To sign a record deal or not to sign? (What you don't know could cost you)

Updated: Aug 20

Getting a record deal today has a very different connotation then it did twenty years ago. If you are not a major artist, you have to seriously take a look at the benefits of signing with a record company.

You have to ask yourself what am I getting for what I’m giving away, and is it worth it?

They may be providing all or a partial recording budget and possibly helping with tour support. That sounds good, and feels good to have a team helping you. However, know that all fronted money is recoupable through any royalties you generate. That means that they will charge you for that money against your royalties. If the money you make touring and through downloads is not enough for the record company to recoup their investment, then you are in debt to them, and you may never see any royalties from that record deal.

One of the most important things to take into consideration is that the record company will own your master and possibly part of your publishing unless you have negotiated something different.

Why is this important? Because streaming royalties pay half to the master owner. Here is one of several scenarios: you get signed to a record deal. It’s exciting - it makes you feel special, and like finally, all your hard work has paid off. Maybe they have a little celebration party to welcome you to the new label. Maybe there are even some music icons that you meet who play on your new release. You get to work with a new producer that has some excellent credentials - it’s all exhilarating. You work on the recording for maybe a year, perhaps less. You have a team helping you with promotion on social media platforms and possibly some radio interviews, amongst other opportunities.

There are so many different support possibilities that a record company could offer, ranging from more support to practically nothing but a promise that they will help get more eyes and ears on you. Each company and each situation has to be viewed clearly and not through rose-colored glasses.

So now you have to start touring to support your new release. It’s a lot of work because you are a new artist, and the reality is that you aren’t making as much money touring as you had hoped. Perhaps you really aren’t making any money at all but your playing your music and having fun . . . or maybe not. Either you have an agent, or someone at the record company hired an agent to book you. They aren’t trying every way possible to save you money. They probably just want to take care of their commitment to you as quickly as possible. You aren’t their priority because you aren’t a big moneymaker. You’re not paying attention to all of this because you’re busy touring and putting on a show. You have a team to do this, and you trust that they are doing their job with your best interest at heart.

Another possibility is that you book your tour, but you really don’t know what you’re doing yet and aren’t aware that you need to do all you can to keep your costs down. It feels good to be playing your music in front of audiences and having a record company that you can claim as yours. So you do the best you can to book shows and keep things moving along.

So moving ahead a year or so: things aren’t what you’d hoped. You aren’t happy with the record company, so you decide to leave. They still own your master or masters depending on how much work you’ve done with them. You are still touring and promoting your music, but you’ve decided that you could work better on your own. You put out another release, but this time you recorded the album, so you own all rights. Now one of the songs or several from the releases that you put out with your previous record company starts getting a lot of streams because they have been well-seeded on the streaming platforms. You, however, are only receiving the featured artist share, which is only 45% of your streaming royalties because the record company owns the master, and the master owner collects 50%.

Now maybe being on that label, working with that producer and the connections you made were worth the experience, and perhaps not.

If you had made that recording on your own, you would retain all the royalties. Yes, you would have come out of pocket, but you would own the master recording and all your publishing. You would have also been in control of how much you wanted to spend on that recording. There wouldn’t be any surprises when you get the bill or don’t get paid any royalties because you are still paying off the record company for laying out the money for the recording, touring, and possible lunches that you didn’t know about.

You could have chosen to go into a less expensive studio or possibly traded for some studio time. You may have hired an equally fabulous producer that didn’t cost as much. There are many possibilities, but the bottom line is that in spending less money and retaining all your rights, your return on your investment could happen much sooner, and you would own your investment. The future royalties generated by those songs are going to you and not to someone else. Again, if the work that the record company did for you pays off in one way or another, then perhaps the gamble was worth your time and effort.

Unfortunately, streaming does not pay a lot, so creating and holding onto as much of your intellectual property as you can is very important. Every stream counts towards helping you acquire more passive income. If any of your music for which someone else owns the masters starts to receive lots of spins by being on a great playlist or by other means, you will only see 45% of that. That could be in perpetuity, or it might be for only a set amount of time. That depends on your contract.

If you are a prominent artist that is making millions of dollars and the record company machine is helping you do that, then it might be worth giving up your masters, among other possible revenue-sharing possibilities. However, if you’re not a big artist, then owning your masters and all of your publishing might mean the difference between paying all your bills or not.

It’s essential to go in with your eyes wide open. You need to know what you’re giving away so that you can make informed decisions.

The tools to help you book your group in some fantastic venues are more prevalent now than perhaps any other time. That goes the same for helping you promote your music. Artists that want to retain more control over their catalog and their career have much more opportunity and resources than ever before.

Yet, with all of these resources available to help support and inform artists, there are still so many that choose to stay uninformed. I see this not only in young artists but also in well-seasoned veterans. The lack of knowledge and understanding of how the music business works is the downfall of many great and would-be great artists.

Make sure that you are not one of those artists. Explore all your possibilities. Before you sign anything, make sure that you fully understand every ramification that comes with that commitment.

#indieartists #indiemusicians

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