Opinion: The trials and tribulations of record deals

Image courtesy Wikicommons
Image courtesy Wikicommons
John Seay
John Seay

First there was nothing, and then there was something, and then there were musicians, and then some people with money figured out how to profit off the musicians and lo, the major labels were born. And it was good for a few musicians, but maybe not so good for everyone else. And then came the Internet, and then Internet porn, and then music piracy, and then more porn, and then everything in the music industry changed. Then some guy in Sweden licensed a bunch of content from the major labels and put it online and lo, music streaming was born. And it was good for the major labels, and maybe a few musicians, but other musicians thought it wasn’t so good and so lo, much debate, lots of misinformation and even some lawsuits, followed. Oh, and there was probably some more internet porn in there too.

The music industry has changed dramatically over the last 20 years. Musicians now have more control over their careers than ever before. Gone are the days when signing to a major label — and therefore also signing away many of your rights — was the only way to distribute your music. Now, in the span of a few hours, you can write and record a song and release it online, all while keeping those valuable rights intact. But, if you can do that, then so can the kid down the street — and his friend, and his sister, too … and apparently everyone now living in Brooklyn. Releasing your music online, without more, is like throwing a glass of water in the ocean. There’s a good chance it will fade away without making waves.

To be sure, some artists have generated enough attention on their own, or with the help of a few industry professionals, and have acted as their own record label, signing deals with distributors along the way as needed, and retaining far more of the money in the process. But, this option is not easily obtained, and it involves a lot of work and upfront financial investment on the part of the artist or the artist’s financiers. For the rest of us, labels still serve a valuable purpose under the right circumstances. Below are a few reasons why partnering with a label might be worth considering, even in this day and age.

Labels Have More Resources
Yes, you can theoretically release, promote, market and monetize your music yourself, but it’s a ridiculous amount of work to do, and because most of it requires specialized knowledge and skills, you might not do it well, or at least not as well as it should be done. And, while you’re doing all of that, who is writing and performing your songs?

A label can help you establish a vision and timeline for your project. They can handle sourcing, distribution, sales, marketing, social media, press and radio promotion. They presumably know how to market your music (and by the way, they should be able to explain to you how they plan to do that before you sign with them). Labels also handle accounting, so that you don’t have to worry about paying mechanical and producer royalties. Labels have a person or a team of people to do all of these things for you, and better than you would be able to do on your own, because they have more experience.

Of course, not all labels are created equal. Some are better at certain things than others. Depending on where you are in your career, you might be willing to sacrifice, for example, radio promotion in favor of some of the more basic label functions. Try to learn what your label’s strengths and weaknesses are before entering into an agreement. Knowing the area in which your label is weakest may help you address that concern yourself.

Labels Have More Money
The above services cost money, even if the label handles them in-house. Labels incur these expenses at no upfront cost to you in exchange for participation in the revenues they collect from your music, and they only recoup that investment if the music sells. Remember that the risk of losing that investment is the risk that labels take. You should never be asked to repay any of those amounts from your own pocket except in a few specific situations.

We all know that major labels still have deep pockets and therefore the ability to spend big on certain releases. And, that’s still a model that works in some circles (notably, pop and country). For most artists reading this article, though, spending so extravagantly would be a disaster and guarantee that the artist’s label would never recoup, and therefore that the artist would never receive any royalties. Any investment by a label should be smart — calculated to be just enough to boost sales, but small enough to not subsume the profits.

Before signing a record deal, you should have an idea of what kind of promotion you’ll be getting from your label and what sorts of expenses they’ll be incurring on your behalf. Some labels will even agree to attach budgets to the deal itself, or at least have ongoing conversations about budget. At the very least, you’ll have an idea of just how un-recouped you are so you aren’t expecting a check when none is forthcoming. Remember too that how much the label is investing has a direct effect on what they’re asking for in the record deal.

Labels Have Connections
Labels know people. Typically, they’ve worked with a few different companies in different areas of the industry. They can help open doors for you. They may, and probably do, have connections to various placement and licensing professionals. Many labels have thousands of email subscribers and followers on social media. If you sign onto the right label, then there may even be another, more successful band on the label with which your band can tour. Certain labels also have great reputations as being tastemakers. Growing up, for me it was Matador, Merge, Sub Pop, 4AD, Thrill Jockey, Touch and Go, Drag City, etc. By signing with one of those labels, you are tapping into, and benefiting from, that reputation.

If you want to know what the label can do for you, then ask, or better: ask another band that’s on the label. If the label doesn’t have a solid answer, then they either haven’t put enough thought into your project or they don’t have adequate resources, either one of which is a red flag. Remember that you don’t have to sign with anyone, so whichever company you do sign with, it should be a good fit and someone who can help your career.

The Deals Have Changed … Some
Label deals, particularly small and mid-sized label deals, have evolved. Although you may still occasionally see the five or six album deal where the artist is accounted to on a royalty basis as a percentage of the wholesale price, those deals are typically reserved for the major labels. Deals with smaller labels often provide for simpler artist royalty computations, often based on the net profits of the label. Some deals even provide for licenses of copyrights versus transfer of copyrights. These deals are typically for a shorter duration, often three albums or even fewer. Of course, that doesn’t mean they are always fairer — a “simpler” deal can be deadlier than a 60-page deal with a major label.

Whether a particular deal is “fair” (which never means the same thing to both sides) depends on your leverage in the negotiation (usually based on your sales potential) and the upfront investment on the part of the label. You are always going to have to give something up to get the help of a label, even in the best scenario. An attorney can help you decide what changes, if any, to request to any deal that is offered to you, with the understanding that most labels are more than willing to discuss reasonable changes to their form agreement.

The Decision to Sign
Before you sign with any label, big or small, you should at a minimum ask yourself whether the label is going to generate more money for you than you could on your own, and whether the rights and percentages they are taking in exchange for their investment are commensurate with that increase. And, as always, the best thing you can do to help your career is write original and compelling music. The right deal with follow.


John Seay is a musician-turned-entertainment attorney at The Seay Firm LLC, a law firm located at the Goat Farm Arts Center. You can read more about him and his practice here.

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