What's the Deal with Record Deals
So, you’ve been practicing and writing songs and your mom (among others) says you’re awesome and should make a record. So what’s the next step? Getting a record deal! Right? Well, the short answer is yes… but the actual answer is complicated and requires a little bit of background knowledge.
There are basically two ways to go about making a record. You can do it yourself (DIY) or you can use a record label.
Digging deeper into the record label sphere there are two types of record labels: Major record labels and Independent (Indie) labels. Now, even deeper info:
There are three major record labels: Sony BMG, Universal Music Group, and Warner Music Group. That’s it! Any other label you may have thought was “major” is owned by one of the three labels mentioned above. Indie labels by definition are labels that are not owned by one of the major labels.They can be owned by anyone from a full-time accountant with a bit of extra money and a love for music to a successful producer who branched off and decided to do his own thing.
Major record labels have some advantages. They have A LOT of money!$!$!$! This means there is more money to spend on recording, marketing, and distributing the album. The money can also be spent on artist development, album tours, and non-music related potentially money making activities such as clothing and fragrance lines. The second big advantage to working with a major label is that they have LOTS of connections. They have been around and in the business for years and not only work with the best in the business. The major labels have access to the most success artists, producers, marketers, artists developers, managers, agents, and anyone else you could possibly need to work with. Not to mention all of the major record labels are major players in other forms of entertainment such as TV and film (talk about a monopoly!!!). So depending on the type of deal you get (well talk about that later) the major label can hook you up with everything you need to be successful. On the flip side....
There are some disadvantages to working with a major label. The first is that because they have a lot of money and will likely spend a lot of money on you… they are likely to assume more creative control over your music. While some musicians may not have as much of a problem with this as others, those who write and produce their own music might not work well with someone who wants to change everything about the song that you spent months writing and producing to perfection. Major labels also have a larger pool of artists and a high turnover. Meaning the competition is stiff even once you get the deal you could get dropped for various reasons including there’s another artist similar to you who is easier to work with, prettier, funnier, has a cuter dog, or some other random or not random reason. The last and possibly the largest disadvantage to working with a major label is that the artist, especially new artists, are likely to get a smaller cut (percentage wise). Though an established artist, depending on the type of deal (hold your horses we’ll talk about this in a bit) may be able to negotiate a larger cut.
The big advantage to working with an Indie label is that it MAY be more “artist friendly”. The artist retains greater creative control and gets a larger cut (percentage) of the profit from the records...typically. Now if the Indie label is operating off of venture capital funds, donations from friends and family, or the personal funds of the owner; there still are people interested in making a return on investment, so don’t think you’ll automatically have control over everything with your music. You’re still spending someone else’s money, so they are likely going to want to have a say in how it’s spent.
The potential downsides to working with an Indie label are that the labels are smaller, so they have less money (than the major labels) and fewer connections. Now there are some caveats to these disadvantages that depending on the situation and the type of deal (okay okay I’m talking about that next) that may negate the disadvantages. Though the Indie labels have less money than the major labels they still probably have more money than you have! The second caveat is that if the label is owned, operated by, affiliated with, or just has the number of, some successful songwriters, producers, managers, agents, or anyone else in the industry that’s still a connection that you don’t have. And some Indie labels are quite large with a pretty impressive artist roster (some of whom were previously signed with a major label).
So now that you know a little about the different types of labels I feel it’s important to talk about the different types of record deals. Now there are many many types of record deals but these are the most common: Production, Distribution, Standard, and 360.
Production Deals: with this type of deal the label pairs an artist with a producer (or two) to work on the album. This is used for new artist to help develop their artistry, get exposure, and build a fanbase. This can also help an established artist reach a new fanbase. Because the artist is working with the producer their cut is smaller. There may or may not be a recording advance
Distribution Deals: this is when the record label agrees to take care of the logistics required to make the album available for purchase. This type of deal does not get an advance… the artist pretty much just delivers the completed album to the label and they “put it out there”. This is great for establishedartists who have a good marketing team (or solid understanding of marketing) and relationship with their fan base (meaning they have fans that constantly buy things from them). This is typically the deal where the artist stands to get the largest cut of the profits.
“Standard” Deals: this is the deal people typically think of when they think about getting a record deal. The label takes care of everything pertaining to the album: artist development, distribution, marketing, recording, and the artist typically gets an advance. The artist typically gets 12%-15% of the profit from the album (after paying back any advance).
360 Deals: this is a relatively new type of record deal. This is like the standard + deal. Not only does the record label do everything in the standard deal but they also coordinate tours and other things such as TV appearances, clothing lines, product sponsorship, etc. With this deal the label not only gets a cut of the profits from the album, they get a cut of anything that results from their efforts even if it's not music related. So if the record label gets the artist an appearance on a TV show they get a cut of the money made from that appearance.
Thanks for reading this post. I hope you found it helpful. In a later post, I will talk about the DIY approach to making an album as well as so “combo” methods. I’d appreciate your feedback so if you have any questions, comments, or concerns please let me know in the comments. For further reading on this topic check out the two books below.
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