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Tips for Negotiating a Record Deal in the 21st Century: It's Different Than You Think!

The music business has changed in the past 10 years. Gone are the days when things were simple. While the independent artist is flourishing, the music industry and the record deal are still very much alive. In this post, we will help you in determining how to negotiate your record deal and discuss the importance of hiring an entertainment lawyer to help you with the process.

Ten years ago, the music business was a very different place than it currently is today. In this blog post, we are going to discuss how the music business has changed in the past 10 years and teach you the best ways to negotiate a record contract so that you -- and your band -- can get the most out of a deal. The music industry is filled with sharks - be careful not to get eaten by one of them.

What is a 360 Deal?

Much of the music industry, as we once knew it, has been decimated due to online piracy. However, the existence of the Internet as a whole has leveled the proverbial playing field for musicians -- causing the rise of the independent artist. As an end result, record labels have had to find new and innovative ways to make money -- or, in reality, just earn back their initial investment into an artists' career.

To that end, they created the 360 Deal -- so named because, like a circle, record labels hope to get "every piece of the pie" -- to get a portion of the earnings from every stream of income. Whereas the traditional recording contract used to just allow for the recoupment of money from the sales of records (and, later, cassettes, CDs, and digital recordings), the 360 Deal allows the record company to take a percentage of the earnings from merchandise sales, touring, licensing, and other revenue streams previously unavailable to the record label.

As with any deal, there are good points and bad points to the 360 Deal. On one hand, for a newer artist, a 360 Deal allows an artist to get some much-needed funds up front (often called an advance), as well as obtain marketing and promotion support (which, as most independent artists will tell you, is often the most crucial part of the business process -- with all of the artists on iTunes, and indeed on the Internet as a whole, today, you have to do something in order to stand out. Without a proper promotion and marketing budget, many musicians would get lost in the proverbial ether.

On the other hand, there are plenty of drawbacks to the 360 Deal, and one of the worst drawbacks is also the most obvious: the record labels can take a piece of every part of the  pie, even those that they didn't have access to in the past. Simply put: if you, as the musician, can make money off of it, under a 360 Deal, a record label wants a piece of it.

The other drawback is a little less obvious, but still salient for a serious musician: any musician in a 360 Deal will have to sacrifice his or her creativity in order to satisfy the requirements of a 360 Deal. In this regard, a record label is acting as a bank of sorts, and they have to make their investment back -- and the way to do that, of course, is to stick to what they know will work in getting their investment back, which may be contrary to what the musician wants to creatively do.

What are some things to look out for in a record deal?

Believe it or not, negotiating a 360 Deal in your favor isn't as difficult as you think. First, and foremost, you need to hire an entertainment lawyer who has your best interests in mind and will fight for those best interests in order to get you the most out of your 360 Deal. Check out our previous blog post for tips on how to choose an entertainment lawyer.

Don't have money to hire an entertainment attorney? We get it, hiring an entertainment lawyer is certainly not cheap. However, you may be able to hire an entertainment lawyer that is able to take a fee of your earnings as payment. If this is not an option, there are a few things to keep in mind when negotiating a deal for yourself.

Some clauses to look out for in your entertainment law contract or record deal (as these are almost predatory and never, ever work out in the artists' favor) are actually pretty common in the industry and my be easy to spot. Depending on how much leverage you have, here are a few provisions to look out for.

  • A record deal that demands net profits -- while this may seem like it's part of the creative process, it actually means that a record label can demand that you use their producer, engineer, etc., which they will then deduct accordingly (and never in your favor)
  • A record deal that demands mechanical royalties -- make sure you try to get this out of your "recording costs" so your net royalties aren't non-existent.
  • A record deal that doesn't require your written approval for costs -- remember, any expense incurred on your behalf needs to be repaid. If they don't get your written approval, you may be unknowingly signing your life away.
  • A record deal that demands a multi-album deal -- you only need one good album to "blow up," and after that, your recording career should be in your hands. However, this might be more difficult to try to negotiate out of. The record label feels like they are making an initial investment in putting out your first album, such that they should be able to benefit of off your future value at that point.

Conclusion

Getting a favorable record deal is not impossible. However, to do so, you need to be educated on the music industry and the provisions that are generally found in a record deal. We strongly encourage you to consult an attorney prior to signing any record deal. For more information about us and our services, contact us today to see what we can do for you.

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Julian Cordero is an Attorney, Business Strategist, and Music Producer. Oh and he blogs too!  Julian is licensed to practice law in New York and is the Managing Attorney of Cordero Law LLC, a New York City based law firm focusing on Business Law, Entertainment Law, and Intellectual Property Law.