Navigating Your Record Deal
By Lacey Allen and Alyssa Minnec
For many musicians, landing a record deal can be a monumental achievement. However, it’s important to recognize that a record deal represents more than just an opportunity; it’s a legally binding agreement with significant responsibilities and implications. If you are considering signing with or releasing your music on a label, we highly recommend you hire a skilled entertainment lawyer to assist you throughout the process. However, understanding the components of the deal yourself is equally important and is essential to growing in your career as a musician or producer.
What is a Record Deal?
At its core, a record deal, also known as a recording contract, establishes the parameters of the relationship between you and the label. While the specific terms and conditions within each recording contract may differ, your agreement should clearly outline important aspects such as the duration of the agreement, compensation structure, your responsibilities, and the commitments of the label.
Below, we go into different things you should be looking for in connection with each of these deal points.
1. Advances.
Advances are upfront payments that you’ll receive from the label. These can be paid in full at the time of signing or paid in installments over the course of the deal. However, your advance isn’t free money; they’re essentially loans, but the label makes its money back from the revenue and royalties your music generates.
When you’re looking at the advance, consider these questions:
· How much is the advance, and how is it structured (e.g., upfront, installments)?
· What expenses are considered recoupable against the advance?
· How does the repayment of advances affect the duration of the contract?
· What happens if the label is unable to recoup?
· Can I get out of the agreement early by paying back the advance out of pocket?
2. Royalties.
Royalties represent your share of the revenue generated by your music, including streams, downloads, and physical sales. Your contract should clearly outline the percentage of royalties you’re entitled to. However, you won’t start receiving royalties until the label has recouped all the expenses it fronted on your behalf, including your advance, recording costs, agreed- upon marketing budgets, and other incurred expenses.
To better understand your royalty terms, consider the following questions:
· What percentage of royalties am I entitled to, and how is it calculated?
· What expenses are considered recoupable before I start earning royalties?
· How does the label track and distribute royalties from different sources?
3. Term.
The “Term” of the agreement outlines how long you’re committed to it. It starts with an initial period and might have optional extension periods, which the label can decide to use. Pay close attention to whether these extensions happen automatically or if they need to provide notice to you before the renewal. Also, look out for clauses related to extending the contract to cover expenses like advances. Labels might extend contracts until they recover these costs, potentially keeping you tied to the agreement until they’re fully recouped.
Look for a “buyout” provision in your contract. This may allow you to end the contract after the initial term by compensating the label for what they haven’t recouped yet, plus an additional percentage, often around a total of 120% of the unrecouped balance. If this provision isn’t in your contract, it’s worth considering asking for it.
Although buying yourself out of a contract might not seem attractive initially, it can offer valuable flexibility in the future. For example, imagine you signed a 3-year contract with a $20,000 advance, and the label can extend it until they recoup their expenses. If your music only brings in $5,000, and the label extends the contract to recoup the remaining $15,000, you could end up stuck in the contract indefinitely, limiting your career options. In such cases, buying out of the contract gives you the freedom to explore new opportunities and take control of your career again.
When reviewing your term details, consider these points:
· Are the option periods for contract extension automatic or do they require explicit renewal?
· Does the contract include a buyout option, and if so, what are the terms and conditions associated with it?
· What happens if I wish to terminate the contract before the end of the initial term or during an option period?
4. Recording/Delivery Commitment.
The recording, or delivery, commitment in your contract specifies the minimum number of master recordings you must provide within a set timeframe. It may also include parameters for individual albums, including their duration or the number of tracks they should contain.
When reviewing this section, consider whether you can realistically meet the commitment. Keep in mind that the label will have certain quality standards for your songs, which should be detailed in the contract. Understanding and meeting these standards is essential for fulfilling your obligations effectively.
Here are some questions to ask about the recording/delivery commitment:
· Is the delivery commitment reasonable for me to achieve?
· Are there any technical or overall quality standards the label will impose on my songs?
· Do I understand these standards, and am I confident that my songs will meet them?
· What are the consequences if I fail to meet the delivery commitment?
· Are there any provisions for extensions or revisions to the delivery commitment if needed?
· How will the label support me in meeting the delivery commitment, such as studio resources or production assistance?
5. Release Commitment.
Release commitments refer to the label’s promise to you regarding when they will release your music. To understand release commitments, it’s important to determine the timeframe for releasing your music after you fulfill your delivery commitment. This ensures that the timing aligns with your career objective. Additionally, clarify what steps you can take if the label doesn’t release your music within the specified timeframe.
Consider asking the following questions regarding your release commitment:
· What is the timeframe for release outlined in the contract? Does it align with your career goals and promotional plans?
· If the label fails to release my music within the timeframe, what options do I have?
6. Grant of Rights.
Simply put, the “grant of rights” section lays out what the label plans to make money from and/or promote, which might include streams, downloads, and sales of master recordings, official artist videos, photos, logos, cover songs, sync licenses, etc. However, it’s important to note that this can extend to the transfer of copyright ownership of your music and moral rights.
Moral rights are often overlooked but can be significant. They encompass the right to receive attribution for your work and the right to object to the use of your work in a manner that could harm your reputation.
Here are some key considerations regarding the grant of rights:
· What rights will the label acquire and for how long?
· Will the label have ownership of my copyrights?
· Are my moral rights protected?
· What are the limitations on the label’s use of my work?
7. Representations and Warranties.
Representations and warranties are essentially promises made between you and the label, ensuring that certain conditions are upheld throughout your agreement. Understanding these terms is crucial to ensure a fair and transparent relationship with the label, minimizing the risk of future disagreements and clarifying the consequences if any issues arise.
When you review this section, consider the following questions:
· Are the representations and warranties mutual where applicable between me and the record label?
· Am I accurately representing and warranting what I say I am? For example, if I claim that there are no samples or contributions from other artists in my work, is that actually true?
· What are the potential consequences if I breach any of these representations and warranties? Could I be held liable for monetary damages to the label?
8. Other Considerations
CREATIVE CONTROL AND APPROVAL RIGHTS.
Creative control is often not explicitly stated as a separate clause in your agreement. Instead, you may see “approval rights” throughout sections related to budgets, music videos, compositions, and artwork. As you consider signing with a label, determine how much creative control you are willing to sacrifice to have the support of a label (there’s also no harm in requesting more approval rights).
Key considerations about creative control and approval rights:
· What does the label expect regarding creative decisions? Are they aiming for a collaborative partnership or more direct control?
· What approval rights do I have over my music? Album artwork?
· How much creative control are you willing to give up? Does that make sense, given the benefits that you get from signing with the label?
· Are there terms that require mutual approval? If so, what happens if there is a disagreement?
BUDGETS/MARKETING.
Budgets and marketing details may be found in various sections of the contract. However, it’s important to identify and understand these provisions because they typically represent expenses that the label can recoup. This means that, in addition to recouping your advance before you receive royalties, the label can also recoup these expenses. Depending on the specifics of your contract, unrecouped expenses may extend the duration of your agreement.
What to ask/consider about budgets and marketing:
· How are expenses defined?
· Who approves additional budgets? And what is covered by the label?
· How are marketing and promotional expenses handled?
· How are different types of budget/expenses recouped and how they impact royalty payments?
Tips For Navigating Your Deal
HIRE AN ATTORNEY: Don’t go solo. It’s in your best interest to hire an experienced music attorney. They’ll safeguard your interests by reviewing the contract, advocate for fair terms, and ensure the agreement maintains balance between you and the label. Your attorney can help you make informed decisions that align with your career goals.
TAKE YOUR TIME: Be sure to understand the terms contract and ask questions! Rushing into a deal without complete understanding can lead to regrets later on.
NEGOTIATE: With the guidance of your attorney, identify key areas for negotiation and leverage their expertise to advocate for favorable terms. Whether it’s regarding royalties, creative control, or distribution rights, effective negotiation can shape a more equitable agreement.
Don’t be afraid to walk away: Remember, it’s within your rights to decline an offer if the terms don’t meet your standards. Saying no to a subpar deal is better than being bound by a contract that hinders your artistic freedom or financial well-being.
DISCLAIMER
The information presented in this post is intended for educational and informational purposes only and should not be construed as legal advice. Attempting to navigate record deals alone can result in costly mistakes, and it is important to recognize that this list may not encompass all considerations.
