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Types of Record Label Deals

Getting a record deal is something many artists dream about, but what does it mean to “get signed”? The phrase gets thrown around a lot but is just a vague definition for a partnership between a label and an artist. There are a lot of different types of deals, so it is important to figure out what your objectives are going into any partnership. Our hope is that this blog will shed some light on the differences and similarities of these types of deals.

In the past Labels have had a poor reputation with the common belief that they take too much from the artist and provide little value in return. However, the artist always has the opportunity to negotiate with the right leverage. We’re seeing evidence of this in the rise of groups like Dreamville, Top Dawg Entertainment, YSL, and countless others. The reason these entities are defined as record labels as opposed to artists signed to a record label is because they knew their options going into negotiations. Remember if prospective partners don’t bring you an offer you are comfortable with, you can always decline an offer.

In the modern music industry, there are so many different definitions for “getting signed” with varying levels of label control that can greatly benefit or hurt an artist. Maintaining artistic control is paramount for an artist and directly affects their happiness in their work. It’s always best to get in touch with an entertainment lawyer when a label offers you a contract. Knowledge is power, and understanding the different kinds of deals so you can decide for yourself what you want to sign is key.

Distribution Deal 

Distribution deals are focused on getting your music out there and helping you promote it. Good for artists that may not have an established fan base or marketing strategy, distro deals were also called Pressing & Distribution Deals (P&D) in the past. This was in reference to the fact that one of the biggest parts of the deal would have been pressing CD’s, but now they can encompass any kind of distribution, such as radio, digital, and more. 

These deals rarely have any money upfront, and the artist is typically responsible for recording and production, also keeping the rights to the recordings. So, the artist approaches a label with a finished product recorded independently, and the label can promote and market using its resources to make the record as successful as possible. 

Independent labels also sign distribution deals to capitalize on a hit, such as when certain albums take off in another country. Partnering with a larger or international label can help the indie label better take advantage of opportunities. 

Standard Record Deal (SRD)

When studios had a greater barrier to entry, the Standard Record Deal (SRD) or Traditional Deal focused on albums and options. Other components like marketing and distribution are not included or can be separate. The label wants to have several album options to decide which has the most likelihood of success to then promote and usually decides how many tracks and albums are on the finished project. 

These deals may be good for you if you already have a large, engaged following, and they’re often used by A-list artists who don’t need a marketing or distribution arm. SRD’s usually come with a cash advance, with the label acting was a bank lending resources to the artist. The artist typically doesn’t keep the masters, and these deals are not as common nowadays. Though it’s not necessarily a bad contract, it may not be ideal for the new artist. 

Major Label Deal 

Ah, the Major Label Deal… what everyone thinks of when “getting signed” comes up. This is the most sought after deal where the label pays for everything, including touring, press, distribution, promotion, videos, etc. A substantial advance helps you change your lifestyle, tailor your brand, and buy nicer clothes, cars, etc. 

However, an advance is still a loan, and banks (the label) are never going to lose money if they can help it. Thus, your royalties as a new artist are lower than other deals, around 11% to 15% of your music sales. The major label also typically owns the masters even after recovering their expenses, so it’s always important to consult with an entertainment lawyer and your management team whenever an offer comes on the table. 

360 Deal / Multi Rights Deal

The 360 Deal or Multi-Rights Deal is really common for major and sometimes independent labels to approach artists with. This deal started with the best intentions as a result of file-sharing music taking off and plummeting album sales in the 90s, and independent labels actually created these deals because they had fewer resources to manage and promote their artists. The label still helps the artist but takes a percentage of all artist revenue streams such as touring, merchandise, appearances, fan club, licensing, music sales, etc. 

This is based on the idea that if the label helps break an artist into mainstream success, the label feels entitled to a portion of these income streams. It can be a flat rate across all revenue streams, usually 10% to 35%, or can have varying rates depending on the source, such as 15% from touring, 30% from merchandise, and so on. 

Other variations such as 270 Deals or 180 Deals cover just one to two income streams, but these are uncommon. They can include, for example, touring and publishing income or recording and publishing income. The label may also be more or less involved with individual income streams, with contracts having either active interest or passive interest. Active interest allows the label a certain amount of control over the publishing or merchandise, while passive interest means the label doesn’t have as much, if any, control. 

If you are an artist getting this type of offer from major labels, it’s key to know what your points of leverage are, such as your music sales, social following and engagement, touring figures, merchandise sales, etc in order to potentially negotiate a better deal. 

Anti-360 Deals 

Anti-360 Deals turn the multi-rights deal on its head with the focus on the artist’s needs. These deals allow artists to maintain their artistic control and leverage without losing the resources and backing they deserve. Labels partnering with artists typically focus on promotion and marketing strategy. While labels in 360 deals want everything, these deals aim to provide artists everything they need and make them happy, which leads to the label’s brand being strengthened.

Single Deal Recording Contract (SD)

Single Deals, which are quickly becoming the norm outside of the United States, especially Europe, are based on singles, not albums. A variation of the Standard Recording Deal, these deals typically involve the production and release of a single song or a series of singles. Major labels may not want to invest in a whole album with an unproven artist, so they can use Single Deals to test the market and get a better idea of how successful an album will be with an artist by releasing singles. Joint-Ventures and indie labels also use these deals to test the market’s response.

A full album is also expensive to produce and will only have a few solid singles to push to the market, so the other tracks on the album are not as good of an investment for the label. Labels have begun to work around this by asking for 36 singles instead of 3 albums with 12 tracks, allowing the label to promote the strongest tracks instead. It’s much easier for the label to recover the price for a single than a complete album with 10 or more tracks. 

With a similar pay structure to the standard deal, Single Deals are less risky for both the artist and the label, though the artist royalty rate is typically lower than on album deals. Album deals are usually for more established artists that can negotiate a better rate. Artists can also negotiate to include Track Equivalent Albums/Streaming Equivalent albums in their contract, which allows single tracks to fall under the better album royalty rate than the single royalty rate. Since fans may purchase or stream a single from an album more, the deal could include 10 sales or several hundred streams equal to an album sale. This means that though the royalties would be from a single song, you could potentially earn more than you would from album sales and streams alone.

Profit Split Record Deal, Joint Venture Record Deal & Deals Between Labels

Profit Split or Joint Venture Deals can vary with several different kinds of deals, such as the traditional record deal or a 360 variation, and are usually more fair to the artist. Often, independent artists or artists working with indie labels can get flak for having “secret recording deals” with major labels, but this is very common actually. There are three components to making music – recording, distribution, and marketing. Independent labels can handle one part such as recording and managing the artist, while a third party takes care of distribution and marketing. This third party can be a major label or owned by one. Indie labels sometimes enter into joint ventures with major labels who handle marketing for a profit split.  

For the artist looking to get signed, it’s important to find an indie label that has a marketing and distribution partnership that benefits you. You may not know your label is working with a major company, and it doesn’t matter, as you typically have more flexibility in your royalty rates while getting the benefits of the major label’s connections. 

For a solid completed project that has yet to be released, artists can approach labels with a profit split offer. The label can invest in the marketing of a finished product that the artist already funded. However, the label may not go for it if the production does not fit their brand. Profit splits allow labels to look at artists purely for the music, not just the opportunity to turn a profit. If the release is a hit, it’s good for everyone, and if it does poorly, the label did not lose any money. This allows both parties to re-evaluate the partnership after the release so neither is locked into a long-term contract. A flexible short-term deal can also lead to a successful long term partnership later. 

50/50 Deal

50/50 Deals, which can also be viewed as a joint venture or partnership deal between an artist and a label or between two labels, were very uncommon up until very recently. But with the rise in brand power and influence of the independent artist and indie labels without the help of major labels, a more attractive deal is the only way for a major label to sign them. These are usually only offered to big name celebrity artists and labels, especially when multiple labels are bidding for a deal. 

However, they are also common with independent labels. Artists are more likely to be offered a more balanced deal by an indie label since they may not have the resources to provide a substantial advance upfront. 

Artist Deals

A 360 deal but between artists, these contracts allow newer artists to reap the benefits of the more established parter. The more famous and established artist with a larger following can offer increased visibility and increase the likelihood of success, such as One Direction owning 5 Seconds of Summer. 

If the artist signing another artist is partnered with a label, then both parties will inherently be working with the label in question. It’s not uncommon for the independent artist to approach a label or another artist with this offer. 

Licensing Deal

Licensing deals are mostly for artists with a large catalogue of music and a significant amount of existing sales numbers. By licensing the album to the label, this allows the artist to maintain the rights to the project while still getting the benefits of working with a label. 

Generally, a major label offers a 360 deal to a previously unsigned artist with substantial sales. To help ensure the success of their release strategy, the label will often want to control previous albums or remove them from the market altogether. So, licensing the previous projects for an increase in revenue prevents the artist from giving up the rights to previous work and the label from having control of the copyright.  

EP Deal 

Private EP Deals allow labels to test the market before signing an artist full time. They produce an EP together, then the label markets the project without publicly announcing their partnership. This isn’t a bad option for the artist as it allows them to promote their project under the label’s direction, which can help them get influential blog placements, write-ups, contracts, etc. Neither the label nor the artist can claim any public connection to the label. 

If the project does well, and the public finds out the artist is partnered with a label, the label can then step in and announce they have officially signed the artist. To the public, this appears as though the label had the best offer compared to other labels once the artist entered into mainstream popularity. On the other hand, if the project is not successful and lacks press coverage, the label hasn’t lost a significant amount of money nor negatively affected its reputation. EP Deals and Profit Splits can be a safe topic to discuss with labels since there aren’t massive investments on the label’s part. 

Production Deal

Though not technically a record deal as it does not cover distribution, Production Deals are usually offered by a production company only for recording and producing your music. If an artist does not have the resources to record on their own, this can be a good option prior to looking into a record deal. However, there are some things to consider, such as what the company will do with the music once it’s complete and how they will market and distribute your music to make it as successful as possible. 

Artists can also sign to producers in the same way they would sign to a label for a particular project. This can happen when the label signs a producer to help develop artists and create complete projects ready for release. What the artist will make in these deals is heavily reliant on what the artist and producer agree to. The production label will usually split 50/50 with the artist, but only after the label receives their share, so the split could look something like 50% going to the label, then 25% for the producer and artist each. The producers often keep the rights to the masters as well or share them with the label. Many production deals are created with the goal of making music that can lead to a record deal. As always, it’s still imperative to be careful, consult with proper legal counsel, and speak with your management team before signing anything, so you don’t end up with a less than favorable deal. 

Decide for yourself the kinds of label deals you are willing to enter. If you feel like you have more opportunities for growth without the help of a label, or if the deal doesn’t bring you the benefits you want from a partnership, then don’t sign.

With so many options in today’s music industry, an artist should not have to enter into a bad deal. As an artist, you should always identify your value and points of leverage, such as music sales, streaming numbers, engaged social following, etc. The more leverage you have, the better the terms you will be able to negotiate.

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