Big Record Deals

February 25, 2010 in Promotion, Recent Leave a reply

Jumping in With the Sharks

Here's the typical situation. You find your music starting to make waves. Maybe just locally: but you are starting to get attention. Your manager makes some calls and important people start showing up at your gigs. The thrill of fame and fortune seem to be knocking at your door.

There is a change of energy in the air. Next thing you know: your band is on a airplane flying to New York. You get to play in front of some big label execs. How exciting!! Isn't this what every musician DREAMS of?? Or is it the beginning of a nightmare.

The Cold Side of the Dream

In the music business it takes a LOT of money to go big. Beyond the cost of manufacturing product and putting it on the shelves – there are promotional costs. You didn't think people get on the radio and MTV for free did you??

Launching an artist into the mainstream can easily run $2 million! If it was YOUR money: would you bet that much on a property that doesn't already have huge demand to back it up?

What if you also knew that 95% of new artists can't bring in enough revenues to recoup that initial investment.

How the Big Guys REALLY Make their Money

Here's an important truth. Music industry money isn't really made off of record sales: the REAL MONEY is in publisher's royalties.

KEY POINT: There is a difference between a song and a recording. The ownership of a song belongs to the writer. But someone else might record that song. Publishers invest in the ownership of SONGS.

How does it work? American Radio bills out millions of dollars in ad sales every week. A portion of this income must be divided up among the owners of the SONGS that are played on the radio. The recording artists get none of this income unless they also own the songs.

Organizations such as ASCAP and BMI handle the collection and disbursement of song income. So back to our original question. Why would a record company want to lock a musician into a contract – if going all the way was almost certain to lose money??

What if you already had put millions of dollars into your existing artists? You might want to pro actively keep new talent from diluting your investment.

Answer 1: By acquiring rights and options on new artists: the music industry is able to protect it's existing investment by keeping new properties from diluting the existing catalog of recorded material. In other words it often makes good business sense NOT to divide up the royalty pie.

Answer 2: By preventing other labels from getting their hands on hot new talent – big music business players are able to reduce competition for market-share on their own current artist investments.

Basically the dinners, the fancy suits, and the limo rides are often just a show to persuade you to let them acquire your rights – and put them on the shelf. Honestly: that's about the end of your recording career in most situations.

Deal With the Devil – How Options Lock You In

The scariest part of a big record deal is that the musician loses the right to use their own likeness. This means that you no longer own "you". Your image can't appear on albums, posters, and possibly the web, along with severe restrictions on your appearances in other forms of media: including live performances.

Recording contracts usually have a one-year term for the first album to be recorded and released.

BAD NEWS: Your album may be released – But what if nobody knows about it?? Releasing an album and actually promoting it are two separate animals. ( Read the article called The (NO) Airplay Opportunity to understand what we are talking about here.)

The contract will have a number of options that the record company can use to activate the second contract period, the third contract period etc. If your first experience was negative and you would rather not do another one, there is no way to get out of the contract. The label simply terminates the agreement, but the lock-out clause prevents re-recording of the material! Even if the record label has no interest in your music, they own all the recordings. There is no way to re-release an album on your own.

For a full break down of recording contracts and options visit – How Stuff Works.

Honest Questions to Ask Your Self

1. Does your music resonate with a such a WIDE market: right now - that you need the massive corporate music machine to handle your promotion and distribution?  If this is the case: read A Better Way to Go Big.

2. What is more important to you? Fame? or Making music ( and possibly a living doing so ) ?

3. If fame and exposure are your immediate priority: to what extent are you willing to risk your rights to perform and earn money from your own music?

4. Would you rather earn fifty cents per album (this is the typical big-music cut to the artist) – most contract recording artists never see this because it's totally consumed in advance, by managers and "expenses". ….Or would you rather bring in somewhere between $2 and $10 per album – this is what most independent musicians average in profit per sale.

5. Will you relentlessly pursue fame and fortune like so many other astoundingly talented people who moved to Hollywood and ended up being studio musicians with a day job. Or will you make it happen for your self. Will you create the personal freedom to make the music you were born for?

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