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Fine, Let’s Talk About Label Deals

October 2, 2020

Alright, you win, Internet. You often do. Let's talk about record label deals. 

A few weeks ago, Kanye West gifted the music community more than 100 pages of his major label contracts in a barrage of Tweets. He also (bizarrely) posted a video of himself peeing on a GRAMMY statue. So, there's that. 

The billionaire superstar is on a mission to reclaim much of his intellectual property and, presumably, shift the dynamic of future record label deals. It's the modern day version of Prince infamously writing "Slave" on his face in protest of label overreach.

And it's a "gift" to the music community (particularly music attorneys and journalists) because major label contracts with superstar artists are notoriously locked up pretty tight. Now that plenty of smart folks have gotten their hands on the contracts, you can read lots of great insights into West's deals and how they function.

But What Does Any Of It Mean For Everyone Else?

Here's the real rub: as demonstrative as it is to look at Taylor Swift, Kanye West, Prince, and other superstars and their deals, it's not really helpful for the thousands of independent artists who will have a contract populate their inbox in the next year. 

For starters, those contracts might not even come from a traditional record label. We're seeing distributors, artist development companies, publishers, managers, and everybody in between cooking up hybrid deals that assume a lot of responsibilities traditionally reserved for record labels. 

On top of that, nobody can really be certain how many contingencies we'll be looking at in a post-COVID era (whenever that may be). But one thing is clear: copyright ownership and revenue stream diversification has never been more important. 

Every artist should care deeply about things like master splits and reversion clauses. 

So What Would My Label Deal Look Like?

That's just the thing — the Kanye conversation involves things like $8 million advances, clauses for B-sides and secret "lost tape" rough recordings, $4 million recording budgets, performance bonuses, and more. 

In most cases, unless you're riding a viral hit, artists are looking at much more conservative budgets and advances. Independent label deals, development deals with majors, and distributor deals are much more likely to provide advances and budgets in the tens of thousands than the hundreds of thousands. 

But they're still just as likely to take a big slice of your master recording, which is at the heart of the matter with people like West, too. You may have actually seen a record label contract calculator pop up in your social feed recently.

The calculator gained a lot of interest in industry circles, probably for equally good and bad reasons. The core issue comes down to context.

It's impossible to objectively weigh the merits of a deal on math alone. Yes, artists have been historically hoodwinked when it comes to the money in the industry. But that doesn't mean it's always the upfront deal terms that did them in.

Battling The Inherently Irrational Desire To Sign A Deal

Record label deals aren't inherently good or bad. They all come down to leverage and if they satisfy the needs of each party. An artist usually needs (or wants) money and marketing connections. A label usually wants copyright ownership and project oversight.

"How much" of all these components is up to all the variables of any typical contract negotiation. 

But the thing that *is* inherently bad about label deals is the emotional attachment many artists feel to signing one. Label deals hold a historic, albeit romanticized, place in music industry lore. For many, they represent a certain level of industry "validation" and a notion of having "made it."

Of course, when you peel back the layers of what makes different artists successful and how the modern industry has evolved, labels play much more nuanced roles in an artist's success. Thanks to drastically reduced costs of production and essentially zero barriers to entry when it comes to distribution, a lot of artists make a lot of money without even giving a label a sniff.

But that's a rational argument. And for a lot of artists, there is something inherently irrational about some of the motivations to sign a record deal. 

Cash Is A Commodity

No matter how you spin it, a record label's primary function is and always has been "being a source of money." Label deals may be closer to payday loans than something like a mortgage, but record labels have also historically been the only ones willing to come in and put up major cash for music. 

That's not the case anymore. Publishers, distributors, managers, investors, and other parties are jumping into the fray with money (thanks, streaming). 

So now it just comes down to understanding the cost of that money. That's what we mean when we say "cash is a commodity." It gets cheaper and cheaper to borrow money as more people compete to offer it to you. 

A record label may offer you a $50,000 advance and take an 80/20 split of the masters of your new album. Your distributor might offer you a $50,000 advance and a 50/50 split. At that point, it's just up to you to decide if your distributor's additional offerings (like marketing plans, editorial pitching etc.) meet or exceed what a label might offer. 

Independent artists have better access to their data than ever before. That means they have a better opportunity to understand their own leverage and make an informed decision.

The Bottom Line: Have A Plan And Know What You Need

The best way to not get screwed when you sign a deal is to know what you're looking for and negotiate out what you don't need — as best you can. In other words, if you know your biggest needs are related to personnel and experience, you'll be making financial concessions to get those. And you'll most likely find the right match with a label or distribution partner.

But if you've already got a full marketing plan and team and you just need the capital to push "go," you might not even need to go to a label. Heck, you might make it work with a business line of credit, as several artists have famously done. 

Just remember: every deal is a starting point. Arm yourself with your own data and know what you want from a deal, whether it's from a record label, distributor, publishing company, or any other partner. Take your time when a deal comes your way, try to disconnect from it emotionally, and work with a lawyer you trust.

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