The terms in recording contracts are always tailored and negotiated for each individual situation. So no two are alike. However, they all have a basic structure from which they build from. Even if you decide to remain an independent artist, it is imperative that you learn as much as you can about the business you are in.
I’ll lay out some of the most common record deals in the industry, but I advise you to always research for yourself. The structure of these deals are changing constantly along with ever changing ways people are receiving their music.
Distribution deals with a major labels, commonly referred to as P & D (pressing and distribution) deals, are usually given to artists or indie labels who have created a significant buzz for themselves. In this agreement, the label takes on the responsibility of making the artists’ music accessible to the public by pressing and distributing it to retail stores and throughout the internet.The artist or indie label that the artist is signed to, is responsible for all other costs in a P & D deal. That includes any promotional costs, videos, radio, posters, wardrobe…everything.
The artist or indie label retains ownership of the masters. The distributing label almost never pays an advance and takes 20% to 25% of the profits made from music sales. Accounting for and retrieving your share of the profits is usually a task so make sure the contract you have with the label makes this less of problem.
These deals are useless to artists who don’t have the adequate financial backing nor an effective promotional plan to drive fans to their product. In other words, your CD maybe be distributed by Sony, but it will collect dust on some Walmart shelf, if you don’t know shit about running an indie label or promoting a record.
Artists and indies that have their street and internet grind together, find that they can do well without a distribution deal, but this takes an extreme amount of hard work and discipline.
Instead of being signed directly to a label, some artists sign to producers that record projects on them. A major label then gives those producers an agreement to develop artists under their umbrella and turn over complete projects for release. A lot of what the artists receive in a deal like this depends heavily on the aggreement between them and the producers. After the major gets it’s share, it is not uncommon for the production label to split 50/50 with the artist after recouped costs. Producers usually own the masters or share them with the label.
Major Label Deal:
This is the most sought after deal. The record label pays for everything. Recording, pressing, distribution, promotion, videos…etc. They even give you a hefty advance do you can you look fly while your record is out. Who’s wants an artist on their label looking broke? No one! So you go spend that fat advance on some fly shit and maybe buy you a nice whip. The only problem is…every dime they spend has to be recouped and you have to sell a helluva lot of record to make up for. Artists seldom do. Your royalty rate, as a debut artist, will be somewhere between 11%-15% of your music sales, and the major label almost always own the masters (even after they recoup their expenses).
The 360 deal, often referred to as the “multiple rights” deal, seem to be the future for artists agreements between them and labels. With this deal, the label gives the artists a big advance and joins with them in a kind of “partnership”, sharing in any and all profits made by that artist.
With the ever increasing decline in physical CD sales, labels entered into these deals with artists to create other profitable opportunities. These profits usually include a share of touring, songwriting, and merchandising. The label pays for everything and basically invests in the artist as a brand that can be used as a source of advertising revenue. There is no standard structure for this deal because they have not been around for very long.
As with any record contract agreement, always seek the advice of a competent entertainment attorney.