The Deal Breakdown
Record deals have been present since the earlier days of music recording but the structure of these deals have evolved with time and technology.
In the 60s the format of the LP grew, royalties in the UK ranged between 8-15%. The 70's introduced the independent label predominantly in the U.K, which didn't change the value of royalties too much, standing between 5-15% with the expansion of the upfront advance.
The 80s saw the rise of the advance, followed by lengthier contractual periods and hidden clauses as imagined.
Artist Development Deal
The Artist Development Deal model was one of the most popular pre-internet. If the label liked you, but didn’t want to fully commit to a deal.. this may have been an option. They use their resources to build the artist brand, share industry contacts and invest time into developing the artists they believe in. Labels had the ability to generate revenue from live and publishing, with clauses that laid out obligations of a full record label deal. Nowadays, these deals can range from being extremely beneficial for artists to being openly exploitive. With the label receiving a % during the agreed term, contracts may include clauses that permit labels to generate additional income from whatever is sold from the compositions created during the term, over a “sunset period” e.g 10 years. Let’s say you sign for 4 years, once the 4 year term is finalised, the label have the ability to take 10% from the gross revenue you made during the 10 years and everything negotiated during the term but for those 10 years e.g brand endorsements/sponsorships.
The Standard Record Deal
The “Standard” Record Deal highlights the type of offers prior to the digital revolution and the type for a-list artists with full control of their brands. Based largely on the amount of albums (defined 10+ songs) + optional periods with find artist having deals up for renegotiation. Labels 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. This isn’t the standard record deal any longer, considering this worked best for the physical age.
Once physical consumption reached its peak and Napster revolutionised the industry alongside Steve Jobs creating iTunes, the need for physical slowly declined. Digital downloads and piracy paved the way for the infamous 360 deals aka Multi Rights Deals that dawned over the industry from the late 90's.
360 deals give labels the opportunity to own the artists and generate income from every revenue stream the artist has apart from record sales including; 15-30% of endorsements, 10-30% of touring, 20-50% of merch, 15-40% of sync and anything else the artist makes money from. They believe that if they break the artist, they’re pretty much deserving of the cut. Some artists may still sign deals like these.
Initially the roles of the distributor included the payment, manufacturing and pressing of physical. They had relationships with both labels and retailers and more of less played the middle man. As the industry shifted to a digital model, distribution companies followed. The DIY generation was created by easily accessible DAW software, whilst the backlash of *bad deals* and iTunes having provided a more practical way for artists to release songs without the cost of CD production. Distribution today refers to presenting a finished product and getting your song out, traditionally into stores but today virtually too. As an affordable and practical solution for the self-made artist, these deals don’t include having to sell your rights meaning you monetise on money made from sales and, most importantly, you retain ownership of the recordings themselves. Distribution deals are pretty popular amongst artists in 2020, they offer global distribution, give artists full control over music without collecting a immoderate royalty. It’s ideal to understand what is expected of a distribution company as some companies may offer additional label services for example; marketing, advertising, sync licensing, data & analytics and so forth.
Profit Split Deals
Profit Splits/Net-Profit Deals are short-term agreements between the label and artist based on splitting the net profit (amount remaining after costs) on sales 50/50 once all costs have been covered. Costs including production, manufacturing, design, distribution, marketing, promotion, anything else with a price-tag attached that’s connected to the recording under consideration. Nowadays, labels will gladly look at funding artists based on the creative product instead of how they can make monetise long term. Furthermore this means they’ll fund marketing if approached with a well-produced project as the artist has already funded the project. If it works, both parties share profit equally. If it happens the do the opposite, the label doesn’t lose out on much as they didn’t invest.
Licensing deals are often confused with distribution deals. Licensing is when a “label” or distributor purchases the rights to your album/song. They will pay you a one off upfront fee and taking a risk to push the product. These deals are considered more practical for artists who want to break in international territories. Let’s say you have a song you want to release in Germany, a German label will license this from you, pay you and take on the role of promoting, distributing and manufacturing the song in that country. If they do make money, it’s theirs. If an artist did decide to go this route but in their own territory, it’ll be based on the resources provided by a major label for wider scale exposure.
Single deals quickly becoming the new normal as virality is enforced by creativity across social media platforms. Digitally the market has advanced to an understanding that singles sell, more than albums. Album productions are costly and still push out singles which usually become the money makers. The additional tracks may become an investment bust depending on the artists. Instead of signing for 3-4 albums, labels can demand 40 singles. this gives the label alongside a&r’s the opportunity to allocate the best tracks to promote as opposed to albums that may only contain a few strong singles per album.
Artist Deals are essentially artists signing other artists. Something we see a lot with artists today as they have the right platforms and therefore have the ability to ignite the right conversations & create their own labels.
Some have the chance to distribute via the major labels. Even though the 360 concept may remain between the Artists, the Label partnerships remains the same. For example, If G24 signs B13 and Artist G24 is signed with Columbia, G24 and B13 will both be partnered with Columbia, this is called a joint venture.
Don’t be mistaken this does not mean all signed artists that sign artists automatically sign them to a major. Many artists create their own independent labels and therefore have the ability to closely control decisions made in relation to their artist.