8 Types of Record Deals

blog imageRecord labels get a bad rap.  The collective reasoning behind this thought process is that Labels screw Artists.  Labels overreach, they take too much, they want everything and give little in return.  Let’s set this theory on fire.  “Labels screw you over” is now a small fraction of reality.  In today’s industry, if a Label is screwing you over, it’s because you let them.

Artists have leverage, and in most cases, this leverage is identified as the ability to enter into a variety of Label deals.  If the Label deal isn’t right – negotiate.  If the negotiation doesn’t work, you have the ability to say “NO.”  Traditional Label deals have given the industry a bad rap, but we now live in an age of non-traditional deals.  The number of record deal opportunities for Artists continues to grow, and to date, a “record deal” can fall into eight different categories.  Didn’t know there were eight?  You’re not alone.  Not so long ago, there was only one type of record deal.  Six months from now there will be twelve types, so stay tuned for updates.  In the immediate, check out the following eight options for Artists in today’s market:

1.  Standard Record Deal

The Standard Record Deal (“SRD”), which is not the standard today, represents the type of offer prior to the digital revolution.  In remote cases they’re still used, primarily with A-listers.  The focus rests on recorded music and album sales.  Ancillary components become separate issues altogether.  Major artist that have deals up for renegotiation  have the leverage of keeping recording/ancillary components separated. SRD’s are based on the premise of “albums.”  The label will attempt to position itself into having numerous album options (1 album + 4 options, and albums being defined as 10+ songs per album).

2.  360 Deal

The 360 Deal (aka Multi Rights Deal) set the modern tone for Label negativity.  Pending on who’s arguing, the 360 offer isn’t necessary a bad model.  In short, a 360 deal is exactly what it sounds like – the Label takes a percentage of numerous income streams (recording, touring, merchandising, ancillary activities, fan club, etc.).  The Label justifies this multi payment approach due to the fact that IF they break an Artist, they helped create all those income streams, therefore should be paid from those income streams accordingly.  In a typical signing scenario (i.e. a developing Artist being offered by a major Label), the standard first approach offer will come in the form of a 360 deal.  Artist in this scenario, know your points of leverage (i.e. sales, social numbers, touring/merch figures, etc.), as you may be able to reposition into an alternative type offer.

3.  Single(s) Deal

Pending on your geographical location, Single(s) Deals (“SD”) are quickly becoming the new normal.  The United States, due to its large overall market share, will be the last to implement the SD.  This model is commonplace within European territories.  Unlike the SRD based upon the concept of “albums,” clearly SD’s are based on “singles.”  This new mindset is due to a sobering market reality – singles sell, not albums.  When a Label funds a full album production, it cost lots of money.  The Label will likely push only a handful of those singles into the market place, and more so, those singles will be the primary investment breadwinner.  Therefore the additional tracks that the Label funded become an investment bust.  Labels know their figures and they’re now structuring deals around this financial black hole.  Instead of demanding 3 albums, a Label will now demand 36 singles.  The distinction being, with 36 singles, the Label will select what they feel to be the strongest tracks to promote as opposed to 3 albums which may only contain 3 solid singles per album (total of 9).

4.  Licensing Deal

What if you’re an Artist that already has a catalogue in the marketplace?  Further, what if you already have substantial existing sales?  A licensing deal may be the way to acquire a Label partner.  In short, you can license the album to a Label, which essentially means the Artist still owns the copyright.  This is key.  The scenario is most applicable if a previously unsigned Artist (with large sales) is offered a 360 deal with a major.  The major will either (a) want control of the previous album(s), or (b) want the previous album(s) off the market so that it doesn’t create clutter with their album release strategy (i.e. blackout option).  In either scenario, don’t simply give the previous project away, license it for an income spike and continue to keep control of the copyright.

5.  Profit Split

Your band just finished funding an album, what’s next?  Do you release it and hope the release attracts a Label, or do you shop the album prior to releasing and hope a Label picks it up?  It’s a difficult scenario.  If you self release and the strategy tanks, you’ll inevitably generate dismal sales therefore sacrificing your chance to attract a Label.  If you shop an unreleased album to Labels and they like the band but not the production, they’ll likely request you reenter the studio on their dime (i.e. you’re signing a record deal, but the project your band recently funded becomes worthless).  If you’ve got a solid unreleased project and want a Label partner, approach labels under a project split scenario.  Labels love this because their only real investment is on the marketing side due to the fact the Artist already funded the project.  If the overall production doesn’t align with the Label’s expectations, they’re more likely to turn a blind eye because they don’t have money at stake.  Profit splits allow Labels to evaluate Artists purely through a creative filter as opposed to a monetary filter.  If the release works, everyone shares equally.  If the project sucks, the Label doesn’t care because they had no money at risk.  In most cases profit splits also allow for both sides to evaluate the partnership after a release, therefore nobody is locked into a long-term relationship.  Shorterm flexible geared towards a longterm partner is the key for Artists.

6.  EP Deal

There are a growing number of Labels exploring private EP Deals.  Private remaining the operative word under this type of structure.  Labels will test the market prior to publically signing an Artist, and this isn’t a bad thing for bands.  Under this situation, Label X may offer Band X (or Band X may request from Label X), an EP Deal.  Label X will allow Band X to promote the project under the direction of Label X’s marketing/promotional personnel. This often means Label X will assist Band X in blog placements, write-ups, contacts, etc.  However, Label X wants ZERO public connection to Band X, and Band X can’t make any connection to Label X.  Should the general listening public embrace Artist X and/or Artist X catches fire with PR coverage, Label X has the luxury of entering into the picture and making the announcement that they officially signed Band X.  In reality, Label X already “signed” Band X via the terms of the EP Deal but it appear as if Label X beat out all the other Label suitors in a bidding war once Band X got hot.  If it turns out that Band X is terrible (i.e. nobody enjoys the project and they got poor coverage), Label X hasn’t been (a) out any money, nor (b) has the general public connected Band X to Label X – which would inevitably dilute the Label’s reputation.   Unsigned Artist, if you’re looking for a Label partner, EP Deals & Profit Splits remain a safe conversational topic when approaching Labels because it doesn’t result in massive investments.

7.  Anti-360 Deals

Regular blog readers and followers know this is an area of excitement for me and I remain amazed Anti-360 haven’t risen to common knowledge within the industry.  Anti-360 Deals remain an efficient way to carve out a variety of partners, especially in the international arena.  Additionally, Anti-360’s allow Artists to completely flip the script of the Multi Rights Deal.  In short, Partners are more strategic based on promotion, which ultimately allows the Artists to keep musical leverage and artistic control.  Read more (Anti-360 Deal,  360 Deals vs. Anti-360 Deals or for even more details, watch my entire MIDEM lecture HERE.

8.  Artist Deals

Labels aren’t the only entities generating 360 Deals, as today’s Artists have created their own version of a 360– and it’s really smart.  In short, Artists are signing  Artists (Artist 360 Deals).  The most public example being One Direction’s ownership of 5 Seconds of Summer.  Established Artists tour, they sell lots of merch and they have heightened visibility.  Anything they touch has a higher percentage chance of the Midas touch – including other Artists.  They have the ability to start the conversation, and more so, control the flow of information.  Even though the 360 concept remains between Artist and Artist, in most cases the Label partners remain the same.  If Artist X signs Artist Y, and Artist X is signed with Label Z, Artist X and Artist Y will be with Label Z.  Unsigned Artists – approaching a Label and/or another Artist about alignment is not uncommon.

Given the options in today’s music market, there is NO excuse to having a bad deal.  To completely ignore the “bad deal” scenario, take ownership in your assets.  Know your worth.  Know your points of leverage.  Draw a hard-line in the type partnerships you’re willing to make.  If it doesn’t fit your progression model – don’t do it.

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