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What is a Recording Contract in Music?

Music Recording Contracts have been around for decades yet they’re still an important part of how the music industry functions. They are always extremely important though when it comes to legally forming an agreement between an artist and a record label.

Recording

It’s a very common question ‘What is a Music Recording Contract?’ so here’s our short answer followed by lots more in depth detail. Essentially, it’s an agreement between and artist and a record label stating the label’s ownership over a music recording. It also covers their licensing rights in the promotion of the record.

Getting signed to a record label is a the end goal of mosts singers and musicians, so let’s explore music recording contracts in some more depth.

Music recording contracts explained

As well as being an agreement between and artist and a record label stating the label’s ownership over a music recording, the contract may also include something called the label’s licensing rights over a song.

What are ‘licensing rights’? Well, if a label has the licensing rights to a music recording, it means that it owns a share in the copyright of a song, so it earns money whenever the song is used anywhere (for example, if it’s used in a TV advert or on the radio).

For many years landing a deal with one of the big names in music management was the only route to a chart-topping career. Is that still the case for emerging singers and songwriters in 2020? It’s tricky to attract A&R attention and even harder to get signed. Do you need a record label to succeed.

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What is a record deal?

A music recording contract is also more commonly known as a ‘record deal’. You may have heard that record deals sometimes scam musicians, whilst some labels have taken a seemingly large percentage of the revenue away from artists, there are ways that, as an artist, you can avoid these pitfalls. One way to avoid this is to ensure you have good advice both legally through a solicitor and business wise through a music manager.

Different types of music artist recording contracts

#1 License deal

This is where an artist licenses a record label to manufacture, distribute and sell a recording that already exists. This is common when, for example, an artist has a song recorded and ready to go but needs the record label to help package and sell the music.

#2 Exclusive recording contract

In this type of deal the record label exclusively manages the music recorded by the artist during the length of the contract. After the duration of the contract is over, the label is provided with the right with an option to renew the contract for further periods of time. A record label will exercise the option if the first album is enough of a success. Normally one album is recorded during this contract term.

In this deal the label usually puts in a significant investment of time and resources into the artist. This could even cover the costs of recording videos, marketing and promotion.

What is a 360 deal in the music industry?

#3 360 Deal

In a 360 deal, the artist agrees to allow the record label to make money from not only selling recordings of the artist (like in an exclusive recording contract) but all other areas of activity where the artist is involved.

Typically these would include royalties from ticket money, merchandise or even written publications that the artist might produce (like an autobiography).

Music production contract

#4 Production deal

In a production deal, the artist doesn’t have a direct contract with a record label, rather, with a business that makes recordings. The recording company then licenses or assigns those recordings to a label.

The business (normally a production company) will generally expect exclusivity from the artist. During the term of the contract, the production company will develop the artist by recording multiple tracks and will then push their artists to the bigger labels, in the hopes to achieve a licensing deal

Typically, in this type of deal, the artist may enjoy greater creative freedom and have more focus come from the owners of the production company. Most production deals are 50:50 net profit deals though which means that the artist only receives 50% of net profits.

#5 Development deal

This is where a record label gives an artist the opportunity to record a number of singles or demos rather than an entire album. After judging the success of these singles, the label will then decide whether to extend or end the relationship with the artist.

This type of contract provides the artist an opportunity to impress the label in order to secure a full exclusive recording contract, however the fees payable to the artist are often limited and may only cover recording costs.

How long does a music contract last?

Typically exclusive recording contact terms last for a fixed period of 12 months. During this period you’ll make your first album, which may then be followed by further option periods, also usually of 12 months.

During this period, the record company has the option to extend the contract if they wish.

How much do record labels pay artists?

Once the record label recoups the artist’s advance, the artist will then start receiving royalties based on a percentage agreed at the start of the contract.

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What percentage will the record label contract give?

Songwriters and publishers receive the most royalties out of all the people involved in selling recording music. They usually split royalties they receive from labels – their combined share can range from 5% to 25%, depending on the specific deal.

Labels pay songwriters and publishers mechanical royalties for every unit sold while broadcasters and venues pay the performance royalties for TV or radio airplay and live shows.

Record producers are usually paid upfront either by artists or their managers. Producers can also get percentage points off album sales, which normally a small amount (around 3%).

Artists on major labels usually receive around 10% to 15%. Artists’ managers usually take 20% as they help finance or develop the artist’s project.

If, for example, an individual is both a performer and the songwriter of the record, a higher percentage will usually be calculated for that individual. Again, it depends on the deal.

Major record labels vs independent record labels

Traditionally, a major label is a label that owns its distribution channel. This means that they distribute music internally rather than externally.

Independent record labels are small companies that produce and distribute records, but aren’t affiliated with (or funded by) the three major records labels: Universal Music Group, Sony Music Group and Warner Music Group.

It is important to note that some independent labels sign dual-release agreements with major labels if they have a significant number of successful artists. Over time though, major labels can fully or partially acquire independent labels completely!

Some independent labels are started and sometimes run by artists on major labels, but are still fully (or partially) owned by the major label. These labels are great for bigger artists to discover and promote newer smaller artists.

The main thing though about record deals is that the major labels are brilliant for doing all the complicated stuff behind the scenes and making people aware of your music and your brand. It can really help you build a fan base and encourage more people to discover you as an artist.

The huge advantage of Major Record labels is they can have you represented globally. With experts in each territory across the World who are able to tap into different markets and bypass any cultural differences.