For 99% of indie artists, receiving ‘the’ call from a record label is pretty much the definition of the dream.
A sign that all those years of grind on the underground have finally paid off, & that you’ve now caught the attention of some of the most acclaimed minds in the music business. Great news! And no doubt a solid sign that there’s believed to be demand for what you do - demand that could quickly turn music from an extravagant hobby into a full-blown career as a global superstar. However…
Before you get too excited, you should know that the world of music labels is anything but sunshine & rainbows. As with any business, these investors are ultimately in it for one primary reason - to make money. Hence why signing the first piece of paper that’s thrust in front really wouldn’t be a wise decision. Do so & aside from hampering your ability to make the money you deserve from your music, it could also determine how likely you are to blow up. Team that with various other possible debt & legal issues, & it’s safe to say that being clued-up on how to spot a bad deal could be invaluable to the rest of your career.
In which case, here’s a speedy overview on music labels & just some of the signs that we consider to be signals of a bad deal…
Quick summary: What are record labels & how have they changed?
In layman's terms, a record label is an investment company that aims to develop artists from small-time acts into mainstream superstars in hopes of making a profit. The concept of music labels themselves dates all the way back to the 1800s, & has since gone on to become the main method through which an artist can ‘make it big’.
Something that mainly stems back to marketing & promotions. The major advantage of music labels has always been their access to marketing materials & industry contacts, all of which help to get an artist seen & heard. Many even have in-house teams dedicated to artist promo & event relations. However, today with the rise of the internet, the business model of the traditional music label has started to show its age. With the rise of the internet & social media, artists are more able to freely market themselves to their fanbase & make money off the back of their music independently.
Thus detracting from the advantage a label once had. Couple that with CD sales being exchanged for streams (one of a music label’s largest streams of revenue), & the modern music label is entirely different to what it was 20/ 50 years ago. Today the majority of labels rely on concert revenue to make money & ever since covid, the sale of an artist’s merchandise & the launch of other side ventures like clothing or perfume brands.
This has led to the formation of something called the 360 deal. If you want to know more about 360 deals & what they are, click here.
7 signs you should TURN DOWN a record deal…
Just like any sort of business deal, no 2 record deals are the same. So it’s important that before you sign anything that you’re aware of what a good deal looks like, as well as one you’d perhaps want to pass up. Fail to do so & as crazy as it sounds, your career in the industry could be over before it's even started! So without further ado, here’s 7 signs you should put your ballpoint away & turn down a record deal…
1. A hyperinflated advance - Might sound a bit crazy at first, but you soon understand why this is the case when you realise the label is really just investing in you - NOT giving you free money. So that advance, is actually just a loan. One that by signing the record contract you agree to pay back using the profits generated through your music. So the larger your advance, the more money you have to make from your music in order to pay back the loan. Factor in that this loan (just like one from a bank) will also accrue interest over time & it's not hard to see why so many artists go broke because they signed for too much in the first place.
2. Their cut is extortionate - When signing with a label, it’s worth remembering that because they’re an investor, that they hold the equity position. In other words, out of all the money you generate, the vast majority will go to the record label. Usually record deals see you retain about 10-20% of your profits, with the rest being ‘earnt’ by the label. Bag yourself a good deal (20%) & for every 1 million dollars you generate, the label would be entitled to $800k, leaving you with $200k. But, don’t get ahead of yourself… this $200k would then be used to offset any expenses - videographers, producers + other misc costs they face, including studio time & buying new music gear - with what’s left then being used to pay down your advance. So it comes as little surprise why the majority of artists don’t actually start to see any money in their pocket until years down the line.
3. The label doesn’t ‘get’ you - As reiterated previously, a major perk of being on a music label is access to their expertise in marketing & branding. This being things like gaining coverage in music magazines & getting exclusive radioplay. Something that yet again will come at a cost to you (usually deducted from your advance), so if you get the feel a label doesn’t ‘get you’ & what you stand for, walk away. There’s nothing worse than entering a relationship with a label only to pay for them to warp your public image into something you never intended it to be. Have a firm idea of what you stand for & make sure they do too!
4. They’ve signed similar acts - You could see this as a positive & negative sign. If a label has a lot of acts that make a specific type of music, chances are it’s a sign that they’re experts in that area. Hardly a bad thing. However, if a label has too many artists which target the same market - i.e. share a similar fanbase - tread carefully. Sign a deal with such a label & you could end up being second best (i.e. robbed of giggs/ other opportunities) by other artists on their roster. In other words, not be fully given the chance to develop you career! A move that could easily stagnate your success.
5. You can do what they do… yourself - While music labels are useful for a lot of artists, they’re not always necessary. Those with strong business acumen may actually prefer to set up an LLC, build a website & market their brand themselves, providing of course they have the available cash. In which case, appointing a label would come with significantly less value. Not to mention come as a HUGE cost saving as you’ll discover in the next point…
6. They want your masters forever - Intellectual property is the beating heart of the music industry. It’s how artists & record labels make the majority of their money. So if you were to sign the rights to your master recordings over to a music label as part of a deal, they (not you) would have the right to claim these royalties for as long as they state in the contract. All of which means that every time your music is being played, they’re the ones getting paid. And yes, while some labels do lease the masters from artists, others still demand the exclusive rights in perpetuity - in other words, the exclusive ownership over your master recordings forever.
7. They don’t have the contacts - Despite the internet, music is still very much a people based business, so before you sign anything, you need to be certain that the music label you choose has the necessary contacts to get you & your music into the right places. Remember: before you sign, they can promise you the world without incurring any legal implications, so you need to be sure you’re not being mis-sold. Once you sign however, you’re legally binded by your contract, which will usually last for several years + state that you cannot be affiliated with another label during this period. Exactly why having a clear idea of their experience, network & how they can give you the leverage needed to progress, is key. Otherwise, you’re basically pinning your entire career on a lucky dip.