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Production Company Deal, Record Company Deal - What's the Difference? Part
3: The Major Label Deal, and Pros and Cons of Recording and Production
Contracts
by Darcie-Nicole Wicknick
With the climate of the recording industry as
temperamental as the San Andreas Fault, dissecting and negotiating the
perfect deal can seem daunting: Traditional label deal? Production company
deal? Independent label deal? What’s better for burgeoning
artists whose mission is to gain a widespread audience for their music?
In Part Three of this article, Darcie-Nicole Wicknick explains important
things to be aware of before signing with a major label.
Darcie-Nicole Wicknick is a freelance music
business consultant and the founder of AskDarcie Music Business Consulting.
She can be reached through her website at
http://askdarcie.tripod.com
The Major Label Deal
As stated previously, this article does not constitute or replace
legal advice, and I highly recommend that you read Don Passman’s book
All You Need to Know about the Music Business
and Mark Halloran’s
Musician's Business & Legal Guide before even setting up a
meeting with your attorney.
Signing to a major label deal for an artist without the aegis of a
production company is a very major process and requires
attention to some important things to watch out for during the negotiation
process. The depth of this subject is vast, and there is much more than this
to get into. But this is a good starting point to get your mind reeling:
1. Make sure you have a manager and a music attorney to guide you
through the process and help you to negotiate the best possible recording
contract.
2. Never agree to sign the first version of the recording contract
3. Never sign the first recording contract you get. Use the first
contract offer to negotiate with another company; get their best
terms and use that as leverage against the first company. Do this
until you get the most desirable contract possible under the advisement of
your manager and lawyer. (This process must be exercised with care. Many
record company execs are actually friends and may play golf together on the
weekend and have kids who are best friends. Be careful!)
4. Keep your term length as short as possible and be sure your
contract stipulates that the label will release and promote your record.
Most recording contracts are just that: recording contracts. If you
do not demand release and promotion, the label is not bound to give that to
you. Sometimes they will just sign you and bind you for a very long time to
prevent you from coming out on another label and competing with one of their
existing acts! Sometimes they will also sign you and carry you on the books
as a tax liability if you are not selling. If they don’t release your
recordings, music, what's the point, right?
5. When you get an advance for recording costs, that is just the
beginning of what the label considers an advance! Remember that you
as the artist are ultimately responsible for paying back all advances that
may be hidden: producer royalties, songwriter mechanical licenses, marketing
costs, cost for free goods, radio promotion, tour support, retail
marketing/merchandising, travel (including all those fabulous limo rides),
stylists, wardrobe, video support, equipment rentals, insurance, house
rental, CD duplication, internet marketing, websites, publicity, hotels and
meeting space rentals, phone calls, and a myriad of other operating expenses
that the label can construe as an advance. Your contract must stipulate what
will not be leveled against you. Otherwise, it’s coming out of your pocket.
This includes "gifts" and those designer shoes and haute couture and
fantastic custom jewelry that the label “gave” to you.
6. Labels will always try to cross collateralize the advances and
revenues from one album onto the next. This means that if your advance total
for Album 1 is $162,000 and your net earnings from your artist’s share
(about 12% of album sales after breakage, packaging, and free goods
deductions) equals $100,000, the remaining $62,000 you are in the hole will
be compounded on your advance for Album B. So if you are given an advance
total of $200,000, you must consider this as $262,000 that you must recoup
before you can start earning any royalties.
7. If you are songwriter, your royalties will be cross collateralized
against songwriting revenue as well. While this could help you earn back
that money faster, you are leaving yourself with no income, except for
shows, endorsements, merchandise, and TV and live appearances. If those are
also cross collateralized, you are completely without revenue to live on.
Also, be sure that you do not sign a deal where your songs are considered
controlled compositions. This means that the label does not have to pay you
full (or in some cases any) license fees for the placement of your songs on
the album. Let’s say you write ten songs. Ten times 9.1 cents (the current
going mechanical rate) times 100,000 units pressed in the first pressing
means you could be out $91,000 from the word GO.
8. Your appearances on other people’s projects will be limited, and at
the label’s discretion.
9. Never allow your recording contract demand that you deliver
commercially satisfactory records. Insist on delivering technically
satisfactory records instead
10. Never allow your record company to be your manager, and always get a
good entertainment lawyer on your own, who who the label is not paying.
11. Retain some creative control over your artwork, song choice, image, and
branding. This is an absolute must. Also, make sure that you contractually
cannot be replaced, and add in some clauses stating that projects held up by
illness or personal emergency do not constitute breach of contract.
12. Never sign to a label which does not specialize in your genre. This
could really diminish their marketing potential of your product to your
audience.
13. Be sure you know when and how royalties are calculated. You want access
to the books (they will ask you to request access in writing 90 days in
advance) and you want to be sure you know how much of your royalties they
are keeping on reserve (for their protection they’ll withhold a portion from
you for “incidentals” – similar to the way a hotel keeps a deposit in case
you trash the room and split, but on a much larger scale).
14. Your label will take out life insurance on you.
Are you a little scared yet? Hopefully just enough to realize you need
outstanding representation to navigate through the waters.
Given all this, you may be wondering why an artist would sign with a major
at all. Three reasons: 1. Proven marketing processes 2. Access to
distribution channels 3. Experienced staff in adequate numbers to implement
all of it. It's a decision not to be taken lightly and must all be weighed
carefully in your ultimate decision.
For the case of smaller labels and independent production companies, I
encourage you not to sign contracts that try to claim your publishing rights
or income, or with those that do not have any proven track record. The less
leverage they have, the less cut of your pie you should give to them.
Remember, everyone needs leverage to negotiate the best deal for them,
including the companies.
Lastly, you own it all until you negotiate to give some away.
Part 1
Part 2
Part 3
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