It’s the major label recording deal that most artists dream about, but it's also important to briefly review some of the other recording agreements that exist. These are the independent recording deal, the production deal, and lastly the major label deal.
The Independent Label Deal
Independent record companies (also called indies) are typically more prone to signing undeveloped talent and more obscure forms of music than major record companies. For instance, indies were essentially the breeding ground and lifeline for the punk and grunge music revolutions.
Independent record companies are usually not owned or controlled by the “majors” and are distributed by smaller regional distributors. Sometimes, an independent record company may arrange a “distribution” deal or a “pressing and distribution” deal (P & D deal) with a major
record company. This means, in plain English, that although you’re signed to an indie record label, a major label may still agree to get your record into the stores and may also manufacture your albums. Independent record companies may also form “joint ventures” with major record companies relying on funding for the recorded masters, artwork, manufacturing, and distribution. In any case, the record royalties that new artists can expect to receive for sales are in the range of 9 to 13 percent of the suggested retail list price of your record, or 18 to 26 percent of the wholesale price. Recording advances can range from as little as $10,000, upwards into the $100,000 range. Got it? Good, let's move on to the production deal.
The Production Deal
Production companies are typically made up of independent record producers that sign, develop, and record talent. Very much like independent record companies, production companies may initially be more willing to develop younger talent and more obscure forms of music than
major record companies would. In a typical scenario, a production company signs an artist, and then enters into an agreement with a record company on behalf of the artist. The record company then pays the production company a royalty for sales of the album, who in turn pays
you around 50 percent. For example, if the record company paid the production company a record royalty for sales at 19 percent of the suggested retail list price of your record, the production company would pay you half of this rate or 9.5 percent (19 x 50% =9.5). The production
company receives a recording advance that can range from $125,000 to $350,000 and often much more depending on the stature of the record producer. If there’s any monies left over after recording expenses, they may be split 50/50 between you and the production company. Now lets move
on to the grand daddy of all deals, the major label recording deal.
The Major Label Deal
Lastly, and once again, what most artists dream about, is the major label recording deal. Major labels initially seek artists that are commercially viable, guaranteeing them the quickest return on its investments. Major labels make up the majority of commercial recordings sold in the United States. As of the year 2002, the five largest record companies (or five majors) are Sony, Universal, BMG, EMI, and WEA. Each major covers a variety of services such as A & R, promotion,
advertising, sales, legal, finance, shipping, and merchandising. All of the major record companies are also part of larger corporations that run a system of distribution channels, regional offices, international divisions, and other music business companies, such as publishing companies and record clubs. The record royalties that new artists can expect to receive for sales are in the range of 11 to 16 percent of the suggested retail list price of your record, or 22 to 30 percent of the
wholesale price. Record advances can range from $125,000 to $350,000 (and often much more).
Copyright 2002 Bobby Borg.
Excerpt from “The Musician’s Handbook: A Practical Guide To Understanding The Music Business,” which is scheduled for release in the Spring 2003 by Billboard Books.
For more information, visit bobbyborg.com, or write: bborg@earthlink.net
or snail mail: Bobby Borg, PO Box 18564, Beverly Hills, CA 90209.
