Record Deals in Plain English - Part 3

This is part three in a series that breaks down the deal points of a recording agreement into simple language that is easy to understand.

The post below starts with section 6.

Review parts 1 and 2 to catch up:

• In Part 1 we went over record deal basics, advances, and royalties.

• In Part 2 we covered the topics of copyright ownership and control.

The goal is to give YOU a clear picture of what you are getting yourself into if/when you sign a record deal.

But first… a disclaimer!

There are two sides to every negotiation, but I write from the perspective of the creator. It is part of my life’s mission to empower music creators, which is what I aim to do in this post.

However, it is important to keep in mind that each label is a business. Businesses are required to make smart business decisions and look out for their own interests.

In other words, I’m not trying to downplay the importance of labels or suggest that everyone should stay independent.

I just want you to have power at the negotiating table 💪 

6. MARKETING & PROMOTION: NAVIGATING THE MUSIC INDUSTRY HYPE MACHINE

It's time to peel back the glitz and glamour of the music industry's marketing machine.

The label's job is to transform you into a household name, but that doesn't always happen. Google the success rate of artists on a major label, and the results may surprise you 🤯

Behind the bright lights there’s a complex web of budgets, recoupable costs, and fickle fan preferences. But with the right mindset and strategy, you can leverage the label's marketing power in your favor.

The Budget Breakdown: Knowing the Numbers Behind the Hype

• How much money is the label actually committing to your marketing and promotions campaign?

• It has to cover a range of expenses, from social media ads, to playlisting, to influencer marketing, and potentially even radio promotion.

• See if you can get a closer look at the budget breakdown the label has used for previous releases, and use it to gauge their effectiveness before signing with them.

The Recoupable Challenge: When Promo Costs Become Your Problem

• Chances are those marketing expenses are coming straight out of your royalties. Review Part 1 Section 2 on Advances.

• That means your hard-earned streaming and sales income is being used to pay back the label's promotional efforts.

• It's a double-edged sword – the more the label invests, the more you owe them down the line.

• Negotiate wisely to ensure the recoupable costs are fair and transparent!

The DIY Expectation: Embracing the Social Media Hustle

• Don't think for a second that the label's marketing machine will do all the heavy lifting.

• You'll be expected to maintain an active, engaging presence on social media.

• Cultivate a loyal fanbase, create shareable content, and keep that hype train rolling. Revisit The Fanbase Flywheel for tips on building a scalable music money machine.

• The label wants to see you putting in the work – your success is their success, which begs the question…

Again, this is where the leadership mindset comes in. You are the leader and the label is part of your team!

The Reality Check: No Guarantees, Only Potential

• Just because the label is investing in your promotion doesn't mean they'll move the needle in any significant way.

• Their focus is divided, their resources are spread out over many artists, and their bottom line (profit) is always first priority.

• There's no surefire formula for music industry stardom, no matter how much the label spends.

  • There may not be a formula for ‘stardom’, but there is a formula for long term success - create a catalog of truly exceptional songs and sound recordings, and market them continuously.

  • You can’t pick the winners, but you will win in the long run with enough great songs. It’s a numbers game!

• Your destiny isn't entirely in the hands of the label – you have to be ready to seize every opportunity as the master of your own fate. And remember…

The Empowered Mindset: Leveraging the Label's Muscle

• See the label's marketing machine as a powerful tool, not a magic wand. You still need to know how the tool works in order to leverage it!

  • Revisit the Classic Formula for Music Marketing.

• Use their resources and connections to amplify your own strategic efforts.

• Maintain a clear vision, stay flexible, and be ready to adjust the plan if it is not working.

• You are the creative force at the heart of this enterprise. Don't let the label's agenda eclipse your own.

Strategies for Marketing Leverage:

• Negotiate Transparent KPIs - Establish clear, measurable goals for the label's promotional commitments. Hold them accountable to those targets, and don't be afraid to demand more.

• Cultivate a Diverse Fan Ecosystem - Supplement the label's efforts with your own social media, live shows, and community building. Diversify your audience reach beyond the label's traditional channels and collect as much fan data as possible!

• Explore Alternative Promotional Avenues - Investigate influencer marketing, sync placements, and other out-of-the-box opportunities.

The more you can bring to the table, the more leverage you have in the partnership.

7. CONTRACT LENGTH: DETERMINING THE TIMELINE OF YOUR MUSICAL FUTURE

Let’s talk about one of the most critical aspects of your record deal: TIME

How long will you be obligated to work exclusively with this label?

Album Commitments: The Multi-Album Marathon

• Your contract might be for one song, one album, or it could stretch to several consecutive albums.

• Each album is a milestone, but also a potential hurdle.

• The more albums you're committed to, the longer you're tied to the label's actions and limitations.

• Pro tip: Negotiate fewer guaranteed releases with options based on performance. It gives you more flexibility and leverage.

Options: The Label's Choice

• They can choose to extend your deal if you're blowing up, or cut you loose if you're not meeting expectations.

• Options usually benefit the label more than you. The label gets to decide if they want to keep you in the deal.

• Negotiate hard on these. Try to limit the number of options or include performance benchmarks that must be met for options to kick in.

  • Remember: if you do blow up and you are free of contractual obligations, you can renegotiate your deal for more favorable terms or use your popularity to build your business without a label.

Delivery Schedule: The Rhythm of Your Creative Life

• Know exactly when you're expected to deliver new music.

• These deadlines aren't just suggestions – they're contractual obligations.

• Understand the consequences of missing deadlines. It could trigger penalties or even breach of contract.

• Pro move: Build in some flexibility and pad your timeline a bit. Creativity doesn't always follow a schedule.

Exit Strategies: Mapping Your Escape Route

• What happens if things go south? You need to know how (and if) you can leave early.

• Look for mutual termination clauses or performance-based exit options.

• Beware of one-sided termination rights that only benefit the label.

• Remember: The best exit strategy is one you never have to use, but always have in your back pocket.

A Key Negotiation Strategy:

Create milestone-based renegotiation points.

Include clauses that allow you to renegotiate terms after certain achievements. This lets you capitalize on your growing success and adjust the deal in your favor as you rise in popularity.

Don't let the allure of a long-term contract blind you to the importance of flexibility and new horizons.

Your career is a journey, not a destination.

Make sure your contract length gives you room to explore, experiment, and excel. The right balance of commitment and freedom can empower you to always work with the right partners for each phase in your career.

8. FINE PRINT: THE DEVIL’S IN THE DETAILS

The fine print isn't just legalese; it's a determining factor of your music business future.

Contracts can be very creative, which means there can be an infinite number of fine print deal points. Here are a few of the most important.

Territory: Mapping the Borders of Your Label’s Power

• This defines where your music can be sold and distributed.

• Worldwide rights are most common, but what if a different label could do better in certain markets?

• Consider carve-outs for specific territories where you might want to retain control.

  • It may be unorthodox, but this could include seeking out a label in a different country to represent you only in that territory.

  • For instance, if you are a U.S. artist and could negotiate a regional deal with an Australian label, that move could work out in your favor.

  • Your boosted presence in another territory could give you more bargaining power in the U.S.!

• Pro tip: The music world is global, but markets are local. Develop your strategy accordingly.

Reserves: The Label's Financial Safety Net (at Your Expense)

• Labels can withhold a percentage of your royalties as a hedge against returns or overpayments.

• This can significantly delay your payday and impact your cash flow.

• Negotiate hard on the percentage and duration of reserves.

• Remember: Your art is creating value now. Why should you wait to be paid for it?

Audit Rights: Make Sure Nobody is ‘Cooking the Books’

• Can you verify the label's math? How often? Who pays for the audit?

• This is your financial future. Don't let it become a tangled mess.

• Push for regular, comprehensive audit rights. Transparency is key, especially when it comes to your money.

• Pro move: Negotiate for the label to cover audit costs if any discrepancies are found.

Strategies for Fine Print Mastery:

• Get a seasoned entertainment attorney to review your contract.

  • Their experience can spot traps you might miss. Don't shy away from asking questions. Understanding is your strongest negotiating tool.

• Create a fine print checklist of must-have clauses and deal-breakers before you start negotiating.

  • This keeps you focused on what really matters amidst the sea of legalese.

  • Don’t forget about reversion clauses so you can take back ownership of your copyrights as we covered in Part 2!

• Future-proof your contract by including clauses that address emerging technologies and revenue streams.

  • The industry is changing so rapidly, so you must anticipate future trends and disruptions. That is why we are Helping Our Music Evolve 😉

Don't let the excitement of a deal cloud your judgment.

Paying attention to small details can set you up for long term success, but missing them can cause major problems.

I hope these posts become your secret weapon - a way for you to manifest for your artistic vision, and a launchpad for your wildest musical ambitions.