An essential component of any serious musician or producer’s career since the middle of the 20th century, the record deal, or recording contract, can be the doorway to fame and riches or the first step on the road to potential ruin. A truly life-changing document, it sits at the heart of everything record labels are about…

WHAT’S A RECORD LABEL?

A record label is a commercial organisation that manufactures, distributes, markets, promotes, sells and generally ‘owns’ the music and physical media made by the artists legally bound to it. It comes in two flavours: the major and the indie.

The majors comprise the many subsidiaries of the ‘big three’ labels: Universal Music Group, Sony Music Entertainment and Warner Music Group. Between them, this titanic trio command roughly 80-85% of the market, with well-known subsidiaries including Parlophone and Atlantic under Warners, Def Jam and Capitol under Universal, and RCA and Epic under Sony. Major label artists comprise the vast majority of ‘headline’ acts, from U2 and Coldplay to Daft Punk, Beyoncé and (as of her £90m move from XL to Columbia earlier this year) Adele.

The remainder of the market is shared between countless independent (indie) labels, serving every conceivable genre of music, from Toolroom and Earache to Ninja Tune and Onyx Classics. They vary in size, from enthusiastic one-man operations to moderately sizeable outfits like the aforementioned, and work on a very different financial footing to the majors – ie, they don’t tend to have much money to risk on big advances and fancy top-end studios. Better known examples of indie artists include The Cinematic Orchestra, Roots Manuva and The Horrors.

There’s also a crossover point between the majors and the indies in the shape of the Distribution-Only deal, whereby the former simply get product into the shops for the latter, with no say in what they release or when they release it.

WHAT’S A RECORD DEAL?

It’s very important to be clear on the difference between a record deal and a publishing deal. The two are dealt with entirely separately, and ideally, you want both.

A record deal is a legally binding contract drawn up between a label and an artist, laying out and enshrining all obligations on both sides. Obviously the term ‘record’ doesn’t refer exclusively to vinyl pressings and CDs any more – it covers downloads and streaming, too.

It’s very important to be clear on the difference between a record deal and a publishing deal. Publishing deals – which we’ll come back to in a future Roland blog post – relate to songwriting, while record deals relate to recordings. The two are dealt with entirely separately, and ideally, any artist writing their own material as well as producing it wants both.

Until a few years ago, the most deal most commonly offered by the majors was the Direct Sign, under which the label owned the master recordings and the copyright on them, and the artist got a percentage of all profits made – ie, royalties, typically between 15 and 20%. For a specified length of time or number of records, the artist could only make records for that label, and the label would market and sell them as best they could.

The Direct Sign deal does still hit the table from time to time, but with the music industry now having to exploit multiple revenue streams to make up for the losses incurred by piracy, it’s largely been replaced by the 360 deal. This expands on the Direct Sign, giving the label a cut of the profits generated by everything the artist does, from movie soundtracks and endorsements to touring and merchandise, rather than just record sales. The down side of this is that the label effectively owns the artist, lock, stock and barrel. The potential up side, though, is funded label involvement in all those endeavours, which can be immensely beneficial, particularly for the fledgling artist.

While 360 deals have worked very well indeed for some artists, for others, they’ve been a total nightmare; so if such a contract comes your way, be sure to research it fully before signing.
An often misunderstood element of any record deal is the advance. This is a sum of money given by the label to the artist for them to live off while producing an album, which then has to be paid back from sales of that album before any royalties can be claimed. It’s a loan, in other words, and most assuredly not a free pot of gold to be squandered on a new Lexus.

All costs involved in recording and producing albums and singles are also usually on the artist, too, so although it might look like the label are paying for all that studio time and associated expenditure, you will be presented with a bill at the end. Keep this fact firmly in mind when you’re hiring in the London Philharmonic just for that high-concept middle eight…

WHAT OTHER KINDS OF RECORD DEALS ARE THERE?

Although the 360 is now the contract of choice for major labels and quite a few indies, there are other types of record deal worth mentioning, too.
For the entirely self-produced artist, the Distribution Deal can be a great option. Under this one, you deliver your finished product to the label, who then put it in the shops, both real and virtual, and sometimes handle marketing and promotion as well. You receive the wholesale price of everything sold minus the label’s cut of up to 30%, and, crucially, you retain ownership of the recordings themselves. The Pressing and Distribution Deal adds manufacture of CDs and vinyl into the label’s side of the contract, paid for using an advance that they recoup before you see any profit.

If a label likes what an artist does but doesn’t yet envision enough monetary mileage in it to serve up a full-blown 360, they might offer an Artist Development Deal instead. Under this contract, the label pays for production, distribution and marketing of a small number of tracks in exchange for minimal artist royalties and the possibility of a bigger deal in the future. Clearly, the Artist Development Deal is heavily weighted in the label’s favour, particularly if you’re already able to produce finished masters in your home studio. That’s not to say they’re a total waste of time, though – you just need to be very confident that your ‘development’ will result in a proper deal at the end of the line.

A relatively new invention and one that’s finding particular favour with indie labels looking to minimise non-recoupable expenditure, the Net Profit Deal sees the label and artist splitting the net profit on sales 50/50 after all costs have been covered. ‘All costs’ means production, manufacturing, art and design, distribution, marketing, promotion, publicity and anything else with a pricetag attached that’s even vaguely connected to the recording in question. You need to sell a lot of records to make this one worthwhile, but assuming the label keeps costs under control, it can be a winner all round.

PICK YOUR POISON

Perhaps the most important thing to understand is that any record deal is a gamble for both you and the label.

So, assuming you’ve got your heart wholly set on a deal, which should you aim for: major or indie? You won’t be surprised to learn that there are pros and cons to each. The majors have stacks of money to throw around, vast distribution networks and huge marketing clout, while indies tend to be more ‘into’ the music, pay greater attention to each individual artist and can be more flexible in terms of contract details and that all-important financial split. The majors can be absurdly demanding in their pursuit of the holy dollar and have a tendency to abandon artists as quickly as possible once sales start dropping off, while indies don’t have much money (any advance will probably only cover recording costs, for example) and aren’t geared up for top tier marketing and promotion.

All that aside, you are, naturally, more likely to succeed in getting signed if you target indies rather than majors, particularly if you produce dance and electronic music. This is partly because there are so many of them, and partly because their infrastructure enables them to be much more modest in their expectations and requirements. For the indie, the talented bedroom producer able to put together mastered tracks on a shoestring is a gift.

Very broadly speaking, if you want to take the long odds on getting rich and famous and have no qualms about shifting your artistic direction on demand for the sake of commercial success, go major. If you want a somewhat better chance of ‘just’ earning a living making the music you want to make, look to an indie. Perhaps the most important thing to understand, though, is that any record deal is a gamble for both you and the label.

Finally, it goes without saying that you should never sign a record deal of any kind without getting a reputable music lawyer to look at it first, questioning anything you don’t like the look of, and negotiating changes if necessary. When the big day comes, you’ll be so eager to sign on that hallowed dotted line that your rational brain will take a back seat to its optimistic, emotional counterpart, but you’re well within your rights to get any deal properly checked over and take a few days to think about it. If the label pressures you into making a decision there and then, walk away – they’re probably not the kind of organisation you, as an artist, should be getting in bed with anyway.