Since their creation, record labels have been pegged as the backbone of not only the music industry, but the fame of each music artist deemed fortunate enough to live under one. Independent artistry was a joke and the furthest thing from an aspiring music superstar’s mind who wanted to make it to Hollywood’s big leagues. The process was uncomplicated enough: the artist handled the creative juices that essentially flowed in the revenue and the logistics were left to the label. But despite it being designed as a win-win for both parties, at face value, there were still artists whose careers fell flat on their faces after signing on the dotted record deal line. Hidden contract stipulations, unpaid royalties and poor negotiations don’t begin to describe the wars that have taken place over time between disgruntled musicians and their label homes. While there are still dozens of success stories to inspire the advantages of a contract, the hit-or-miss probability of fame or failure beneath a record label deal still breaks even.
Now, over a century since the first record label was born, artists are evening the industry playing field. Abandoning cosigns, awakening their own devout fan bases, discovering new means of making money and unleashing music across creative platforms, artists are handling industry success on their own terms. The show isn’t completely stolen from industry elite record labels, but the stage and spotlight are now shared with industry independents now more than ever before. So when a stack of 100 pages is plopped in front of the aspiring music artist with enough potential to helm the success of his or her own career, a new question lingers: to sign or not to sign?
Here are some fundamental considerations for the ultimate decision.
Consider royalties an amended version of an hourly-wage paycheck for an artist, but instead of hours, the amount is calculated based on record sales. Varying based on the contract and artist, the most common percentage can fall between 14 and 18 percent of the price to dealer (PPD): the unit price of a record. Additionally, instead of taxes being removed as it would be from a paycheck, deductions are scratched off from the artist’s royalties by the label for a number of expenses. You know, like when your favorite rapper drops anticipatory visuals for a hit single, posts footage of a studio session on Instagram teasing a new collaboration, or like back in the early 2000s, gave away free CDs to the first 100 fans to arrive at a given venue. What you’re normally seeing there is royalty rate deductions. Not to mention the slice that producers and managers are cut from an artist’s royalty share.
But even after these deductions kick in and before the artist receives an actual profit from royalties, the label also secures a recoupment clause. In other words, it needs a return on its investment in the artist, so whatever costs they dug from their pockets to fund your project must be returned from artist royalties.
“Honestly, if it were up to me I wouldn’t sell my music,” D.C-born, Maryland-raised hip-hop lyricist Chaz French stated. French is signed to the legendary Motown Records on a major joint label deal with ThreeSixEight Music Group. “I feel like people should be able to get the music at will — for free. It's an experience and it should be one that people don't have to pay for.”
That’s not to say, however, that the label can go shopping in a musician’s pockets to reimburse any of the aforementioned costs. Two types of royalties, artist and mechanical, are details an artist must always keep in mind with respects to the recouping process. Artist royalties are paid to an artist for their record sales, while songwriters and publishers grab the cash from mechanical royalties. Should an individual enjoy the best of both worlds as a songwriter/publisher and artist, however, the label typically shouldn’t touch the mechanical side of an artist’s royalties. With that said, artists should never fail to keep a keen eye on royalty clauses and provisions, as some labels have been known to tack on asinine deductions on artist royalty rates that are essentially useless but can easily be hidden beneath contract jargon. In the unfortunate case that you do get swindled on royalty payments and turn out as lucky (and wealthy) as Lil Wayne, who has third-party assistance on his side amid his record label battle with Birdman, there are also companies to help artists collect royalty coins they are rightfully owed.
For all the married folk, this term should be all too familiar. Terms of exclusivity in a record contract vary, but are generally universal: no recording for another label without permission and no backing out of the contract. However, your partner in contract matrimony, the label, doesn’t owe you the same loyalty. In fact, record labels have little to no restrictions on how many artists they can sign.
Some artists see it fit to make sense of signing individual records to a deal rather than their entire career over to a major label. While this option is not unheard of, labels will avoid these sorts of deals simply because a longer-term relationship means more control and more security for future material. Furthermore, an artist would want to pay special attention to the terms of exclusivity with respects to features. Covered by something called a “sideman provision,” this allows an artist to jump on a fellow musician’s track, even if that musician is signed to another label. The best means of keeping an eye on these terms would be to enlist a trusted team of advisers, something that Slip-N-Slide Records songstress Teenear was fortunate enough to realize early on.
“I don't have many concerns [about the label’s control over collaborations] because I have full trust in my team, who all help make sound business decisions,” she said. “When collaborating or building, my input on which artists to feature it always considered. I also make sure to present various business ventures as they come up. As an artist, I still dip in on the business end and it's well received by everyone.”
The “Friday Night” singer views her label home executives as family that hands her the tools she needs to pursue her own artistic freedom — within their consent, too, of course.
“If I'm interested in doing a feature with anyone else, I definitely have to make sure I get approval,” she said. “The label then works with that artist's label or their management team to handle any specifics, like signing off on verses, the budget, booking the studio time, etc. The team works the mechanical end.”
Teenear’s healthy relationship with Slip-N-Slide comes a dime a dozen, though. As a smaller label, she enjoys the luxury of having more focus on her projects, which isn’t always the case at larger-scale record labels. Her advice? Check all of the hens before dropping all of your eggs in one basket.
“I would say,to not be in a rush and shop around,” she said. “Different labels offer different things in terms of what they are willing to invest and bring to the table.”
If an artist’s creative juices flow nearly as heavily and prolifically as R&B crooner Frank Ocean or G.O.O.D. Music’s masterful helmer Kanye West, the amount (or lack thereof) of creative control outlined in a record deal should be among the first of conversations between artists, their legal team and the legal team of the label.
According to Richard Salmon, an entertainment lawyer with contract negotiation credits over at Sony/BMG Records and EMI, there are about seven general areas artists should pay attention to when deciding how creative a contract allows them to control their own artistry: visuals, artwork, secondary use of music, name and likeness, single selections, studio teams and recording budgets. Should artists be primarily concerned with expressing themselves freely through music videos and artwork, provisions concerning the direction, budget and storyboard development belong in the hands of the artist. This means that artists should be cautious of any stipulation that might interfere with their artistic freedom, such as control freak A&Rs, for example. Additionally, they may want to be able to determine which singles are released before a full album drops, the number of single releases and the order in which they become available.
For Chicago-native Taylor Bennett, creative control is actually the No. 1 priority. As a 21-year-old breeding hip-hop talent, he’s taken the initiative to cut any and all cosigns loose from his rap career, including record labels and any from the thriving, independent success of his brother Chance the Rapper. The Restoration of an American Idol artist believes it’s critical to grab charge over all aspects of your music and all the mechanics behind it.
“For a very long time, the idea of the music business and the music industry has been something made more important than the sound of the music, who the music connects to and what the artist stands for,” he said. “I think very often that gets blinded by the business behind it. Control your own music. The best thing that can happen for you is that you know you worked hard and got it all by yourself. No one else is in control of what you want to do.”
Considering that a percentage of an artist’s royalties are shared with a producer, it’s also only right that artists also have the freedom to select their own producers and engineers. Copyright ownership and payments concerning photographers, graphic designers, etc. also contribute to an artist’s image and should be negotiated in terms of control. Name and likeness are comparatively as essential as secondary use of an artist’s music. As it falls beneath the creative control clause, some contracts allow the artist to dictate where their music is used outside of music entities, such as commercials, films, etc. Just imagine how awkward it would be if Donald Trump had used Rae Sremmurd’s “Up Like Trump” in his pre-presidential campaign, right?
Atlantic Records A&R Jason Lewis echoes Bennett’s sentiments, reminding artists that labels are interested in seeing what buzz they’ve chalked up for themselves before throwing a signed contract on their careers.
“Here’s the thing: today, the average record label isn’t what you expect it to be from the outside looking in,” he said. “There are no more Berry Gordies, there are no more P. Diddies. There’s just no more people that actually know music. There are no more Clive Davises. There’s no more actual record people. So, there isn’t necessarily a person saying, “Hey! You need to go from being Pink and become Madonna!”
There’s no more artist development. It’s all about getting onto a train that’s already moving. If you come into a situation where you feel like you’re butting heads with the label, it would only be because what you’re currently doing or what you came in doing isn’t working. Now, it’s a last-ditch effort to try and figure it out.
Dealing heavily with recording rights, most of an artist’s labor is taken into consideration with ownership. For beginners, the most popular and widely-recognized clause under ownership communicates one thing: every bar, every lyric and every beat of a record from an artist belongs to the label. Ownership clauses are also laced tightly with how other elements of a contract will be handled, like royalties and distributions. Scary at first glance, we know, but artists don’t have to tie their hands when determining ownership options.
To begin, record labels are still obligated to pay artists for records that are sold even after an artist is no longer recording with the label, regardless of who owns the tunes. Where some artists grow skepticism is where stipulations grant the label’s full ownership of unreleased records and rights retained even after the artist has already reimbursed recording costs to the label. A good contractual team might advise artists to do one of two things: agree on a timeline for when rights to the music return to the artist or decide upon certain circumstances that will grant rights back to the artist. Examples of these circumstances might include if the artist is dropped from the label, in which sometimes cash for recording costs would need to be coughed up from the artist to the label, or a delay on the record’s commercial release.
Agreement, or lack thereof, on ownership clauses could also be what makes or breaks the relationship between a label and an artist. In much worse and more extreme circumstances, late legend Prince was among the first, but not the only, to struggle with this. The internet era’s impact on music made the traditional forms of music-selling obsolete and the access to all things music readily available. That meant tours no longer had to be attended, but watched through television screens. CDs and cassette tapes no longer had to be purchased, but downloaded, YouTubed or streamed for little to no cost. But that happened well after Prince’s industry career prime, when artists traded in ownership of their music and likenesses for a contract signature.
His Artist Formerly Known as Prince moniker and symbol used as his legal government name weren’t just some megalomaniac phase in his towering stretch of a music career. Instead, it was a declaration against label sharks who not only refused to release him from a contract he signed at the inexperienced age of 19 years old, but also wouldn’t return the ownership of his very own name. It gassed the fuel behind his decision to re-record his entire music catalog as well.
“I wanted to buy my masters back from Warner Bros.,” the then-Artist Formerly Known as Prince told Paper Magazine in 1999. “They said no way. So I'm going to re-record them. All of them. Now you will have two catalogs with pretty much exactly the same music — except mine will be better — and you can either give your money to WB, the big company, or to NPG. You choose.”
As Prince’s legacy lives on, his words have eerily echoed 16 years later in the same breath as former Def Jam records star Trinidad James. The “All Gold Everything” artist, real name Nick Williams, was scratched from his $2 million deal with the major label in August 2014 indefinitely. Citing a “difference in creative ideas,” he felt better inclined to handle his career independently and didn’t feel a major label fit into those plans. Just as Prince did during his fight for label liberation, Williams paid his respects to the structure of the major label houses, but still holds the bravery of fellow independents to a higher regard.
In a lengthy discussion with BuzzFeed, Trinidad James dropped many record label and contract signage gems that even artists who are currently signed can take home.
Williams’s sentiments of new artists seeking labels out as a career crutch is of crucial importance for potential signees as well. Fresh talent like Migos are just one of many he pointed out as generation-leading artists who are ahead of the record label game. At this point, the relationship dynamic between artists and labels has become a game of tug-of-war catch-up.
“Labels wanna win, and with the record industry being so jacked up with people not buying physical CDs and everything transitioning to the digital world with Spotify, Tidal, iTunes, etc., it’s a global shift,” he said to Buzzfeed. “So I think starting a few years ago, major labels really started trying to reinvent themselves and become a little more creative about their revenue streams so they could actually make profits and be successful. So I think with artists who were already developing at a young age, Migos and guys like that … the labels had to catch up. As a business, you have to always be evolving, that’s what good business is about. But if you talk to the majority of artists, they’ll say it’s always a battle with the label. So I think now with the internet and this new game, artists are going to stop battling with the labels. I’m not going to keep begging you to put me out. F**k you, respectfully. If the stars align, and you start popping on WorldStar or SoundCloud, and you kill a festival like SXSW or Coachella — now you that n***a. You don’t need a major label for that. You just gotta keep working."
Prince’s words in 1999 still ring true in 2017: "Own your own masters or your masters will own you.”
Ultimately, this term is a label’s return on its investment in the artist, which assures that costs used to fund an artist’s records, albums and other select expenses will need to be given back at some point. In a manner of reimbursing itself, the label will at times pay generous advances to an artist, but expects it returned from the artist’s future royalties. What artists should remember is that while some costs are recoupable, like recording and tour expenses, there are some that are not, such as certain promotional tools used by the label for example.
As it may seem like a remittance from artists, the recoupment process is not to be confused with a “refund.” Artists should never sign any contract with a clause demanding money directly out of their own pockets. Instead, these provisions should state that future artist royalties will be recouped in the case that profits come up short from a current royalty.
To put this concept in a practical framework, let’s assume an album costs a label $90,000 in expenses and royalties amass to $100,000. Most clauses allow the label to collect its $90,000 back, with a royalty payment to the artist (remember: after deductions) of $10,000. On the other hand, should the royalties amount to under $90,000, say $70,000, the label has missed out on $20,000 but should be able to collect this amount back in the recoupment process from all other future projects released under the label. After all, once a contract is secured, it’s moreso the label that is taking its risk on the artist versus the other way around.
300 Entertainment’s Tate Kobang fully understands that risk. Even after his booming “Bank Rolls” single became a hometown anthem on his breeding grounds of Baltimore, he believes the support of a record label comes down to a matter of important roles behind the artist.
“As an artist there is so much that we can do. We create the record, we put the record out, we promote the record and that gets us somewhere. But it doesn't get us as far on the label end,” he said. “It's the label that puts the money in and the machine behind everything. So, our job is to get paid for the record. As far as making sure that the music gets heard and shoved down people's throat — that's on the label. That's all in how they handle promotion. We're the face of the record. We can say, "Go get my record!" a million times, but if the right people aren't seeing it, then it doesn't matter how much we say it. It's all in the label. It can be fair if the label's going to pay ball. If not, it puts us in a hole.”
Kobang boasts his personal decision to sign with 300 due to its affiliation with fellow Baltimore native and industry executive Kevin Liles, as well as the career fruition of other names on the label’s roster like Young Thug, Fetty Wap and Migos. But in hindsight, if there was any advice he would give his former, pre-signed self, it would be simple.
“Don't do it,” he said of his advice to aspiring artists faced with the decision to sign a contract. “Run. Just run. It's just not needed anymore. It's just the way that entertainment is set up nowadays. Accessibility. Everything's just too easily accessible, now. You don't have to run out and do footwork. You don't really need the cosign for real. All you need is something hot and that's going to attract attention, and you're good.”
As self-explanatory as it sounds, duration is used at times interchangeably with “term” in a record contract.
It is simply how long an artist and label agrees that the contract will live between them with a minimum commitment period also. This commitment can determine certain responsibilities on the artist’s behalf, such as a number of albums or projects that will need to be released under the contract. A common red flag term in this section may be especially concerning for many artists: commercial acceptance. Delivery and reception requirements may be outlined in a contract with this term and basically mandates that projects should make radio hit, fan favorite status. As a promise that won’t always be guaranteed, let alone be achievable, these requirements may also affect the duration of a contract and whether or not it becomes null and void after a set period of time.
Some might say the duration clause is the nucleus powering of one of hip-hop’s most frustrating label wars between Young Money helmsman Lil Wayne and Cash Money label head Birdman. As delineated by freelance attorney Jessica Meiselman in Complex, Weezy’s label agreement with his now-industry rival reportedly required 21 albums over seven years from 2008 to 2015. No more than three albums could be released per year and his Young Money artists like Drake and Nicki Minaj are obliged to the stipulation as well.
When Wayne sought to free himself from Cash Money’s contract handcuffs, filing the 2015 lawsuit for unpaid royalties, he opposed the duration term. The Young Money/Cash Money merger was over with once summer arrived in that year, he cited in the lawsuit, and he wouldn’t budge on another album until his royalty payment conditions were met. Cash Money’s rebuttal held this — Weezy could rep as many different labels as he sees fit, but until that duration clause is satisfied, which Meiselman points out he’s one album away from, he’s staying put under his contract. Any attempt to release music under any other label umbrella might be a direct contract violation and fuel even more legal tension with a countersuit.
Avoiding messy legal warfare from duration technicalities is left up to how well you, the artist, take time out to understand the provisions outlined concerning the term of a contract. Any unforeseen circumstances that might affect the life of an artist’s contract should be discussed, too. Who knows how far Gina Longo, the first white singer signed to the infamous Death Row Records, may have ended up in her career had she had a full understanding of these terms back in 1996. With no solid album or single releases, Longo stepped onto the label alongside over 20 hardcore hip-hop talents, including Tupac Shakur. So, in the same year that claimed the West Coast rap legend’s life when he was fatally shot, Longo’s contract and potentially fruitful career was cold-shouldered into non-existence by Death Row. She shared with the Las Vegas Sun that the label stopped returning her phone calls upon Pac’s death and Death Row’s lead man Suge Knight being arrested for parole violation.
To avoid being cut high and dry from your own record deal due to exigent, but uncontrollable circumstances, artists should gain total understanding of what factors may affect the terms of their contract’s duration. In the case that an artist decides to transition into independent territory, what legal obligations are required to cut a previously agreed upon term of a contract short? What commitments are the artist responsible for if they choose to buy out of a contract? And what about key man clauses, which protect an artist’s relationship with team members like a personal manager even if the individual departs from the label but the artists stays? Does the contract grant that the same individual represent the music artist or else the contract becomes null and void? These are the major questions that should be asked and properly answered before even picking up the pen for a signature.
The variations of record deals are slowly but certainly becoming as ubiquitous as the emergence of new artists. Just as each record label offers unique advantages, they also offer different types of deals. Just ask Wale, who parted ways with Roc Nation’s management arm in 2014 because of a “new direction” that he wasn’t on board with. Dependent upon an artist’s status before signing, A&R influence and other factors, there are heaps of different contract styles that become even more dynamic after negotiations. Of them, three of the most popular contract agreements are:
Major label deal
This type of deal is said to spoil artists with an all-expenses paid approach, complete with an exorbitant advance as aforementioned. Normally, royalty rates land between 11 and 15 percent, but recoupment is more demanding and ownership rights are stricter as well.
Reserved mainly for artists who have already established themselves among a devout fan base and promising market, distributions deals give labels the middleman role between the artist and the public to which the artist wants to disburse music. While expenses that are usually backed by the label, like promotions, music videos, tours, etc., end up falling on the artist, so does ownership and the larger percentage of record sale profits.
As taunted at Nicki Minaj on Remy Ma’s “shETHER” diss record, a 360 deal, also known as “multiple rights deal," allows several hands to dig into an artist’s profit pot. In exchange for support on all musical and most business endeavors, the artist agrees to split income from their earnings with multiple executives. This percentage, of course, is agreed upon before signage and can be re-negotiated dependent upon which line of income proves to be more fruitful for the artist.
If there’s nothing else an artist remembers from complex record contracts, tracking of earnings must be at the forefront of his or her memory. On a biannual basis, artists should receive royalty statements, which can be likened to the use and purpose of a bank statement.
“Artists need to understand that there is no free money coming to them from a record label, music publisher, etc.,” entertainment lawyer and artists rights advocate Dina Lapolt said. Lapolt has also overseen the estate of late hip-hop legend Tupac Shakur as its entertainment attorney from 1998 to 2010. “Any money the company spends on the artist, including any advance, is “recoupable,” meaning the artist won’t see any royalty payments until the company makes this money back at the artist royalty rate (if ever).”
An issue that arises in contract negotiations are contract audits and inspections, which are conducted by an artist’s accountant should any earnings come up significantly short. These audits can be pricey, however, but will be worth every penny if artists find that the label has shortchanged them. Stipulations in a contract that holds the label responsible for expenses associated with audits are most ideal. Some labels might work to deter an artist from this clause by throwing audit costs on the artist, however, especially if it has a habit of ripping off a few coins from artists.
Paid upfront to artists, a weighty stack of cash can seem tempting at first to most new artists. That might also explain Young Thug’s early career stumble. The then-22-year-old rap novice misguidedly signed his budding career over to Atlantic Records’ Artist Partners Group after already inking a production deal with Gucci Mane’s 1017 Brick Squad. He didn’t realize it at the time, but he was shortchanged by a $15,000 advance, a relatively small amount for an artist of his caliber, that came along with his reported 360 deal signing. This set off a series of difficult contract negotiations and little to no wiggle room to collaborate with projects, artists and co-signs outside of APG. Artists should still keep in mind that, normally, the higher the advance amount the more work an artist is held accountable for on record sales. And as a recoupable expense from the label, it’s more of an early cash present for all of the artist’s (future) hard work. For artists like independent talent Liana Bank$, the importance of a generous payout is important. But it’s not worth sacrificing your dreams if the label offering the cash isn’t on your wavelength.
“I think for anyone looking to sign, the No. 1 most important thing is to know yourself,” she said. “If you don't know who you are and who you're trying to target, the alignment with a record label may cause you to really get lost. I've seen so many people — really talented people — go into the system and get shelved for years.”
Inspiring an entire record deal type, licensing grants permissions for use of records and musical works by the copyright owner, who is also compensated for these uses. Among several contract provision options, licensing can be strictly retained by the label or be made available to be shared by an artist for a predetermined cash amount. Performances, broadcasting, re-creation/renditions and other adaptations of a copyrighted work are outlined in licensing agreements as well, defining who can use the work, where they can use it and how they can use it.
This definition would have come in handy for Universal Music Group, which became subject to a class action lawsuit in 2015. Several seasoned talents such as Chuck D., Ron Tyson and Rick James were in the plaintiff’s seat of the lawsuit against Universal, citing that these artists were swindled out of royalties. Universal handled revenue from digital downloads as sales instead of licenses. It would only fairly benefit artists, lawyers defending the lawsuit would argue, as the licenses would allow 15 percent of the collected revenue versus owing 50 percent of sales. Besides, with the popularization of digital services like Spotify, TIDAL and Apple Music, labels were not spending money on additional expenses, like CD packaging, as The Hollywood Reporter pointed out.
Admittedly, licensing is one of the more complicated and complex elements in a contract. The intricate details of all the different ways an artist’s work can exist outside of the label’s pockets can be tedious and cause major slip-ups that normally land in court. Rock band Camper Van Beethoven and its founder David Lowery made $150 million worth of an example out of Spotify for this very reason in 2016.
The music streaming service missed the licensing permissions for the music it made available through its platform, causing a mix-up in proper payments to artists on streaming royalties. As elaborated upon by Billboard’s Glenn Peoples, the confusion such a mix-up leads to places specific parties at a disadvantage.
Say someone streams song "X" from artist Y. Song "X" has three co-writers. Spotify might have licensed the catalogs of two publishers, but lacks a license from the third. Until the publisher is located and licenses are obtained, Spotify puts the royalties into an account with other unpaid royalties. After publishing licenses are obtained, Spotify pays out the previously unpaid royalties to the publisher, which then distributes them to the songwriter according to the two parties' contract, much like physical and digital sales.
As explained earlier, the well-versed understanding of all royalty types and creative uses of work is crucial in talks of licensing. Tricky wordage is more prevalent in this section and makes it easier to mask such a complex label subject matter on top of potentially disadvantageous financial hindrances for artists. For the artist, this means an experienced contractual lawyer or trusted advisor is not just necessary, but essentially mandatory.