Independent record label deals

Recording contract

These major record labels , including Sony and Capitol Records, are major corporations with hundreds of millions of dollars behind them.

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This allows them to fully fund the biggest artists out there. In the eyes of emerging artists, a record deal with a major label was always the big prize to chase after. However, the major music industry is on life-support with the introduction of online social networks and digital music retail stores such as iTunes, Rhapsody, and Amazon—and the fact that major releases are often leaked to the internet weeks before their release day. Enter the Indie short for Independent label.

Any music recording label that operates without the funding of the organizations of the major music labels is considered an indie label. While major labels are global and operate their own publishing and distribution companies, indie labels work with other smaller companies, either in long-term partnerships or in smaller contractual relationships for their distribution and publishing needs. And they do offer many benefits that the Big Guys can't. Because of all the upsides and the escalating trend toward social media and digital platforms that's not abating , indie labels have created a true niche for themselves.

Let's take a look at the benefits and the downsides of working with an indie, and check out the pros and cons of working with a major label for a full view. Indie labels generally have the freedom to work with whomever they like. There's no pressure like you'd find at major labels to sacrifice your tastes in favor of seeking chart success. When you are signed to an indie label, in almost every instance it's because the label is a huge fan of your music; that translates into dedication because they believe in what you're doing.

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Because indie labels have smaller staffs and tighter rosters, musicians can more easily develop a close relationship with the people working on their record. Although it's not always the case that artists can pick up the phone and get an immediate answer, the odds of closer communication are greater than they are with a major label.

Some larger indie labels have relatively complex contracts, but smaller indies often do business on little more than a handshake and a profit split agreement. You seldom find indie labels demanding any measure of creative control over their artists, and most indies don't lock their artists into long-term, multi-album contracts. The label, if they are paying for the recordings, will want to own those recordings, or masters.

The rationale is that the label, indie or not, is taking all the risk up front, and will also need the copyrights or at least an exclusive license in order to do their job, such as manufacture copy or distribute the record. In addition, any label dealing with a major will have to guarantee that it has the right to grant certain rights to the major -which it cannot do if it does not have those rights in the first place! So it makes good business sense for the indie to own the recordings they paid for.

Remember, just because the label owns the copyrights in the recordings, does not mean they will own the copyrights in the songs themselves — those rights are separate. Artists hell-bent on owning the copyrights in the recordings should be prepared to give up a whole lot of other things to get this, and should realize that they will have to grant the label many rights temporarily like a license so that the label can do their job without stopping to speak to the artist about every little detail. This could be a deal-breaker.

Alternatively, artists could try to have the copyrights to the recordings revert back to them in the event the record is not released, or after the passage of a certain amount of time. Term, Options. Major label deals are usually only for a term as long as it takes to record and release one album, with the label then having many options to renew the contract and release more albums for the artist.

Music Publishing deals vs Record label deals

Artists will always want to commit to the fewest options possible. Especially with an unestablished indie, an artist should not want to be tied down for too long in case the label does not do well.

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Artists trying to negotiate fewer options with a label without success could ask for a buy-out clause. A buy-out clause sets forth the rules that will apply should a bigger label want to sign the artist.

Independent Record Label Pros and Cons

Buy-out clauses can include pre-negotiated dollar figures that the major will have to pay the indie for the indie to release that artist, or they can simply state that the indie will negotiate in good faith should a better deal for the artist come along. This way everybody wins — the artist can take the better deal, but the indie will have the right to make a nice exit deal for itself to compensate for all the time and money it spent. Artists unhappy with the percentages offered them could negotiate for escalations — where the royalty increases upon certain sales milestones, or for subsequent albums.

Artists should first realize that advances, or funds, are not gifts. The advances offered to artist by indies, if any, will be much smaller than those offered by a major label. The advantage of having a small or nonexistent advance is that the artist will have less to pay back from his or her royalties, and could be earning record royalties more quickly. The disadvantage is that since there are so many costs for the label to recoup before paying the artist his or her royalties, an advance is often the only money an artist will see for some time.

An artist who has more than one label interested in him might be able to get things such as a bigger advance, but just remember that it all has to be paid back! Free Goods, Compilations. Free goods are the records that labels have to give away in order to promote the album and keep its retailers happy. This is important to artists because artists do not receive royalties on records given away for free.

Artists signing with an indie should be prepared to agree to allow the label more free goods. Indies, as well as marketing and promotion companies, will also want to put songs on compilation CDs to showcase the artists on that label, or artists in a particular area.

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Major labels want the right to put individual songs on compilations also, but these are often sold and bear royalties. Compilation CDs put out by indies are usually given away, and artists should not expect any income from this. Many indie deals will include a clause giving the indie publishing or co-publishing rights. Publishing simply means licensing the songs themselves not the recordings — remember, this is separate and administering those licenses collecting the licensing fees, doing all the paperwork, paying the artist his or her share.

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New artists should decide whether they want to try to find a separate, established publisher, self-publish, or let the indie do it. The same principles apply to merchandise.

Recording Agreements.

The main issue to watch out for when granting other rights such as publishing or merchandising to an indie is cross-collateralization. Cross-collateralization is the label practice of recouping the debts of one album from other sources of income — typically the sales of a later, more successful album. This list is by no means inclusive — there are, of course, many other factors to consider and deal points to understand and decide upon.

Again, the nice thing about independent labels is that unless they are linked to a major and are required to structure their deals just like that major, indies are often more flexible and more willing to take chances and be creative. Now that more independent distribution options exist, an indie can offer an unknown or off-beat artist a chance at getting their music heard, or at least be a kindler, gentler alternative to seeking a major label deal.