What Type of Deal Should you Sign?
If you determine that a label, either an indie or a major, is the right path for you, there are several types of deals that you can sign. Here’s a breakdown of 4 of the most commonly seen:
1. Production Deals
Rather than signing to the label, with a Production Deal you would sign on to work with a specific producer who has an agreement to develop artists within a label. Think of this as an artist development deal. You gain the benefit of working one-on-one with the producer, but you also take a big % cut, as it’s possible with these deals for the producer to take up to 50% of the royalties.
2. Distribution Deals
This type of deal is simple. You are often expected to create and produce your album from start to finish, and then the label helps you to get the product into stores. This deal could include getting music videos, albums, and singles onto the label’s own major digital channels. Most often, this deal includes no advance (payment given up front, used for recording purposes, which is paid back by the artist through album sales), and could take up to 25% of the money generated.
3. Major Label ‘Standard’ Record Deal
Formerly the most common type of deal, this is what most musicians think of when getting ‘signed by a major’. In this deal, the label would be part of the artist development, recording, pressing, distribution, and marketing. And in most cases, the label would pay the artist an advance. Once the advance is paid off, artists commonly receive a royalty rate of up to 15% of revenue generated.
4. The 360 Deal
Seen by many as the future of label deals, this is a type of deal offered by labels. With a 360 deal, the label gets involved in all (or most) aspects of the artist development, including touring and brand development, in exchange for taking a % of all revenues generated across all channels, not just recorded music. The benefit here is that you have the label’s network and influence to help you generate further revenue opportunities. The downside is the label can dictate all aspects of your career and will take a cut of even more of the money you make.
So Where does the Money Go?
The purpose of signing with a label is of course to record and sell music. Here’s what you can expect as a breakdown of percentages from music sales:
CD – In the making of a CD, here are the key players and the percentage of sales that they get: Artist (6.6%) Producer (2.2%) Songwriters (4.5%) Distributor (22%) Manufacturing (5%) Retailer (30%) Record label (30%).
ITunes – Selling an album on iTunes has less key players and the percentages are split a bit differently, though the artist doesn’t see much more at the end of the day. Apple takes 30%, and the label collects the remaining 70%, of which they pay out about 12% of their end to the artist (about 8% of the total purchase price of the album).
Which Path Will You Take?
Now that you understand the different paths you can take as a musician, it’s time to weigh the pros and cons and decide which one makes the most sense for you. There is no right answer, it all just depends on where you feel you could use the help and how you can see yourself moving forward most comfortably and effectively in the future.