of The Backstreet Boys who sued their label's parent business, Zomba, for $75 million, asking to be released from their 1994 contract. They said Zomba ignored their artistic needs, instead focusing on Nick Carter's solo career. The band also accused the label of promoting Carter through its website and email list.

How are Copyrights Crucial in a Record Deal?

One of the most shocking aspects of most record agreements is that you will often not own the songs you make- the label will (depending on the contract you signed). The record company typically owns the copyright to your song, which means they can control how it is released and sold. This implies they can transfer such rights to distribution corporations or others without giving you much control.

What does this signify for you, as an artist? Without owning the masters (the original recordings of your songs), you have no control over how your music is used in the future. Want to utilize your song in a film, a commercial, or re-release it? The label calls the shots. You basically hand over the rights to your work and have to seek permission to use them. If you want long-term creative and financial flexibility, this could be a major drawback.

But don't worry—there is a way to increase your negotiating power. You can try to negotiate partial ownership of your masters or include a clause allowing you to buy them back later. It ensures that you maintain control over where and how your art is used long after the first recording session has ended.

Take inspiration from musicians such as Prince, who famously fought for control of his masters, and Taylor Swift, who is re-recording her old albums to reclaim ownership. They are excellent illustrations of why it is critical to have some degree of control over your job.

Final Thoughts

Negotiating a record deal is similar to making a great song: you need the right balance of melody (creative control), rhythm (fair royalties), and harmony (a strong relationship with the label). It is crucial to achieve balance so don’t rush into decisions and if you feel unsure, consult a team and take your time to think stuff through. This deal sets you up to be a great artist today and is your path to future success as well! Make sure you set the RECORD straight when you sign on the dotted line!

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