Recording Contracts | Different Types of Deals Explained
Recording contracts can be a tricky topic to understand. You’re definitely better off getting a lawyer if one lands on your desk. However, it is good to understand the different types of deals that are out there and how they can work for you.
Record deals can vary from deals for singles for new artists to 50/50 partnerships between labels and superstars. However, most deals that you will see these days are 360 deals. Different deals can determine different levels of involvement and commitment from a record label, as well as the royalty rate that you get paid.
Getting a record deal may be the dream for many artists. However, you want to make sure that you get the best deal possible. Find out about these different kinds of deals and decide for yourself what kind of deal you’ll be prepared to sign.
What are the different types of record deals?
There are many different types of record deals that labels can make with artists, as well as with other labels. The types of deals that are offered are also always changing based on the direction the industry is going. This has more recently been in favour of artists, especially those that have been building up their own audience and hype.
Record deals can essentially be broken down into two categories. One where the label owns the rights to your recordings and one where the artist owns the rights. When we talk about rights we are specifically talking about the master copyright. That is the right to reproduce and exploit the recording, which does not include the song behind it.
It is important to consider whether the artist owns the rights to their music or not when looking at record deals. This is because it can determine the nature and relationship of the rest of the deal. It can even affect whether you get a record deal with an actual record label, for instance, Warner Music, or whether you get a label services deal with their label services department, ADA (Alternative Distribution Alliance).
Recording contracts explained
The first thing to know about record contracts is that they are separate from publishing contracts. This means that they only cover the recordings you make and not the songs behind them. However, some labels that have a publishing department may ask you to sign both a recording and publishing deal.
Record contracts can vary depending on the type of deal but there are usually several commonalities. For example, these contracts are typically exclusive so you won’t be able to sign a deal with another record company. There will also be a fixed amount of time that the contract lasts for, known as the term of the deal.
How do record contracts work?
There is also the matter of where in the world the deal covers, known as the territory. This determines where in the world the record label will work for you. Many labels will ask for universal territory, meaning they cover the whole world.
However, smaller labels that are only based in one country may only look at working in their location. For example, you may have a deal with one label to distribute your recordings in the UK and Europe but you may have a separate label distributing your music in the USA.
How much does a record label pay an artist?
The amount a record label pays an artist depends on the type of deal offered. This usually comes down to the royalty rate and advance offered to an artist.
An advance is an upfront payment from the label to an artist. However, this isn’t free money, it’s an investment that the label expects to recoup. Therefore, you won’t see any royalties from your music until the label has made the money back from the advance it gives you.
The royalties paid after the advance is recouped tend to be on the revenue made from the recordings. The royalty rate could also potentially increase by a fixed percentage point as the sales and streams increase, for example, +0.5% for every few hundred thousand sales/million streams.
It’s important to note that 50/50 and 360 deals may act differently to other types of deals. Whilst 50/50 deals are pretty self-explanatory, most royalty rates can range from 13% – 20% depending on how big you are as an artist. These can be even lower for single deals and can vary depending on the income stream for a 360.
What is a 50/50 record deal?
A 50/50 record deal can also be viewed as a joint venture or partnership deal between an artist and a label (or between two labels). These types of deals used to be almost non-existent. However, independent artists and labels have gained a lot more power and influence without the help of labels. As a result, the only way to sign them is to offer a 50/50 deal.
50/50 deals are typically only offered to the artists and labels that are at a superstar level of fame. The number of labels bidding for the deal can also affect whether this kind of deal is offered. If every label if offering a similar deal then it only takes one to float a 50/50 deal and get the signing.
It is far more common to see 50/50 deals with artists and independent labels. Indies may not be able to offer a big advance or any advance at all. Therefore, it makes more sense for them to offer a balanced deal to get an artist on board.
What is a 360 record deal?
A 360 record deal is when a record label takes a share in all of the streams of an artist’s income. The idea is that a record label builds and develops an artist through their recordings. They then grow to a point where other sources of revenue, such as performing and merchandise, increases as a result of this. Hence why labels feel entitled to these income streams.
A 360 deal can be a flat rate across all streams, typically between 10% – 35%. Alternatively, it can vary depending on the source of income. For example, there could be a deal for 20% on publishing, 30% on merchandise, 15% on touring etc.
There are other variations of a 360 that only involve one or two extra income streams. This can be the recording income plus publishing, or the publishing and touring. These types of deals can be seen as 180 or 270 deals, but are far less common than the standard 360.
360 deals can also involve varying levels of involvement from labels in regards to these income streams. Some labels take what is known as a passive interest, meaning that they won’t be able to make any decisions regarding these rights. However, some might ensure that they have an active interest written into the contract. This can mean that they have some level of control over the publishing deal you sign or on the merchandise you make.
Is a 360 deal good?
The reality is that 360 deals aren’t good for everyone. Record labels created these deals to make more money and many artists have a big issue with this. Labels are typically responsible just for the recording products so why should they own a share of everything?
Record labels can invest a lot of money directly into an artist, typically more than other organisations. However, for many artists, this still doesn’t always justify taking over such a large amount of income. This is because an artist could already be giving away a percentage to managers, promoters, publishers agents etc. Now labels are looking to take more on top of that without always getting involved but still controlling the decisions.
However, some artists have no problem with 360 deals, although it usually is a take it or leaves it situation. For example, J Cole wasn’t exactly happy about his 360 deal but described it as necessary. There were also good sides to it, such as the label being more committed to investing in the artist as a whole, rather than just the recordings.
What artists are in a 360 deal?
Most artists keep their deals to themselves so it’s rare to see an artist publicly discuss the terms of their agreement. However, there are labels that are known for almost exclusively using 360 deals.
For example, 300 Entertainment is well known for using 360 deals. They have long been advocated by their founder Lyor Cohen, who is now YouTube’s Head of Music. Migos were one of the biggest artists signed to 360 deal on 300. However, they left in a very high profile falling out over creative control. A 360 might seem fine to start with but it might not work so well as you find success.
Independent record labels were actually the originators of the 360 deal so many early independent artists were likely on 360s. This was because these labels had a lot fewer resources the manage the
What is a single record deal?
A single deal typically involves the production and release of a single song, or potentially a series of single. The idea behind this is that labels won’t always want to invest in a whole album campaign if an artist is still unproved. By releasing singles, a record label can get a better idea of how successful an artist can be with an album.
You might find that the royalty rate for artists is lower on a single deal than an album deal. This is because these deals are seen as more of a gamble and record labels aren’t always sure how it will pan out. However, with an album deal, an artist tends to be more established and can negotiate a better rate.
Artists can always look to include what is known as Track Equivalent Albums, or also Streaming Equivalent Albums, in their contract. This means that if you have a deal for an album, you can include the sale of single songs from it under the album royalty rate and not the single one.
For example, fans might buy or stream a single track from an album more than others. This deal could include 10 sales (or several hundred streams) of a single track as the equivalent of an album sale. This means that you earn the higher rate you would for an album, despite the royalties being from a single track.
What is a production deal?
A production deal is not a record deal because it won’t involve the distribution of your recording. Instead, it is offered by a production company solely for the purpose of recording and producing your music.
This can be a good first step before looking at a record deal, especially if you don’t have the resources or capabilities to create recordings of your songs on your own. However, there are some important points to consider before you get into a production deal.
First of all, you need to get an idea of what the production company is going to do with the music once it is complete. Do they have marketing and distribution partners that will help your music be successful? Or are they going to make you sign something that looks like a record deal and simply distribute it through an actual label, meaning you’re giving away unnecessary royalties?
Many production deals are designed with the aim of making your music that can help you get a record deal. However, be mindful of what is being offered because you might end up being tied into a long term deal that can leave you worse off.
Who has the biggest record deal?
The biggest record deal ever signed was by the estate of Michael Jackson after his death. The deal from Sony was worth in the region of $200-$250 million and is almost twice as much as Adele’s $130 million contracts, also from Sony.
Is signing a record deal selling your soul?
Artists have long been derided for ‘selling out’ in a variety of ways, including signing major record deals. Signing a record deal in itself usually isn’t regarded as selling out. It’s the quality of music that follows this that leads to accusations of artists selling their soul.
The reason for this is usually because many artists build their followings independently and have full control of their music. When they sign a record label, this can change. Different deals allow different levels of creative control. Labels could even end up completely directing the creative process by choosing songwriters, producers and collaborators.
Overall, you won’t lose your soul if you sign a record deal. However, your music and the artistic product could lose the essence of what makes it special if you allow a company to have excessive control over it.
What do record labels offer?
Record labels typically offer services and opportunities that recording artists won’t be able to get independently. This used to be the whole recording and promotion process but artists are now increasingly recording and promoting themselves.
This is a big dilemma for record labels as it calls into question where they actually stand. However, record labels will always have value to artists of all types. Record labels will be able to offer a team that allows an artist and their team more on making music over the business, promotion and marketing, which is what many artists want.
Record labels tend to be more flexible than in the past and this has led to the rise of label services. This is where labels and their teams help out artists with their campaigns without acquiring the rights to the music. This means that labels and artists can work together with the artist retaining more control.
Are record labels dying?
In the mid-2000s where it seemed like the whole music industry was dying. Record sales plummeted dramatically every year because of digital piracy. However, the rise of streaming platforms has definitely improved the situation. The industry is growing again and many big record labels are actually growing and turning a profit.
Whilst record labels certainly aren’t dying or going anywhere soon, independent artists and certainly more empowered than they have ever been. Unsigned artists are taking up a growing share of the money made from recorded music. This could continue to grow over the next decade and successful independent artists may become the norm.
What’s the difference between a record deal and a distribution deal?
A record deal is made with a record company where they are typically responsible for the production of the recording. As a result, they will be the owners of the rights of the recordings, meaning that they control its usage. The record label works with the artist before the finished product has been realised and they then work with the artist to get it created.
Distribution deals are made when an artist has been responsible for the production of the recording and is the owner of the copyright. This means that the artist has typically organised and recorded the music without a label and then gone to a label with the finished product. The label can then use their marketing, business and promotional team to help make the record as successful as possible.
Independent labels often sign distribution deals for specific albums with larger major labels and with labels in other countries. When an indie has a hit, they often don’t have a large enough team to fully capitalise on it. This is especially the case when a record does well in a foreign country. It makes sense to partner with a larger or international label to make the most of a big opportunity.
What’s the difference between a publishing deal and a record deal?
Publishing deals and record deals are responsible for different types of copyright. A publishing deal will revolve around the right to the song or composition, known as the publishing right.
A song can be reproduced in a variety of different recordings. However, the sole publishing right will be controlled by the publisher. If a songwriter hasn’t signed a deal then this right belongs to them. Remember, just because an artist is singing and performing a song, doesn’t mean they wrote it.
A record deal is based on exploiting the works of a recording and recording artist. This is usually a recording of a song, the master right, but it can incorporate a variety of other products, such as music videos and merchandise. This deal is made with the recording artist and their team, not the songwriter.
Of course, many artists write their own songs but this doesn’t mean that they sign for the same company for both rights. A singer-songwriter could sign as a songwriter to one organisation and then sign to another as a recording artist. However, it could be more convenient to sign both rights to the same organisation.
What do I need to know before signing a record deal?
The most important thing you need to know is what you want and why. What are your values and how do they relate to your music and your career? You need to know what your goals are in the short term and the long term and how different record deals can impact this.
You might find that you want more creative control and you want a record deal that reflects this. This could even involve producing and finishing records yourself so you might not even really need a record label.
Alternatively, you might just be an incredible singer and performer. A label could then be responsible for organising producers and songwriters for you. This could definitely be a good deal if you’re the kind of artist that needs this.
How do you get a good record deal?
Ideally, you want as much leverage as possible to help yourself get a good deal. This can be achieved by having things the record label values, such as sold-out shows, millions of streams or a highly engaged audience online. The more of these factors that you have, the better terms you can negotiate.
If you still feel like you can grow without a label then don’t sign the deal. Keep pushing yourself to get as much leverage as possible so you can get the best terms in your agreement.
The first deal you see may not be a good deal because a label can see your trajectory. For them, it’s better to take a risk and offer you a bad deal early than have to settle for a good deal for you later on. However, you might not be able to get a better offer if your momentum drops so make sure you get multiple professional opinions on any deal you see.
Let us know in the comments what type of record deal you would like to sign!