The Deal on Record Deals

Recording Studio Photo

The process seems easy, decide to become musician, write a great song, get record deal, become famous, shower in money. But these days the simple road to ‘making it raiinnnn’ isn’t that simple. If your goal as an emerging musician is to become signed to a label you may need to know what you could be getting yourself in for. There’s more than just one golden, gleaming record deal at the end of the tunnel out there. Thank goodness Music Industry Inside Out is here to tell you the deal on record deals.

The Deal: The 360 Deal

One of the more common deals in the current state of the music industry. This record deal entails the label being able to participate in income streams that were traditionally reserved for the artist, this includes of all your recordings/merch/tour takings, basically the full 360. The 360 allows the label to get a share of not just the income earned from all aspects of your career, but also the creative direction of your career development. This form of deal is being increasingly used by the major record labels when contracting with new artists. Rolf Schmidt-Holtz, the chief executive office at Sony BMG, was quoted in an interview as stating that, as of March 24, 2008, Sony BMG had over 252 artists contractually bound to 360 deals. Although we don’t know for sure how many artists are signed to labels under this sort of deal, it is assumed that most of the new artists that are signed to a major label these days have put their autograph on a 360 deal. The reason for the rise in 360 deals is that dang thing, music piracy. Over the last decade revenue from record sales have been heading south but revenue from ticket sales, merchandise and endorsement deals has steadily increased. So to keep their labels alive and twitching, record executives came up with the 360 deal.

Pros:

  • Labels argue that this model allows them to scout for a wider range of acts and talents, instead of focusing solely on artists that sell lot of record but on ones that might attract endorsement deals or on hard touring bands that attract a loyal fan base.
  • Record companies say they commit to promoting artists for a longer period of time and will actively try to develop new opportunities for them.
  • Plus being signed to a major label is a big push to an artist’s promotion.
  • All of this depends from deal to deal.

Cons:

  • The record label will own copyright to your songs and possibly your image and name.
  • Unless under the 360 deal, the record label is offering some BIG benefits such as larger advances, significantly better record royalties or excellent managing and marketing skills and infrastructure, an artist may be worse off under this kind of deal.

The Verdict:  The 360 deal is reallllly great for record labels but maybe not as fun for artists who have top selling albums but are eating dry noodles out of a packet for dinner.

The Deal: The Direct Sign Deal

Before the 360 deal, there was the direct sign deal. Similar to 360, direct sign allows the record company to have control of your recorded work, including the income earned from it. But the shining light in this deal is that you don’t have to share other sources of income like, tour, merch, etc with anyone else! However, this model is slowly disappearing because of internet piracy (yo ho ho and a bottle of stop that), making  the 360 deal more prevalent with record labels trying to make a buck. In this deal the record label would look after for the recording, mastering, pressing, distribution and promotion of the record. In addition, because they were spending on all that precious cash, cash money on an artist that might be a big flop, labels usually wanted a lot on creative control over the direction of the record, the release, marketing and artist themselves.

Pros:

  • Unlike the 360 deal, this model allows you to make an income, relying on your dedicated fan base buying your merch and selling out your tours successfully.

Cons:

  • The record label will market the artists music the way the they want and possibly change the artist’s songs or image,
  • The label will also own copyright of the recordings.

The Verdict: The Direct Sign deal has it’s perks and is noticeably a lot nicer to artist’s pockets than the 360, still gives the record label a significant control over what an artist does.  Even if this still seems alright to you, the direct sign deal is slowly disappearing and may not even be offered to many new artists.

The Deal: Tape Lease Deal

The tape lease deal was originally introduced when actual tapes were the way you experienced music (CRAY CRAY). An artist would cover the costs to record their songs and then the finished tapes were leased to the record label, which would master, press, distribute and promote the record.  The record company may then pay an advance on royalties before beginning to collect payments from the record. A local example of this type of deal is companies such as Create Control.

Pros:

  • Artist also has total artistic control over the project in this deal (WOOHOO)
  • Artist gets a royalty that is slightly higher than under a Direct Sign Agreement due to the lesser financial risk taken by the record company.

Cons:

  • Copyright is usually retained by the artist, it may be exclusively licensed or assigned to the record company for the term of this deal.
  • Even though the artist will have full creative control over the project, they will have to budget proficiently to be able to afford the recording fees to begin.

The Verdict: a great model if you are at a stage in your career when you can afford to pay for the recording fees.

The Deal: P & D (Pressing and Distribution) Deal

In this deal, similar to the tape lease the artist record and masters their record at their own expense, the delivers the masters to the distribution/record company. The company will then press the record but the manufacturing costs will be paid by the artist. The distribution or record company will then collect monies and is paid a royalty which will be deducted from the collected monies and the artist is given the balance.

Pros:

  • Artist has full creative control
  • Retains the copyright on all their recordings
  • Artist gets the biggest possible share of the income from this type of deal.

Cons:

  • Deal requires the entire project funding to come from the artist themselves
  • Also have to pay for all associated costs of producing and promoting the record.
  • May be fine at the right time but can be difficult to prepare for. Hear from our mentors about how they have funding their career in our funding your music course.

The Verdict:  A P&D deal can be great for artists or bands who are at the right point financially in their career to support the project and are savvy in the ways of marketing and promoting to get the most out of the record.

The Deal: The DIY Approach

This is the only deal you are guaranteed to be able to get as a musician, you can sign one right now! The DIY deal is the way a lot of independent artists start off, funding your own career from gigs, merch, cd sales or maybe even crowdfunding.

Pros:

  • Total creative freedom to create whatever you want!
  • You own the copyright on the recordings, image and name
  • No one to share income streams with (more money to shower in)

Cons:

  • All financial costs fall on you, that includes recording, pressing, distribution, promotion, etc.
  • If you decide to do it all yourself (promotion, managing, booking promo shows, etc) it can be a lot to juggle.

The Verdict: This is a great way to start out for you first release(s), it has proven to be successful for many artists, you can hear how our mentors have kicked ass with this model here.

If you want to learn more about contracts, copyright and funding your career, check out our premium content on Music Industry Legals, Understanding Copyright and Funding Your Career.

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