Record Deals In Plain English - Part 4

This is the fourth and final part 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 9.

Review parts 1, 2 & 3 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.

• In Part 3 we dove into marketing, contract length, and fine print.

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!

Remember, get an attorney, learn how to negotiate, and stay in control of your artistic destiny 🎭

9. ANCILLARY REVENUE: PROTECTING YOUR BRAND'S EARNING POTENTIAL

At HOME, we encourage creators to venture into the realm of ancillary revenue – those income streams that exist beyond the traditional realm of touring and streaming.

Think merchandise, endorsements, fan clubs, acting gigs, and a whole host of other opportunities that can pad your financial future. Pay close attention, because your ancillary revenue can add up, and the labels know that.

Beware of the infamous ‘360 Deal’…

As digital downloads and streaming became popular, record sales began to tank.

So the labels started going after other revenue streams. At one time it was commonplace for record deals to include a cut from live performances.

These deals are now less common, but you should still understand the concept so that you can evaluate any deal you are offered.

Most major artists earn the majority of their income through live performances.

As a demonstration of the earning potential of live music, check out this post by Rob Abelow of Where Music’s Going:

For more thoughts from Rob, check out the HOMIE Podcast Episode 3 - How You Can Leverage Future Music Industry Trends & Technology.

One of the most important takeaways here is that, if you plan to perform live as part of your artistry, then you need to guard your live performance earning potential.

Let’s talk about a few other ancillary revenue streams you may want to keep an eye on…

Merchandise: Your Wearable Works of Art

• Your t-shirts, hoodies, posters, and vinyl can be cash cows.

• Labels may ask for a cut of merch sales, even if they're not directly involved in the production or distribution.

• Negotiate hard to maintain control over your merch empire. This is your brand, your identity, your livelihood.

Fan Clubs and Premium Content

• Less than 20% of your most dedicated supporters will drive over 80% of your earning potential.

  • Nurture those superfans!

• Exclusives, behind-the-scenes access, limited-edition offerings – these can all generate significant income.

  • PRO TIP: Check out the Laylo platform for a super snazzy set of tools to sell direct to your fans via DMs, text, and email.

• Beware of labels trying to get a percentage of your fan club proceeds or premium content sales.

• Fight to keep these direct-to-fan channels as your own personal revenue streams.

Endorsements and Sponsorships

• Brands are hungry to align themselves with popular musical talent.

• Endorsement deals, sponsorships, and other promotional partnerships can be hugely lucrative.

• Labels may try to insert themselves into these arrangements, looking for a cut of the action.

• Negotiate to maintain control over your brand partnerships and the associated earnings.

Adopt a mindset of vertically integrated empowerment. Every revenue stream will help build a lasting artistic empire.

Other Strategies for Ancillary Dominance:

• Carve Out Carve-Outs: Proactively identify key ancillary revenue sources and negotiate specific carve-outs in the contract. Establish clear limitations on the label's ability to claim a percentage of these earnings.

• Maintain Direct-to-Fan Channels: Preserve your ability to sell directly to your most devoted supporters, whether through merch, fan clubs, premium content, NFTs, or any other channel that may emerge. These direct connections are invaluable, both financially and in terms of cultivating your brand.

• Leverage Your Brand's Value: Treat your artistic identity as a valuable asset, not just a vehicle for record sales. Negotiate favorable terms for brand partnerships, endorsements, and other ancillary revenue streams.

Remember, the more you can capitalize on your brand's worth, the less you'll have to rely on the label's financial support.

Your music may be the heart of your artistic empire, but your brand is the backbone that supports it all.

Revisit the Artist Branding Playbook here.

Fight for your right to profit from the unique value you bring to the table – your vision, your passion, your personality, your style. These are the elements that captivate fans and attract brand partners.

10. DISPUTE RESOLUTION AND CONTRACT TERMINATION: SAFEGUARDING YOUR CREATIVE DESTINY

One of the most crucial – yet often overlooked – aspects of any contract is what happens when things go wrong.

Conflict and disagreement are inevitable.

But with the right strategies in place, you can make sure that disputes don't leave you wishing you never did the deal in the first place.

Dispute Resolution: Keeping the Peace in Your Creative Partnership

• Let's face it, the label and the artist don't always see eye-to-eye. Creative differences, financial discrepancies, communication breakdowns – they can all lead to ugly battles.

• That's why it's essential to establish clear dispute resolution processes in your contract. This can mean the difference between a swift, fair resolution and an all-out war.

• Consider including provisions for mediation, arbitration, or even a neutral third-party decision-maker to help navigate conflicts.

• Get a good attorney on your team and keep the focus on your music as much as you can. Don’t let conflicts steal your creativity.

  • PRO TIP: Every year, Billboard puts out a list of Top Music Lawyers.

Contract Termination: Charting an Exit Strategy

• No one enters a record deal expecting it to end, but the reality is, many times these partnerships just don't work out.

• That's why negotiating favorable contract termination conditions is crucial. You need to know exactly what it will take to remove yourself from the deal.

• Performance benchmarks, time-based exits, and mutual termination clauses – these are all tools that you can use.

• Consider including a ‘key man’ clause. If your champion at the label leaves, you might want an out.

Don’t forget about the reversion clause to get back ownership of your masters. Read Part 2 on Ownership for a refresher on copyrights!

Approach these contractual elements with the same focus and strategic thinking you'd bring to negotiating the rest of the deal.

If the business relationship sours, you need to know that you have the power to walk away with your musical destiny in your control.

THE INDIE ALTERNATIVE: CHARTING YOUR OWN COURSE IN THE MUSIC INDUSTRY

Let's talk about the indie vs. label debate.

There’s a lot to consider here…

Going indie? You've got total creative freedom and a bigger slice of the pie.

Your music, your rules.

But don't kid yourself – it's a grind. You're suddenly the CEO, marketing team, and accountant all rolled into one. Every penny spent comes out of your pocket.

Labels can bring serious firepower.

Industry connections, marketing muscle, and cash can skyrocket your career. But it comes at a price. You might have to compromise on your vision, and a big chunk of your earnings goes to the label.

Here's the real talk: It's not about choosing sides.

It's about empowering yourself.

Build your own team. Learn the business inside out. HOME is where you can do that.

Find mentors who've been there, done that. Find ways to continuously invest money into marketing your brand – whether it's your own cash, an investor, or crowdfunded.

This approach sets you up for success, label or no label.

If a killer deal comes your way, you'll know exactly what you need and what you're worth. You'll see the label as a potential teammate, not a savior or a necessary evil.

Remember, your music career is a marathon, not a sprint.

Focus on honing your craft, building your team, and growing your fan base. That's the foundation for lasting success.

Whether you go indie or partner up, what matters is that you're in the driver's seat.

🎁 MEMBER BONUS: If you are an active HOME Member, you can access a 14 page example recording contract that I recently posted on the platform. For educational purposes only 🤓 study away!