A record deal is a contract between an artist and a label covering the making and exploitation of recordings. Deals vary enormously, and the details decide whether a deal launches a career or traps it. Understanding the main structures and terms is essential before you ever sit down with a label.
This chapter is general guidance, not legal advice. Never sign a recording contract without a specialist music lawyer.
Types of deal
Traditional record deal
The label funds recording and marketing, pays an advance, and owns the master recordings - usually for the life of copyright. The artist receives a royalty on income. Labels take the risk; in return they take most of the income and the ownership.
Licence deal
The artist (or their own company) owns the masters and licenses them to a label for a set period and territory. When the licence ends, rights return to the artist.
Distribution and label services deals
The artist keeps ownership and most of the income; the company distributes and may provide marketing services for a fee or a percentage. Increasingly common for independent artists.
360 deals
The label takes a share of income beyond recordings - live, merchandise, publishing, brand partnerships - in exchange for broader investment and support.
Money
- Advance - an upfront payment to the artist, recoupable from the artist's royalties. Not a loan in the sense that you usually do not repay it if the record fails, but you receive no royalties until it is recouped.
- Recording costs - usually also recoupable from the artist's royalties in traditional deals.
- Recoupment - the label recovers advances and recoupable costs from the artist's share only. A record can make the label a profit long before the artist sees a royalty.
- Royalty rate - the artist's percentage of income. In traditional deals this has historically been a relatively low percentage; in licence and distribution deals, the artist's share is much higher.
- Cross-collateralisation - unrecouped costs from one album are recovered from income on another.
Term and product
- Term - how long the deal lasts, often defined by a number of albums rather than years.
- Options - the label's right, not the artist's, to extend the deal for further albums.
- Delivery requirements - what counts as a delivered album: number of tracks, length, commercial and technical standards.
- Approvals - who decides on singles, artwork, producers and videos.
Rights and ownership
- Who owns the masters, and for how long? The single most important question in any deal.
- Territory - worldwide or specific countries.
- Reversion - whether rights ever return to the artist.
- Name and likeness - how the label can use the artist's image.
- Re-recording restrictions - limits on re-recording songs for another label for a period.
Clauses to watch
- Controlled composition clause (US) - reduces the mechanical rate the label pays on songs the artist writes.
- Key person clause - lets the artist leave if a specific executive departs.
- Audit rights - the artist's right to inspect the label's accounts.
- Accounting periods - how often royalties are paid and statements sent.
- Leaving member clauses - what happens if a band member leaves.
Before signing
- Get a specialist music lawyer - not a general one.
- Understand exactly what you are giving up and for how long.
- Compare the offer with what you could achieve independently.
- Ask what the label will actually do: budget, marketing plan, team.
Do this now
- Summarise the difference between a traditional deal, a licence deal and a distribution deal in one sentence each.
- Work out how many streams it would take to recoup a hypothetical advance at a given royalty rate and per-stream income.
- List five questions you would ask a label before signing.