Don't Let These Labels Do You! A Beginner's guide through the basics of a record deal.

 

For most artists securing a record deal is the dream, it’s the goal of the hustle. Of course having the backing of a major label has its perks, suddenly you have the resources necessary to propel you to international stardom, with huge marketing and production budgets your career is set to hit the big time. The reality is that most artists get lost in the sauce, by that we mean that the seduction of being signed often leaves artists accepting deals which in the long run can hold you hostage.

Our aim at YMB is to empower the next generation and provide the tools necessary to navigate this complex, sometimes hostile and fickle industry. It is vital that as an artist you have at the very least a basic understanding of the clauses in a recording contract which have the power to determine the course of your career.   

Here we give you some key things to look out for and negotiate when presented with a record deal.

 

Ownership – how is your creativity exploited?  

In the creation of a song, three main copyrights arise; one is in the lyrics, second is in the composition of the sound recording and finally the performers’ rights from performing the lyrics on the track. As the ‘author’ of the lyrics, the arranger of the sound recordings or the performer of the song on the sound recording, you are the first owner of these copyrights. 

Most song writers will have their copyrights managed by publishers (sometimes the label is the publisher too), as a recording artist your rights will be managed by a record label - who will own the master. 

When you sign a record deal as a recording artist labels will need mechanism which allows them to distribute, promote and license your sound recording(s) (masters) for exploitation. It is in the interest of the label to ensure they can exercise this control as freely and for as long as possible. Therefore, most labels will seek to have complete or permanent ownership.

In addition to your copyrights this will also encompass the labels ownership over other intellectual property such as trademarks / likeness, which allows them to exploit your image, logo, domain names etc.

YMB GOLD TIPS:

Pay close attention to the wording:

-       Assignment = this is a complete transfer of ownership of your copyrights to the label.

-       Work-for-hire = though this is slightly less common, it may still come up. Typically this is wording you would see in an employment contract, which means that anything created during the course of your employment / deal becomes the property of that employer/ label.

 

It is obvious that in order for your relationship with the label to work they need to have the ability to exploit your work. However, there are other ways of achieving this without a permanent assignment. Depending on your bargaining position you could negotiate a licence deal which gives the label the right to exploit your work for an agreed period of time (most licensing deals will last 10-25 years) but doesn’t transfer complete ownership.

 

If you are negotiating with a major label with a huge infrastructure and it seems reasonable/logical to grant them an assignment, then it’s crucial that you play extra close attention to the term.

YMB GOLD TIPS:

-       There are instances where labels ask for a term which is ‘for the life of the copyright’ – in the UK a copyright lasts for the entire lifetime of the author + 70 years. You should not accept such an onerous term, this would mean that even once your record deal comes to an end the label will still have complete ownership of your copyright and that would also mean that they will continue to make profit and have the firsts rights of refusal for anything pertaining to the copyrights they have been assigned.

-       If you are offering the label an assignment, there should be a term in the contract which stipulates that all copyrights will revert back to you after a certain period of time.

-       Remember that when you agree to an assignment you are relinquishing ALL rights as the copyright owner to the label. In this digital age it is therefore also important to negotiate that you have promotional rights over your music which will give you the freedom to use your sound recordings on your personal platforms.

360 DEALS:

-       As we all know the way artists make their money has really changed in the digital age, artists main source of income is no longer record sales. Artists make money off touring, merchandising and book deals to name a few, for this reason record labels strive to secure a 360 deal which allows labels to profit from ALL income rather than just recording income. 

 

Minimum release commitment

This is the part of the deal that lays out the obligation the label has to put out your music, of course that is the aim, so imagine being stuck in a deal where the release commitment has been unfairly or vaguely drafted and your music actually never gets released.

You should make sure that it is clearly spelled out exactly what the release commitment is reliant on and that it is coupled with a sufficient marketing budget to push the release.

YMB GOLD TIPS:

Pay close attention to the wording used under this term.

-       The commitment will usually be linked to the discretion of the label by determining whether the work is technically, artistically and commercially viable. However, these things are subjective and allowing wording such as ‘Absolute discretion’ can put you in a dangerous position, you should push for wording which oblige the label to act ‘Reasonably’ when applying their discretion.

 

Exclusivity, Duration and Territory.

It’s pretty obvious that a label would want exclusivity to restrict the possibility that you may go and sign with another label if a better deal comes along after having invested all that money in you. This is usually tied in with the number of projects an artists is to release before being released from being exclusively bound to that label (the recording commitment). For example 1 album to be delivered within 12 months from the date of the deal, including the time required to promote the release.

YMB GOLD TIPS:

-       This part can get very tricky and it is absolutely vital that as an artist you understand exactly how long you will be bound to the deal

-       OPTION PERIODS: This gives labels the right to extend the contract for a successive period and apply a new recording commitment, the wording may look like this e.g. “contract term will be for a period of one year plus any option period(s), artist grants company six separate options to extend the term”.

This means that if the label exercises all options the you are potentially tied in to a contract which could last 7 years.

It’s crucial that you carefully analyse how many options to extend the label is asking for and negotiate it so that there is at its very highest aMAXIMUM of 5 contract periods.

 Most major labels have offices in all major markets which will mean that the territory will be ‘worldwide’. However, you may want to negotiate this if for example you only want to be exclusively bound to a label in the U.K. and have the option to sign a different deal in the U.S.A, depending on your bargaining power most major labels will want to grant Worldwide deals.

 

Artistic control

It goes without saying that this is a key area for you as an artist to negotiate to the best of your ability. It is no secret that labels are notoriously known for manufacturing artists, sometimes to such an extent that the artist loses their identity and passion as a creative. So it’s important to retain as much creative control as possible over not only your records, but the artwork, music videos, branding, promotional materials and the use of your likeness (trademark).

YMB GOLD TIPS:

Pay close attention to the wording used under this term.

-       Again, you would want to avoid wording which leaves approval to the ‘absolute discretion’ of the label.

-       To put yourself in a more powerful position, carefully negotiate that all artistic aspects are subject to your approval. E.g. subject to the written approval of the artist’ - labels may be reluctant to accept this as it could be burdensome to have to seek your written approval for all artistic works but you should find a middle ground which keeps you in control.

 

Royalties, Advances and Recoupment

Royalties is the money you are paid from profits for the exploitation of your records. In today’s digital age it is vital that this clause accounts for physical and digital income separately. The obvious reason for this is that the royalty rate for digital sales should be higher than the rate from physical sales as there is less cost and risk involved for the label with digital distribution.

Royalty rates will vary but are typically between 15-20% for physical sales and 20-35% on digital income.

YMB GOLD TIPS

-       Negotiating a fair royalty rate is imperative as this is part of your livelihood as an artist, on many occasions labels will try and start of with a low royalty rate subject to future increase negotiations – DON’T HAVE IT

-       Producers Royalty: Bare in mind that in most instances the producers royalty will be deducted from yours, so if the producer is entitled to 5% and your agreed royalty rate is 20% you will in fact only end up with 15%.

Advances is the payment you get up-front from the label against royalties which are recouped from future income. This is one of the strongest bargaining points for labels, by seducing artists with large advances they strategically place themselves in a position to negotiate a lower royalty rate for the artist. Of course the bigger of an artist you are the higher the advance.

YMB GOLD TIPS

Pay close attention to the wording in this clause.

-       Before you actually receive any money the label will recoup recording costs, video costs, promotional and marketing costs etc. (depending on the terms of your contract)

-       The label will also seek to recoup it’s advance and they will be very crafty in how this is presented in the contract. One thing you need to ensure is that the Advance is ONLY recouped from ‘record’ sale royalties and not ‘All income’ e.g. money received from endorsement deals etc.

 

What we have listed here are the absolute basics, a record contract can be a long and complex document with a whole leap of legal jargon which operate to act in the favour of the label (in most cases). We strongly advice that if you are thinking about getting signed or have a deal on the table that you get the right professionals involved. If you have any questions or need more clarity don’t hesitate to get in touch with the YMB team. With all that said, it is 2016 who needs a label anyway? …it’s the D.I.Y generation.