Music Industry

What is a Recording Contract in Music?

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Music Recording Contracts have been around for decades yet they’re still an important part of how the music industry functions. They are always extremely important though when it comes to legally forming an agreement between an artist and a record label.

It’s a very common question ‘What is a Music Recording Contract?’ so here’s our short answer followed by lots more in depth detail. Essentially, it’s an agreement between and artist and a record label stating the label’s ownership over a music recording. It also covers their licensing rights in the promotion of the record.

Getting signed to a record label is a the end goal of mosts singers and musicians, so let’s explore music recording contracts in some more depth.

Music recording contracts explained

Music recording contracts explained

As well as being an agreement between and artist and a record label stating the label’s ownership over a music recording, the contract may also include something called the label’s licensing rights over a song.

What are ‘licensing rights’? Well, if a label has the licensing rights to a music recording, it means that it owns a share in the copyright of a song, so it earns money whenever the song is used anywhere (for example, if it’s used in a TV advert or on the radio).

What is a record deal?

A music recording contract is also more commonly known as a ‘record deal’. You may have heard that record deals sometimes scam musicians, whilst some labels have taken a seemingly large percentage of the revenue away from artists, there are ways that, as an artist, you can avoid these pitfalls. One way to avoid this is to ensure you have good advice both legally through a solicitor and business wise through a music manager.

The main thing though about record deals is that the major labels are brilliant for doing all the complicated stuff behind the scenes and making people aware of your music and your brand. It can really help you build a fan base and encourage more people to discover you as an artist.

The huge advantage of Major Record labels is they can have you represented globally. With experts in each territory across the World who are able to tap into different markets and bypass any cultural differences.

Different types of music artist recording contracts

#1 License deal

This is where an artist licenses a record label to manufacture, distribute and sell a recording that already exists. This is common when, for example, an artist has a song recorded and ready to go but needs the record label to help package and sell the music.

#2 Exclusive recording contract

In this type of deal the record label exclusively manages the music recorded by the artist during the length of the contract. After the duration of the contract is over, the label is provided with the right with an option to renew the contract for further periods of time. A record label will exercise the option if the first album is enough of a success. Normally one album is recorded during this contract term.

In this deal the label usually puts in a significant investment of time and resources into the artist. This could even cover the costs of recording videos, marketing and promotion.

What is a 360 deal in the music industry?

#3 360 Deal

In a 360 deal, the artist agrees to allow the record label to make money from not only selling recordings of the artist (like in an exclusive recording contract) but all other areas of activity where the artist is involved.

Typically these would include royalties from ticket money, merchandise or even written publications that the artist might produce (like an autobiography).

This type of deal has become more common in recent years as physical music has lost its value (as it’s so easily accessible for little cost), so record labels ‘want in’ on all of the other things that make the artist money.

Music production contract

#4 Production deal

In a production deal, the artist doesn’t have a direct contract with a record label, rather, with a business that makes recordings. The recording company then licenses or assigns those recordings to a label.

The business (normally a production company) will generally expect exclusivity from the artist. During the term of the contract, the production company will develop the artist by recording multiple tracks and will then push their artists to the bigger labels, in the hopes to achieve a licensing deal

Typically, in this type of deal, the artist may enjoy greater creative freedom and have more focus come from the owners of the production company. Most production deals are 50:50 net profit deals though which means that the artist only receives 50% of net profits.

#5 Development deal

This is where a record label gives an artist the opportunity to record a number of singles or demos rather than an entire album. After judging the success of these singles, the label will then decide whether to extend or end the relationship with the artist.

This type of contract provides the artist an opportunity to impress the label in order to secure a full exclusive recording contract, however the fees payable to the artist are often limited and may only cover recording costs.

Here’s how record contracts work, notably the now common 360 deals:

How long does a music contract last?

Typically exclusive recording contact terms last for a fixed period of 12 months. During this period you’ll make your first album, which may then be followed by further option periods, also usually of 12 months.

During this period, the record company has the option to extend the contract if they wish.

How much do record labels pay artists?

Once the record label recoups the artist’s advance, the artist will then start receiving royalties based on a percentage agreed at the start of the contract.

What percentage will the record label contract give?

Songwriters and publishers receive the most royalties out of all the people involved in selling recording music. They usually split royalties they receive from labels – their combined share can range from 5% to 25%, depending on the specific deal.

Labels pay songwriters and publishers mechanical royalties for every unit sold while broadcasters and venues pay the performance royalties for TV or radio airplay and live shows.

Record producers are usually paid upfront either by artists or their managers. Producers can also get percentage points off album sales, which normally a small amount (around 3%).

Artists on major labels usually receive around 10% to 15%. Artists’ managers usually take 20% as they help finance or develop the artist’s project.

If, for example, an individual is both a performer and the songwriter of the record, a higher percentage will usually be calculated for that individual. Again, it depends on the deal.

Major record labels vs independent record labels

What is a Recording Contract in Music?

Traditionally, a major label is a label that owns its distribution channel. This means that they distribute music internally rather than externally.

Independent record labels are small companies that produce and distribute records, but aren’t affiliated with (or funded by) the three major records labels: Universal Music Group, Sony Music Group and Warner Music Group.

It is important to note that some independent labels sign dual-release agreements with major labels if they have a significant number of successful artists. Over time though, major labels can fully or partially acquire independent labels completely!

Some independent labels are started and sometimes run by artists on major labels, but are still fully (or partially) owned by the major label. These labels are great for bigger artists to discover and promote newer smaller artists.

What is an advance in a recording contract?

It’s important to note that when you sign a record deal you receive something called an ‘advance’.

An advance is a pre-payment of royalties from a record label to an artist, publisher or writer. It is seen in most cases as an investment into an artist. This means that, although they are giving the artist money, they are expecting to get that money back and of course, make money on top of that.

Typically, after the advance and all the other expenses have been paid back to the record label, the label will start splitting the royalties received from music sales etc. to the artist and all other necessary entities.

This all depends on the specific contract though – it may say that even after the money has been paid back in full, the record label has the right to keep all royalties until a certain point.

This is only one example though – independent labels will typically offer you a lessor advance but potentially higher percentage, but this also means that if you’re successful with a small amount of money, you’ll start turning a profit quickly (as you won’t have to recoup back such a large advance).

Just remember every deal and terms are different. A major established artist can command a much higher advance and percentage. With an established fan base this would be considered as low risk were as breaking a new act is high investment and high risk for labels!

How to get a recording contract

get a record deal now

#1 Make great music

This sounds vague, and in some respects it is, but the most important thing is having good music.

The industry is very competitive, which means that you can’t just have a ‘good’ demo, you need well-produced, professionally recorded, well mixed and mastered amazing songs. If that means spending a little bit of money up front to achieve this, so be it. See it as an investment though.

#2 Get management representation

As an artist, having a manager can be a great step towards getting signed to a record label.

A manager is an individual (or company) who oversees the everyday business affairs of an artist. They usually advise their artists on professional matters, long-term plans and personal decisions which may affect their career.

A good manager will have plenty of connections to other people within the music industry. If they’re a respected individual (or company) within the music industry on a local, regional or national scale, they can push your artist project to relevant people at record labels. If the manager truly believes in an artist’s vision, they’ll be more able to convince a record label that their artist is the next big thing!

#3 Think about a publishing deal first

If you’re good at song writing, this might be a way forward for you – a publishing deal is where you write songs for publishers and then they pitch those songs to labels.

You don’t necessarily need well-produced songs for this, you would just need simple, well-arranged versions of your best few songs that you could imagine being sung by current major artists.

It’s a great way to not only practice your song writing by seeing what works and what doesn’t, but it also get your proverbial foot in the door.

#4 Build a fan base and momentum

Imagine if you were a major label. If you saw an unsigned band already achieving amazing things, with hundreds of thousands of committed fans – you’d want to pick them up instantly because you’d feel like they had something to offer you. This is what labels want!

This doesn’t mean that you necessarily need that many fans to get signed, it just means that once you start creating a real buzz that can potentially be replicated in other cities or countries, you’ll start pricking up the ears of A&R scouts in the local or regional area, making it much more likely for you to be offered some form of deal.

#5 Build relationships, network well and make connections

“It’s not what you know it’s who you know” has never stood truer than in the music industry.

Go out and network, go to shows, go to industry events, find out where all of the industry people hang out, and most importantly, go and strut your creative stuff at open mics!

Always remember to be genuine though – don’t be too focused on the ‘business’ side of the industry and what you can get out of people, just go out and make friends in the music scene – you never know who you might meet!

If you sign a music recording contract are you selling your soul?

It depends what you consider ‘selling your soul’. Typically (and understandably) a record label will want to make money. Don’t be surprised if they encourage you to sound more commercial than you might like. You can, of course, take on all their advice, or alternatively, you could completely ignore them and be completely true to yourself and your musical sound. You could also choose to do something in-between!

If you do take a label’s advice, make sure you never completely sell out – it won’t be good for your career in the long run. You might achieve some brief success in the charts, but nobody wants to be that person singing songs or playing music that they hate for years!

Don’t forget, you can absolutely defy all conventions and achieve commercial success with a brand new sound that’s never been heard of. Arguably Billie Eilish has done this in recent months, however there’s always a risk to doing this. It can absolutely pay off though if you know you have something unique that people will be able to relate to and fall in love with.

Are record deals a scam?

You might hear stories of record labels taking huge amounts of money ‘away from the artist’ but it’s also important to take this with a pinch of salt.

Of course, a record deal should be fair for the artist and everyone involved, but if it isn’t, you can avoid falling into to the pitfall of taking it by doing this…

Make sure you read every single line of any deal you’re offered. Get 10 people you trust to read through it. Get 10 more people who work in the music industry to read it. If something in there is dodgy or unfair on you, it’ll be picked up on. Make sure you plan ahead and always read the small print!

Do artists need music recording contracts?

Absolutely not! Plenty of artists make a decent living from independently releasing their music and managing the business side of their projects too. A notable example of this is Chance The Rapper.

Nowadays, because of the direction that music distribution, the internet and social media have taken in the past decade, independent artists can now do everything that record labels can do, they just might not have the time or the skill set that it takes to do everything that the major labels can achieve relatively easily.

Major labels typically have large budgets and huge teams of people working behind the scenes on an artist’s project, making a music recording contract a more sensible option for major artists with big audiences.

Equally though, for smaller artists, it’s probably more sensible to stay independent and not go hunting for a record deal until you’ve built up significant support for your project.  Even then, representatives from labels will often want to approach you rather than the other way around.

Major labels especially will be swamped by submissions of demos to their inbox – they simply can’t listen to everything they get.

If something about your music stands out, you’re more likely to be found by a scout or an A&R representative from a label rather than whoever is on the other end of [email protected]