11 Types Of Deals In The Music Industry
You have completed a great song, you have a masterpiece album in the bag, or you’re a member of one of the most talented bands around. But now what? Navigating the ins and outs of the music industry is nothing like making music. So, what are the options for artists looking to release their songs?
In this article, you’ll find 11 types of music-industry deals that define the current landscape of the business. Some of these are relatively outdated, some are pretty rare, and others are abundantly beneficial for record labels. Either way, these are still the main options for artists trying to make it.
1. Recording contract
‘Recording contract’ is an umbrella term that applies to any deal made between an artist and a record label. It’s also the term that loosely defines a major label deal.
When you sign a recording contract, you should expect to see a big chunk of paper on top of your table, and you should read it all. Major label deals are known for being incredibly specific, for containing an exhaustive number of clauses, and (in most cases) for being very beneficial for the record company.
This kind of vaguely-defined contract, however, is not as common as it used to be and is often viewed as old-school. It has a distinctive characteristic, though, as a generous fee is often paid to the artist. The idea is that the record company gets access to pretty much anything (from the masters to the copyright) but the artist is paid a lot of money for signing the contract. Some of the most famous recording contracts in history involved payments of up to $100 million (just ask Whitney Houston).
You can think of recording contracts as the sort of contract professional athletes sign with clubs, but with a bonus entry prize instead of an annual, monthly, or weekly salary.
2. 360º deal
In sum, a 360º deal is similar to a traditional recording contract but it’s more adapted to the 21st century.
Decades ago, it was easier to track the sources of revenue of music artists; they typically made money by selling records and performing live. In the age of licensing and social media, though, much has changed.
The 360º deal is the strongest commitment an artist and a record company can make in today’s music-industry environment. As stated by its name, it involves pretty much everything. The record company is supposed to support the artist at all levels (including marketing and touring) and the artist is expected to pay the record company a percentage of every cent that he or she makes.
This means that, if contractually stated, artists are obliged to pay a percentage of the money they make on Instagram to the record company (for instance). Generally, though, 360º deals are about record companies owning a stake in an artist’s touring, publishing, recording, and image rights earnings.
While some people have found much success after signing 360º deals, this type of contract is generally criticized for being too restrictive for artists.
3. Anti-360º deal
Anti-360º deals are about letting the artists have it all. But why would record companies, which tend to be motivated by profit, do something like that? In a nutshell, anti-360º deals are more about marketing and PR than making money directly from the musician.
In such a socially-conscious time, corporations are becoming increasingly aware that there’s value in allowing musicians to own their creations. Especially if they can associate their name (i.e., their brand) with such an artist.
The idea is simple: to make a company look cooler by associating it with cool musicians. For this reason, anti-360º deals are mainly offered by record labels that were created by already-established brands.
Hard Rock Records, made by the guys who run Hard Rock Café, is one of the ultimate examples. The goal of Hard Rock Records is not to make money by signing artists and profiting from their work. Instead, it’s to promote Hard Rock Café while also “generously” supporting emerging bands.
4. 50/50 deal
Also known as a profit split deal, a 50/50 deal is one of the best options around for artists. Musicians are forced to give half of their revenue to the record company but are entitled to an advance and a recoup on all costs.
While music contracts are never perfect, 50/50 deals do sound like a fair solution. The artist puts in the work and gets half, and the record label assumes all the financial risk and gets the other half.
The artist gets a nice entry bonus for signing the deal and never has to worry about professional expenses again, while the record company makes a significant (but not abusive) profit.
5. Artist development deal
An artist development deal, also known as a demo deal, is a type of recording contract in which the record label makes a bet on a musician not based on his or her current output, but on his or her potential.
For another sports analogy, an artist development deal can be compared to an academy deal. Big clubs pay for all the costs of developing young athletes based on the notion that they will one day become huge, hence maximizing their return on investment. At the time they sign the contract, the young athletes are still not old enough to play in the “big league.”
Artist development deals are pretty much the same: the record company sees something special in a young artist, invests in his or her musical development, pays for a demo, and hopes that the bet proves worthy in the future.
A unique characteristic of artist development deals is that they’re often kept private. Since the artists signed by the record label aren’t ready to step up just yet, the deals are rarely made public.
6. Single deal
A single deal is similar to an artist development deal in the way that the record company is still unsure about making a definite commitment to the artist. As stated by the name, it involves the release of one or more singles but not an album.
Single deals are becoming more common due to the popularity of streaming, and they’re also very beneficial for record companies because they allow them to “test” musicians for a while and only later decide whether they want to commit or not.
While I couldn’t find specific examples of this, single deals also seem to be, in theory, a great way of saving money with one-hit-wonder artists. Labels get the rights to their hit song but refuse to pay for their not-so-successful follow-up tracks.
The disadvantage of single deals is that they’re dangerously precocious for both artists and record companies.
7. Artist-to-artist deal
Pretty much like a recording contract, an artist-to-artist deal is loosely defined. It has one key characteristic, though: it’s a deal made between two artists, and not between a record company and an artist.
Artist-to-artist deals exist because of the notion that artists are more sensitive to the work of fellow artists. Musicians also tend to be less profit-driven than record companies, which must make money from their music deals to survive.
Artist-to-artist deals usually involve an established music act that supports an emerging music act. Since established musicians make their own money regardless of how profitable these contracts prove to be, artist-to-artist deals can be generally considered more beneficial to musicians than traditional recording contracts and 360º deals.
8. Production deal
A production deal is any recording contract that’s made between a music producer and an artist. In other words, musicians make a deal with a music producer instead of making a deal with a label.
There are two advantages to this type of deal.
The first is that, just like artists, producers are more sensitive to the value of your creation and to the hard work involved in making music. It’s easier to connect, debate ideas, and come up with a fair recording contract when you’re dealing with someone who loves music as much as you do.
The second advantage is that, in general, production deals also involve music-production services. This means that the producer who’s making a deal with you is probably also working on your songs. This is great because he or she will be more motivated not only to ensure that your songs sound great, but also that they do great commercially.
9. Licensing deal
In music, licensing deals usually involve established music acts and international releases. When licensing something, an artist is merely selling his or her creative rights (such as copyrights and image rights) for a fee and allowing someone else to do all the work and take all the risk.
A good example of a licensing deal would be the following:
You are a member of a U.S.-based band and you own the rights to your first album. You released it as a limited-edition vinyl in the United States and it already sold out. Then, a record company from Japan (for instance) listens to your music and thinks it could be huge in the Japanese market.
The Japanese record company then approaches you to buy your band’s licensing rights for a certain fee. They offer you money for releasing your record in Japan only, and you can say yes or no. If you accept, you’ll get a nice chunk of cash and better access to the Japanese music market. The disadvantage is that, if your album is unexpectedly successful, the record company will not add a nice bonus to the fee they already paid.
10. Distribution deal
Distribution deals make for a relatively weak commitment, as the record label is only in charge of getting your albums into shops and streaming services. Some distribution deals may involve the payment of a fee, a percentage negotiation, or any other counterpart.
Distribution deals aren’t very good for artists because artists still have to cover all the expenses of producing a record and are given no immediate financial return. In today’s streaming age, distribution deals made between record companies and musicians are getting increasingly rare.
After all, there are numerous digital music distribution companies (and physical distributors as well) that work essentially as any shop: they offer distribution services for a price, and you either pay it or go for a competitor. It’s not different from buying a product from Amazon or hiring the services of an Uber driver.
Self-publishing is a deal an artist makes with him or herself. When self-publishing, the artist is entitled to every little piece of his or her music. There’s no third-party involved, no written contract, no money flow, and no copyright percentages.
Owning the entirety of your art isn’t the only advantage of self-publishing. Many artists choose self-publishing because they don’t want to deal with the bureaucracy of signing a music deal, they don’t feel like they belong in the business world, they don’t want to promote their music through traditional commercial channels, or simply because they want to be the masters of every little aspect of their music, from the notes played to the final marketing strategy.
Self-publishing is a brave decision and one that’s particularly well-viewed in alternative music circuits. The big downside is evident: self-published artists are left all alone, are forced to cover every expense, and take all the risks. If your goal is to make a living by working as a professional musician, self-publishing shouldn’t be your first option.
The music industry is a complex and ever-changing business, and there are many different ways to make money as a musician. The most important thing is to understand the different options available and to choose the one that best suits your needs and goals. Deals between record companies and musicians can be very beneficial for both parties, but it is important to make sure that you understand the terms of the deal before signing anything.