Different Types Of Record Deals

By Wendy Day from Rap Coalition (www.rapcointelpro.com)

There are a multitude of different deals out there for any recording artist. It depends solely on what you agree to contractually. There is no such thing as a standard contract-- a contract is just an agreement between two people that says who will do what by when, what happens if they do not do it, and how everyone gets paid. You don’t get what you deserve in this business, you get what you negotiate.

It is important to have an entertainment attorney finalize your deal (or negotiate it if you are not skilled in this area--I have done numerous deals and still always have a lawyer by my side in every deal) because it isn’t always what’s written in a contract that can hurt you, but often what is missing. Every contract is different because every situation is different! Recording contracts are always, always, always set up to benefit the label and not the artist, so many changes are needed. In fact, I once heard that the average contract goes back and forth in negotiation seven times.

If the label has experience with you or your attorney, they know what basics will be accepted and what will be rejected quickly, so they often start with a better contract than someone who is brand new with no experience. This is a business first and foremost, and people who are out to make money from your talent, will try to do so at a split that is as beneficial to them as possible.

I shouldn’t have to mention that a real record label or distributor is one that has been putting out music successfully for awhile, has relationships in the marketplace, and is well known. A record label is not Little Bo Bo from down the block who thinks he’s a good judge of music and linked up with the local dope boy or basketball player to start a label. It is also not a website that appeared online last week to sell your downloads and ringtones regardless of how catchy the name is. The goal is not to be signed to just ANY record label, it’s to have a successful career doing what you love to do: making music. This shit is like winning the lottery to begin with, it’s important you learn as much as you can and stack the odds in your favor as much as possible.

Here is an idea of the different types of deals out there, and these deals are attainable based on the leverage of the artist, how badly the label wants to sign the artist, who is on their team that the label sees as added value, if other labels are bidding for the artist as well, and the track record of success of the artist or producers:

Distribution Deal (sometimes called a P&D deal): This is the hardest deal to get. It can be an 80-20 split, with the label making 20% and the artist making 80%. There is rarely money advanced (in a few cases I have seen pressing costs advanced). This deal is usually reserved for the most successful artists where the label perceives minimal risk and sees value in allowing the artist to do the bulk of the marketing, promotion, radio, and video work. Cash Money has this type of deal, as did No Limit back in the mid-90s at Priority. The only thing the label is responsible for is getting the CDs into stores and collecting the money. The artist does everything else. The length of the deal usually runs 3 years and rarely, if ever, goes to an artist without the proper funding and experienced team already in place. The artist always owns the masters.

Joint Venture Deal: This is also a deal that is not easily forthcoming without a track record of success. It is usually a 50-50 split, and the term can run from 3 to 7 years. Most labels split the work with the artist but offer the sole funding for the deal. There can be an advance, which is always recoupable before the splits, and it is up to negotiation whether the label owns the masters or splits them with the artist.

Artist Deal: By far, this is the most popular and common record deal. The label does everything, except record the album (although they pay for it), and they have complete control and ownership. The term is usually for 5 to 7 years, and the average percentage for the artist is 12%. Out of that percentage the artist pays back everything the label spends that is recoupable, rarely leaving the artist any money unless the sales are exceptional (Gold or better)

All labels are not created equal. Just getting signed to a label is not enough. In fact, if you are happy solely to get a deal with a label, any label, you are doing yourself a huge disservice--you are setting yourself up to fail, unless you are just a lucky muthaphukka (in which case, play the lottery and stay out of the music business).

Some labels are great at radio, some are great at working the streets, some excel at making connections into film and TV or have great relationships with BET and M-TV, and some have great connections with the top producers and mixed tape DJs. If you make outstanding radio songs and you do a deal with a label that has a weak radio department with no budget to pursue radio play, you are screwed and your career will falter. Each label is different, and it is important to know those differences as you are building a career in the music business. Just getting a deal, is not enough to guarantee success (not that anything in this fickle business can be guaranteed, but you want as much of a fighting chance as possible). And the labels change, as the people who work for them come and go.

I have played a role in helping to build MANY millionaires in this business (Cash Money, David Banner, Twista, etc). I feel my key to success has been in studying the labels, knowing the abilities of their employees and various departments (which are constantly changing), and really seeing who is able to do what, well. Then, when I am shopping a deal, I link up the artists with the labels that make a good fit. I make sure that the artist is covered by outside consultants in the areas where the label is weak. For example, if a major label is strong at radio but weaker on the streets, I make certain it is in the artist’s contract to hire their own street promotions team along with the budget to do so.

With some labels, it is impossible to do this, so I make certain that I never do deals with those labels—they are not the successful labels anyway, so nothing is lost. Some labels are in business to make a certain percentage back above the investment they outlay to keep their investors or stock holders happy, so they are not interested in driving their artists platinum. Perhaps their business model is to spend no more than $500,000 on the creation, marketing, and promotion of any rap record, and then their goal may be to make back $750,000. It would follow that they would never spend more than half a million dollars and as soon as they achieve their sales goal, they would stop working the project and move on to another project. This is great for artists who don’t have a chance of selling a lot of CDs, but frustrates most artists who feel they can sell more than 100,000 CDs (after all, for a label to make $750,000 all they have to sell is 100,000 CDs).

Some labels spend millions of dollars to promote their artists without knowing what is effective, so their motto is spend, spend, spend. For an artist who desires fame and doesn’t care about making money, this would not necessarily be problematic. I imagine this is why we see so many broke artists on VH-1 “Behind The Scenes” specials, because they weren’t aware of ways to turn that fame into income for themselves.

Then, there are labels that change their staffing, or change their ownership or change the original teams that had made the labels successful in the past. This is why labels such as No Limit, Ruthless, Loud, Death Row, etc could be on top one day, and struggling to compete the next day. One thing is for certain in this business: success is created by hit records and hard work. There is no other route to take. It is impossible to have one without the other to succeed.

The industry is driven by radio right now. This means that the days of Master P selling millions of CDs without any radio play are over. Today, a run-away radio hit is almost a necessity to succeed. But in addition to a hot single, it is important to have a realistic budget and a well-connected team to follow up with strong radio promotion. Radio is just one piece of the pie in creating a successful project. Even though radio is key these days, it is not enough, by itself, to succeed.

Here are some of the things I look at when analyzing a major label:
• Who is running the label? Have they had success before? With what kind of artists? With what kind of music? What and when was their last hit? Do they appear to know what they are doing? Have artists left that label to blow up elsewhere? Are the current artists happy? Do they have a stockpile of artists just sitting still waiting to come out?
• Who runs the radio department? What records do they currently have at radio? Who are the priorities at radio? Which stations do they seem to have great relationships with? Which indie promoters do they hire?
• What other artists are signed to the label? What is their release schedule? Who are the priorities and will my artist be a main priority?
• Is the label good at the type of music my artist makes? Do they offer good artist development? Do they get a lot of press for their artists? Is the marketing staff strong? Does the staff have a good reputation? Does the staff turn over quickly or is it a good working environment? Does the person running the label give their staff the autonomy to do what they are hired to do?
• Is the bulk of the label’s staff an A-List staff or is it comprised of folks who are new to the business or the folks who could not get jobs anyplace else (a sign that the label is overly cheap and has no clue how to succeed)?
• Does this label share our goals and ideas of success? If I am planning to take my artist Platinum and/or do a ton of endorsement deals, we better not sign with a label that only has a history of selling 300,000 CDs on every twentieth release, while barely breaking 75,000 in sales on most releases.
• Do they sign the majority of hot acts around the country or do all of their acts seem to come out of nowhere? If they are signing the hottest acts, do they become one hit wonders or do they have legitimate careers?
• Are their deals fair or are there a lot of disgruntled artists slamming them publicly?

I am not any smarter than you. My connections are not great. I just study this industry under a microscope and place artists with the labels that appear to make sense for that type of artist. So far, it has worked! And, if I can do it, you can do it. So before you take a deal, just any deal, make sure you understand exactly what you are getting into. Do the research and make certain the company to which you are giving the next five to ten years of your life, is worthy. Most are not. The real work begins once you get a deal, so make sure you have as much stacked in your favor as you can!