What is a Record Label Responsible For?

What is a Record Label and What Are they Responsible For?

It used to be that record labels were responsible for just about anything and everything to do with getting music to the consumer. From discovering the artist to nurturing and developing the artist to having an influence (and often final say) on the songs (and the talent used in writing and performing songs), to setting up recording sessions, manufacturing the songs in final form (mastering and pressing CDs), all the way to distributing and promoting the music through radio stations and record stores. The artist’s involvement was usually limited to creating and performing music. In exchange for the things they did, the record label took a healthy percentage. Today, this arrangement between artist and label is called a 360 Record Deal and has largely replaced the traditional record label deal.

What’s the difference between a traditional record label deal and a 360 deal?

In the traditional record label deal between artist and record label, the terms were basically as follows:
1) The record label would acquire the copyright for the artist’s recordings and have options for multiple albums.
2) The record label pays the artist a royalty of sales after deductions for:

1. Producer royalties
2. Recording Studio Costs
3. Packaging
4. Promotion
5. Marketing

The artist would retain the revenues from:

1. Publishing
2. Merchandise
3. Touring
4. Endorsements
5. Appearances in movies and TV shows
6. Ringtone sales.

In their new incarnation, the 360 Deal means that the record label now participates (i.e. gets their cut) from what was previously the artist’s domain—publishing, merchandise, touring, endorsements, appearances and all digital revenues. In exchange, the record labels say they take a longer-term approach to build up the artist’s career as opposed to striving for only hit records.

So, what should the striving artist look for in a record label? The answer depends on what the artist brings to the table and what the record label can offer. Legitimate record labels are still the 600 pound gorilla in the room—they have tremendous resources they can throw into marketing, publicity, video production, social media, radio promotion, tour support and worldwide physical and digital distribution.

Single Album Deals

Today, the record labels are somewhat more flexible in how they will work with artists. A license to distribute a single album is one such contract. It is specific to one album and the artist gets a signing bonus plus compensation from royalties. These deals are usually for a specific amount of time and the artist retains the copyrights to their music and can shop their music to other labels, or self-distribute, once the contract’s time frame has expired. The record label has the right to sell, distribute or license the music from the album covered by the deal for the duration of the deal.  A variation on this deal may include an option for a second album (the record label has the right to match any other offer.)

Exclusive Recording Agreement

The exclusive recording agreement falls between the single album and the 360 deals. Like the single album deal, the artist gets a signing bonus and is paid from royalties and retains the copyright to their music. The record label gets options for additional albums from the artist. The record label pays for the production costs (which they then get re-imbursed from future royalties.) This is beneficial to the artist who has not yet recorded the album.

Record Labels are in Business to Make Money & They’re Very Experienced at It

What is important for the artist to realize is that the record labels are a business, they have been doing this for a long time and they are looking to make as much money they can from any deal they enter. What sounds attractive, may not be so in reality—especially if the record label underperforms on the things, they are responsible for. Before entering into ANY contract, at any point in the process of creating music, the artist should make sure they know what they are getting into and what rights they have to get out of a deal that goes South. Two good references for more in-depth coverage of the points brought up in this article are: Now You Know Everything About Recording Deals by Steve Gordon, a leading music contract attorney with a great track record of helping artists get the best deal available; and The Indie Guide to Music Copyright and Publishing [https://heroic.academy/indie-guide-music-copyright-publishing], which has a great breakdown of all the various rights (which is where royalty payments are generated) and who is assigned those rights (where the royalty payments are sent.)

 

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