Posted: Dec 23, 2019
Category: The Musician Business
**Guest post written by Scott Ronald, musician, songwriter, and creator of GuitarGearHeadz.com.
"Many artists still see signing a record deal as their golden ticket to success. Good labels can give you exposure, industry clout, and resources that are usually unattainable by yourself. However, signing a record deal without thinking about the longer term implications has ruined the careers of countless musicians.
Before signing a deal, artists need to be able to weigh up what the label can do for their career versus the rights, control and income they are signing away.
These are four important questions you need to ask yourself when evaluating a label offer, in order to ensure that you make the best decision for your career.
A label’s roster is likely the first thing you’ll look into at the beginning of the relationship. While it may be exciting to see a roster full of the biggest artists in your genre, it is their smaller, less established acts that are the best indicator of what the label will do for you.
The methods used to grow a small band’s career are very different to those used to market and promote big artists. Many major labels are excellent at using their resources to do large scale, globally serviced releases for bigger acts, but they don’t necessarily have the time or tactics needed to build up the profiles of smaller artists.
They may be able to open the door to big booking agents and have excellent in-house PR, but building a band’s profile requires a lot more than simply building a good team around them.
The best way to gauge this is by looking at the artists that signed to the label when they were a similar size to you. A healthy label will have many bands who have grown since signing and you’ll want your A&R to be full of stories about how they signed small bands, growing them to success.
This success doesn’t necessarily mean selling truckloads of records and selling out 1000 cap venues, but you do want to see that the majority of their artists are playing good festivals, getting relevant support slots and quality coverage in outlets that appeal to their fanbase.
Perhaps most crucially, you want to see that bands are releasing multiple records with the same label and seeing growth with each release. This shows that the label is making a return on the initial advances and using their multi-album options.
Developing an artist takes a multi-pronged approach, spanning traditional PR, digital marketing, distribution and live shows. As a result, you’ll want to see that the label has ideas about booking agents, touring schedules and PR and marketing.
While there are some labels that do a very good job of combining all under one roof, this is an exception rather than the rule.
Right from the very start, the A&R should be able to give you a good idea of the strategy they have in mind for your career, from release schedules to which booking agents they would want you to partner with and how they’ll approach distributing the album and servicing it worldwide.
You’ll want to see that they already have a good idea of your existing fanbase and see opportunities to grow it.
A lot of labels take a speculative approach to signing acts - they’ll sign up a bunch, do a basic release with poor marketing and artist development and then use the profits from the few bands that do well organically to offset the cost of signing the rest.
Growing your career takes much more than a cookie-cutter one-size-fits-all PR push, so you should expect the label to be able to demonstrate this within your first few meetings.
Streaming and digital may have overtaken physical music sales, but vinyl and CD still remain important revenue streams for most genres. For example, this month JME, one of the biggest grime artists in Britain, chose to only release his new album on physical media.
While the volume of sales may not be close to digital, the profit made from each unit is significantly more.
This is why it is important to know how a label sells its physical stock. With most traditional label deals you’ll get a cut of royalties (usually 15% to 30%) after re-coupables. Re-coupables depend on the contract but can include everything from marketing costs to lawyer fees and even some manufacturing costs. This means that your 25% gets much smaller once the checks start to roll in.
Decades ago, distributors were hugely important as that is how you got your stock into record shops where people bought their music. While the industry has moved on, many labels still use traditional distribution channels.
This is bad for the artist as distributors cut profits considerably. Not only do labels sell to distributors at wholesale prices, but stock damage and loss is suspiciously high compared to other industries. All of this means that the 25% slice you receive becomes very small if the main sales gateways are through physical distributors.
The vast majority of record buying is now online and direct to consumer. This should mean that labels invest in their own e-commerce platforms and push this as the main sales gateway, but a surprising number of labels still choose to sell most of their product through traditional distribution channels which lose significant amounts of profit.
It may not seem hugely important at the beginning of your career, but this can be the difference between making a living from your music and having to work side jobs.
When negotiating a deal, it’s very easy to focus on the immediate short term and the promises made by the label. If you’re a developing musician, the allure of the support and resources a label provides can seem like a bigger priority than what that deal might mean for you in three albums’ time.
However, it is the long term implications of a deal that can be the difference between having a long lived career and fading away after an album or two.
One of the most important things to consider is the license terms on the masters. When you sign a traditional label deal, you’ll be giving the label ownership of your recordings. These days, most labels will want lifetime licenses.
Many artists will find themselves with dedicated fan bases hungry for re-issues, but a label that doesn’t see the value in re-pressing the albums. It is also quite common for other labels to approach you to do re-issues. Once again, you can’t as your old label still owns your music.
By giving away ownership of your music in the early stages of your career, you lose all agency over what you can do in your later career.
It’s always worth getting your lawyer to negotiate the shortest possible license. While it’s rare to get licenses as short as 5 years, you can often barter down to 8 - 10 years. If you are unable to reduce the license period, make sure that rights revert back to you if the release isn't in print for a period of time.
The number of options attached to a deal can also be dangerous. If you were to sign for a two album deal, it’s very common for the label to add a couple of options into the contract. This means that they get “first dibs” on future releases. Usually the advances on these options will be higher than you received when you first signed, so this can be a good thing - but your choice of label is about more than just the initial advance.
Multiple options can mean you get stuck with a label even though a better offer has come along, or stuck with a label that under delivers. Often, staff turnaround at labels can mean that the people who believed in you and your music leave the label, leaving you stuck without any advocates. This exact set of circumstances has meant lots of artists had their albums shelved or received very little backing from the label.
Trying to keep the contracted options to a minimum gives you more control later in your career. Control is often the most valuable asset an established musician can have.
Asking yourself these four questions when negotiating a deal can help you steer clear of the pitfalls that affect most musicians. You may think this kind of thing is best left to your lawyer and manager but you should have an active role in shaping the deal and the contract, if you plan to be a professional musician, you need to understand the business you operate in."
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About the Author:
Scott Ronald is a professional musician and songwriter who has been signed to multiple labels, from independent labels operating out of their owners’ bedrooms to subsidiaries of major labels.
As well as being a musician, he also runs GuitarGearHeadz, a website dedicated to reviewing guitars, amps and pro audio equipment.