Record deals

Sonny678

I wonder can anyone answer a few questions about record deals. I know these questions are a bit specific, but it would be great to get answers to these questions.
Say a artist get a record deal and an artist fails doesn’t achieve success . Does the artist have to pay back the money to the company it lent the artist, or is it wriiten off . When an artist’s signs a record contract, can they keep any money for themselves a signing on fee I suppose it would be called, or does it all have to be used to record and promote the album? I cannot get information on the internet about this, it would be great for any answers, i would really appreciate it.

A Primal Nut

No, a record deal basically means the record company pay all costs and they assume the risk so you don't need to pay them back. You might get an advance to cover immediate living expenses, depends how good you are I suppose.

TheBardWest

My understanding of record contracts is quite different than APN's post. I suppose it depends entirely on which company - i.e. perhaps indie labels are more generous...

But if you sign to a major lable, you'll get an advance, which is almost always used to record your album. The record company pays for the production, distribution and advertising - all of which the artist has to pay back via album sales.

In the end, generally speaking musicians/bands don't make money off a record deal unless they sell a TON of records to pay back all the advance + production costs, or have hugely successful live tours, which draw large crowds and earn lots of cash.

Record companies rarely 'write off' losses - they simply keep taking money out of any royalties you might earn from record sales (or otherwise) until you have paid off everything you owe them.

A Primal Nut

TheBardWest wrote: »

My understanding of record contracts is quite different than APN's post. I suppose it depends entirely on which company - i.e. perhaps indie labels are more generous...

But if you sign to a major lable, you'll get an advance, which is almost always used to record your album. The record company pays for the production, distribution and advertising - all of which the artist has to pay back via album sales.

In the end, generally speaking musicians/bands don't make money off a record deal unless they sell a TON of records to pay back all the advance + production costs, or have hugely successful live tours, which draw large crowds and earn lots of cash.

Record companies rarely 'write off' losses - they simply keep taking money out of any royalties you might earn from record sales (or otherwise) until you have paid off everything you owe them.

Sorry I meant if the record fails (makes less than the advance) you won't have to pay them back. If it succeeds then of course they will look to recoup the advance plus plenty of profit, if it makes that much money.

eviltimeban

There's this band. They're pretty ordinary, but they're also pretty good, so they've attracted some attention. They're signed to a moderate-sized "independent" label owned by a distribution company, and they have another two albums owed to the label.

They're a little ambitious. They'd like to get signed by a major label so they can have some security you know, get some good equipment, tour in a proper tour bus -- nothing fancy, just a little reward for all the hard work.

To that end, they got a manager. He knows some of the label guys, and he can shop their next project to all the right people. He takes his cut, sure, but it's only 15%, and if he can get them signed then it's money well spent. Anyways, it doesn't cost them anything if it doesn't work. 15% of nothing isn't much!

One day an A & R scout calls them, says he's 'been following them for a while now, and when their manager mentioned them to him, it just "clicked." Would they like to meet with him about the possibility of working out a deal with his label? Wow. Big Break time.

They meet the guy, and y'know what -- he's not what they expected from a label guy. He's young and dresses pretty much like the band does. He knows all their favorite bands. He's like one of them. He tells them he wants to go to bat for them, to try to get them everything they want. He says anything is possible with the right attitude. They conclude the evening by taking home a copy of a deal memo they wrote out and signed on the spot.

The A & R guy was full of great ideas, even talked about using a name producer. Butch Vig is out of the question-he wants 100 g's and three points, but they can get Don Fleming for $30,000 plus three points. Even that's a little steep, so maybe they'll go with that guy who used to be in David Letterman's band. He only wants three points. Or they can have just anybody record it (like Warton Tiers, maybe-- cost you 5 or 7 grand] and have Andy Wallace remix it for 4 grand a track plus 2 points. It was a lot to think about.

Well, they like this guy and they trust him. Besides, they already signed the deal memo. He must have been serious about wanting them to sign. They break the news to their current label, and the label manager says he wants them to succeed, so they have his blessing. He will need to be compensated, of course, for the remaining albums left on their contract, but he'll work it out with the label himself. Sub Pop made millions from selling off Nirvana, and Twin Tone hasn't done bad either: 50 grand for the Babes and 60 grand for the Poster Children-- without having to sell a single additional record. It'll be something modest. The new label doesn't mind, so long as it's recoupable out of royalties.

Well, they get the final contract, and it's not quite what they expected. They figure it's better to be safe than sorry and they turn it over to a lawyer--one who says he's experienced in entertainment law and he hammers out a few bugs. They're still not sure about it, but the lawyer says he's seen a lot of contracts, and theirs is pretty good. They'll be great royalty: 13% [less a 10% packaging deduction]. Wasn't it Buffalo Tom that were only getting 12% less 10? Whatever.

The old label only wants 50 grand, and no points. Hell, Sub Pop got 3 points when they let Nirvana go. They're signed for four years, with options on each year, for a total of over a million dollars! That's a lot of money in any man's English. The first year's advance alone is $250,000. Just think about it, a quarter million, just for being in a rock band!

Their manager thinks it's a great deal, especially the large advance. Besides, he knows a publishing company that will take the band on if they get signed, and even give them an advance of 20 grand, so they'll be making that money too. The manager says publishing is pretty mysterious, and nobody really knows where all the money comes from, but the lawyer can look that contract over too. Hell, it's free money.

Their booking agent is excited about the band signing to a major. He says they can maybe average $1,000 or $2,000 a night from now on. That's enough to justify a five week tour, and with tour support, they can use a proper crew, buy some good equipment and even get a tour bus! Buses are pretty expensive, but if you figure in the price of a hotel room for everybody In the band and crew, they're actually about the same cost. Some bands like Therapy? and Sloan and Stereolab use buses on their tours even when they're getting paid only a couple hundred bucks a night, and this tour should earn at least a grand or two every night. It'll be worth it. The band will be more comfortable and will play better.

The agent says a band on a major label can get a merchandising company to pay them an advance on T-shirt sales! ridiculous! There's a gold mine here! The lawyer Should look over the merchandising contract, just to be safe.

They get drunk at the signing party. Polaroids are taken and everybody looks thrilled. The label picked them up in a limo.

They decided to go with the producer who used to be in Letterman's band. He had these technicians come in and tune the drums for them and tweak their amps and guitars. He had a guy bring in a slew of expensive old "vintage" microphones. Boy, were they "warm." He even had a guy come in and check the phase of all the equipment in the control room! Boy, was he professional. He used a bunch of equipment on them and by the end of it, they all agreed that it sounded very "punchy," yet "warm."

All that hard work paid off. With the help of a video, the album went like hotcakes! They sold a quarter million copies!

Here is the math that will explain just how ****ed they are:

These figures are representative of amounts that appear in record contracts daily. There's no need to skew the figures to make the scenario look bad, since real-life examples more than abound. Income is underlined, expenses are not.


Advance: $ 250,000
Manager's cut: $ 37,500
Legal fees: $ 10,000

Recording Budget: $ 155,500
Producer's advance: $ 50,000
Studio fee: $ 52,500
Drum, Amp, Mic and Phase "Doctors": $ 3,000
Recording tape: $ 8,000
Equipment rental: $ 5,000
Cartage and Transportation: $ 5,000
Lodging while in studio: $ 10,000
Catering: $ 3,000
Mastering: $ 10,000
Tape copies, reference CDs, shipping tapes, misc. expenses: $ 2,000
Album Artwork: $ 5,000
Promotional photo shoot and duplication: $ 2,000

Video budget: $ 31,000
Cameras: $ 8,000
Crew: $ 5,000
Processing and transfers: $ 3,000
Off-line: $ 2,000
On-line editing: $ 3,000
Catering: $ 1,000
Stage and construction: $ 3,000
Copies, couriers, transportation: $ 2,000
Director's fee: $ 4,000

Band fund: $ 15,000
New fancy professional drum kit: $ 5,000
New fancy professional guitars [2]: $ 3,000
New fancy professional guitar amp rigs [2]: $ 4,000
New fancy potato-shaped bass guitar: $ 1,000
New fancy bass amp: $ 1,000
Rehearsal space rental: $ 500
Big blowout party for their friends: $ 500

Tour expense [5 weeks]: $ 50,875
Bus: $ 25,000
Crew [3]: $ 7,500
Food and per diems: $ 7,875
Fuel: $ 3,000
Consumable supplies: $ 3,500
Wardrobe: $ 1,000
Promotion: $ 3,000

Tour gross income: $ 50,000
Booking Agent's cut: $ 7,500
Manager's cut: $ 7,500

Merchandising advance: $ 20,000
Manager's cut: $ 3,000
Lawyer's fee: $ 1,000

Publishing advance: $ 20,000
Manager's cut: $ 3,000
Lawyer's fee: $ 1,000

Record sales: 250,000 @ $12: $ 3,000,000
Gross retail revenue Royalty [13% of 90% of retail]: 250,000 @ $12: $ 351,000
Less advance: $ 250,000
Producer's points [3% less $50,000 advance]: $ 40,000
Promotional budget: $ 25,000
Recoupable buyout from previous label: $ 50,000
Net royalty: $ -14,000



Now, on the other hand, let's look at the Record company income:


Record wholesale price $6.50 x 250,000 $ 1,625,000 gross income
Artist Royalties: $ 351,000
Deficit from royalties: $ 14,000
Costs of manufacturing, packaging and distribution @ $2.20 per record: $ 550,000
Label's gross profit: $ 7l0,000



The Balance Sheet: This is how much each player got paid at the end of the game:


Record company: $ 710,000
Producer: $ 90,000
Manager: $ 51,000
Studio: $ 52,500
Previous label: $ 50,000
Booking Agent: $ 7,500
Lawyer: $ 12,000
Band member net income each: $ 781.25



The band is now 1/4 of the way through its contract, has made the music industry more than 3 million dollars richer, but is in the hole $14,000 on royalties. The band members have each earned about 1/20 as much as they would working at a 7-11, but they got to ride in a tour bus for a month.

The next album will be about the same, except that the record company will insist they spend more time and money on it. Since the previous one never "recouped," the band will have no leverage, and will oblige.

The next tour will be about the same, except the merchandising advance will have already been paid, and the band, strangely enough, won't have earned any royalties from their T-shirts yet. Maybe the T-shirt guys have figured out how to count money like record company guys.

(c) 1993 Steve Albini

Caught

eviltimeban wrote: »

There's this band. They're pretty ordinary, but they're also pretty good, so they've attracted some attention. They're signed to a moderate-sized "independent" label owned by a distribution company, and they have another two albums owed to the label.

They're a little ambitious. They'd like to get signed by a major label so they can have some security you know, get some good equipment, tour in a proper tour bus -- nothing fancy, just a little reward for all the hard work.

To that end, they got a manager. He knows some of the label guys, and he can shop their next project to all the right people. He takes his cut, sure, but it's only 15%, and if he can get them signed then it's money well spent. Anyways, it doesn't cost them anything if it doesn't work. 15% of nothing isn't much!

One day an A & R scout calls them, says he's 'been following them for a while now, and when their manager mentioned them to him, it just "clicked." Would they like to meet with him about the possibility of working out a deal with his label? Wow. Big Break time.

They meet the guy, and y'know what -- he's not what they expected from a label guy. He's young and dresses pretty much like the band does. He knows all their favorite bands. He's like one of them. He tells them he wants to go to bat for them, to try to get them everything they want. He says anything is possible with the right attitude. They conclude the evening by taking home a copy of a deal memo they wrote out and signed on the spot.

The A & R guy was full of great ideas, even talked about using a name producer. Butch Vig is out of the question-he wants 100 g's and three points, but they can get Don Fleming for $30,000 plus three points. Even that's a little steep, so maybe they'll go with that guy who used to be in David Letterman's band. He only wants three points. Or they can have just anybody record it (like Warton Tiers, maybe-- cost you 5 or 7 grand] and have Andy Wallace remix it for 4 grand a track plus 2 points. It was a lot to think about.

Well, they like this guy and they trust him. Besides, they already signed the deal memo. He must have been serious about wanting them to sign. They break the news to their current label, and the label manager says he wants them to succeed, so they have his blessing. He will need to be compensated, of course, for the remaining albums left on their contract, but he'll work it out with the label himself. Sub Pop made millions from selling off Nirvana, and Twin Tone hasn't done bad either: 50 grand for the Babes and 60 grand for the Poster Children-- without having to sell a single additional record. It'll be something modest. The new label doesn't mind, so long as it's recoupable out of royalties.

Well, they get the final contract, and it's not quite what they expected. They figure it's better to be safe than sorry and they turn it over to a lawyer--one who says he's experienced in entertainment law and he hammers out a few bugs. They're still not sure about it, but the lawyer says he's seen a lot of contracts, and theirs is pretty good. They'll be great royalty: 13% [less a 10% packaging deduction]. Wasn't it Buffalo Tom that were only getting 12% less 10? Whatever.

The old label only wants 50 grand, and no points. Hell, Sub Pop got 3 points when they let Nirvana go. They're signed for four years, with options on each year, for a total of over a million dollars! That's a lot of money in any man's English. The first year's advance alone is $250,000. Just think about it, a quarter million, just for being in a rock band!

Their manager thinks it's a great deal, especially the large advance. Besides, he knows a publishing company that will take the band on if they get signed, and even give them an advance of 20 grand, so they'll be making that money too. The manager says publishing is pretty mysterious, and nobody really knows where all the money comes from, but the lawyer can look that contract over too. Hell, it's free money.

Their booking agent is excited about the band signing to a major. He says they can maybe average $1,000 or $2,000 a night from now on. That's enough to justify a five week tour, and with tour support, they can use a proper crew, buy some good equipment and even get a tour bus! Buses are pretty expensive, but if you figure in the price of a hotel room for everybody In the band and crew, they're actually about the same cost. Some bands like Therapy? and Sloan and Stereolab use buses on their tours even when they're getting paid only a couple hundred bucks a night, and this tour should earn at least a grand or two every night. It'll be worth it. The band will be more comfortable and will play better.

The agent says a band on a major label can get a merchandising company to pay them an advance on T-shirt sales! ridiculous! There's a gold mine here! The lawyer Should look over the merchandising contract, just to be safe.

They get drunk at the signing party. Polaroids are taken and everybody looks thrilled. The label picked them up in a limo.

They decided to go with the producer who used to be in Letterman's band. He had these technicians come in and tune the drums for them and tweak their amps and guitars. He had a guy bring in a slew of expensive old "vintage" microphones. Boy, were they "warm." He even had a guy come in and check the phase of all the equipment in the control room! Boy, was he professional. He used a bunch of equipment on them and by the end of it, they all agreed that it sounded very "punchy," yet "warm."

All that hard work paid off. With the help of a video, the album went like hotcakes! They sold a quarter million copies!

Here is the math that will explain just how ****ed they are:

These figures are representative of amounts that appear in record contracts daily. There's no need to skew the figures to make the scenario look bad, since real-life examples more than abound. Income is underlined, expenses are not.


Advance: $ 250,000
Manager's cut: $ 37,500
Legal fees: $ 10,000

Recording Budget: $ 155,500
Producer's advance: $ 50,000
Studio fee: $ 52,500
Drum, Amp, Mic and Phase "Doctors": $ 3,000
Recording tape: $ 8,000
Equipment rental: $ 5,000
Cartage and Transportation: $ 5,000
Lodging while in studio: $ 10,000
Catering: $ 3,000
Mastering: $ 10,000
Tape copies, reference CDs, shipping tapes, misc. expenses: $ 2,000
Album Artwork: $ 5,000
Promotional photo shoot and duplication: $ 2,000

Video budget: $ 31,000
Cameras: $ 8,000
Crew: $ 5,000
Processing and transfers: $ 3,000
Off-line: $ 2,000
On-line editing: $ 3,000
Catering: $ 1,000
Stage and construction: $ 3,000
Copies, couriers, transportation: $ 2,000
Director's fee: $ 4,000

Band fund: $ 15,000
New fancy professional drum kit: $ 5,000
New fancy professional guitars [2]: $ 3,000
New fancy professional guitar amp rigs [2]: $ 4,000
New fancy potato-shaped bass guitar: $ 1,000
New fancy bass amp: $ 1,000
Rehearsal space rental: $ 500
Big blowout party for their friends: $ 500

Tour expense [5 weeks]: $ 50,875
Bus: $ 25,000
Crew [3]: $ 7,500
Food and per diems: $ 7,875
Fuel: $ 3,000
Consumable supplies: $ 3,500
Wardrobe: $ 1,000
Promotion: $ 3,000

Tour gross income: $ 50,000
Booking Agent's cut: $ 7,500
Manager's cut: $ 7,500

Merchandising advance: $ 20,000
Manager's cut: $ 3,000
Lawyer's fee: $ 1,000

Publishing advance: $ 20,000
Manager's cut: $ 3,000
Lawyer's fee: $ 1,000

Record sales: 250,000 @ $12: $ 3,000,000
Gross retail revenue Royalty [13% of 90% of retail]: 250,000 @ $12: $ 351,000
Less advance: $ 250,000
Producer's points [3% less $50,000 advance]: $ 40,000
Promotional budget: $ 25,000
Recoupable buyout from previous label: $ 50,000
Net royalty: $ -14,000



Now, on the other hand, let's look at the Record company income:


Record wholesale price $6.50 x 250,000 $ 1,625,000 gross income
Artist Royalties: $ 351,000
Deficit from royalties: $ 14,000
Costs of manufacturing, packaging and distribution @ $2.20 per record: $ 550,000
Label's gross profit: $ 7l0,000



The Balance Sheet: This is how much each player got paid at the end of the game:


Record company: $ 710,000
Producer: $ 90,000
Manager: $ 51,000
Studio: $ 52,500
Previous label: $ 50,000
Booking Agent: $ 7,500
Lawyer: $ 12,000
Band member net income each: $ 781.25



The band is now 1/4 of the way through its contract, has made the music industry more than 3 million dollars richer, but is in the hole $14,000 on royalties. The band members have each earned about 1/20 as much as they would working at a 7-11, but they got to ride in a tour bus for a month.

The next album will be about the same, except that the record company will insist they spend more time and money on it. Since the previous one never "recouped," the band will have no leverage, and will oblige.

The next tour will be about the same, except the merchandising advance will have already been paid, and the band, strangely enough, won't have earned any royalties from their T-shirts yet. Maybe the T-shirt guys have figured out how to count money like record company guys.

(c) 1993 Steve Albini

Wow thats long. Whats a 7 - 11? And what are points? :S

eviltimeban

Its an American article, a 7/11 is a convenience store, like a newsagents.

Not sure about Points - I'd say they are percentages. Like you get two "points" and that equates to a certain share of the album's profits. Yeah its a long article but worth reading, and the overall message is, don't sign to a major label!! Or if you do, make sure you have a good deal! And if you do, make sure you sell millions upon millions of albums!

Caught

eviltimeban wrote: »

Its an American article, a 7/11 is a convenience store, like a newsagents.

Not sure about Points - I'd say they are percentages. Like you get two "points" and that equates to a certain share of the album's profits. Yeah its a long article but worth reading, and the overall message is, don't sign to a major label!! Or if you do, make sure you have a good deal! And if you do, make sure you sell millions upon millions of albums!

So indie labels would be better than like Sony or Universal? :O

jackthelad456

I agree with most of the posts so far. I think that the only way forward is to self record and self publish. The Internet is a powerful tool for promoting live shows. The money is in the live side now. Cashing in on recorded music is next to impossible today.

MilanPan!c

To clear up a few things (fwiw: I've been signed to a major and a few indies, so you know):

Points = "percentage points" - but it could be on gross or net or anything... it'd be spelled out in a contract...

As for what labels give and what they get:

Well ok... many many labels are essentially distro these days... you pay for the recording and the art, they pay for pressing the discs and they get them into shops/online (or whatever you agree to).

But there's ENDLESS permutations on this... many labels will NOT do ANY publicity, but will pay a third party to do it, and then deduct that expense from earnings from the record, before you earn a cent.

All labels know exactly what options there are, more or less, some try and build artists over years, but then take a chink of all the money you make (from concerts, merch, etc.) others will basically put out one record for you, then try and sell your contract to a big fish, and you'll potentially be paying two bosses for a few records...

On top of all of this many labels will absolutely, 100%, make sure that they get any money owed to them if you leave them and sign with anyone else... so the debt you accrue is VERY MUCH REAL.

It's a minefield people.

Of course, there's a HUGE number of HONEST labels, but those guys are running a business.... just like all labels... and they're terms are designed to protect their interests FIRST.

Now here's the real bitch!:

You can't have real success without a label.

So.

.......

Caught

MilanPan!c wrote: »

You can't have real success without a label.

So.

.......

Ehm, I know you said real success, but Fox Avenue [one of my favourite bands ever] have only been together a year and 3 months, and have one EP out [Four for Four], and yet they've already played in the o2 supporting bands and they played at Oxygen too.

So uh-huh. You don't need a label to be successful. You can do stuff by yourself too.

BTW, how on Earth did you get signed to a major? :L

MilanPan!c

Caught wrote: »

Ehm, I know you said real success, but Fox Avenue [one of my favourite bands ever] have only been together a year and 3 months, and have one EP out [Four for Four], and yet they've already played in the o2 supporting bands and they played at Oxygen too.

So uh-huh. You don't need a label to be successful. You can do stuff by yourself too.

BTW, how on Earth did you get signed to a major? :L

So we're clear, playing a couple of big shows is cool, but it's absolutely NOT real success.

Real success is playing 4-6 days a week, making 10-20K per show, getting radio play, around the world and having a career path that isn't up in the air.

More or less...

It's cool about that band, but they're not really successful just yet. Though, sounds like they could be...

re: major label... Being signed to any label is about someone somewhere hearing you and thinking they could make money off of you... So, when I was in London that happened to me.

ClutchIt

MilanPan!c wrote: »

So we're clear, playing a couple of big shows is cool, but it's absolutely NOT real success.

Real success is playing 4-6 days a week, making 10-20K per show, getting radio play, around the world and having a career path that isn't up in the air.

More or less...

It's cool about that band, but they're not really successful just yet. Though, sounds like they could be...

re: major label... Being signed to any label is about someone somewhere hearing you and thinking they could make money off of you... So, when I was in London that happened to me.

Could you tell us more about your experiences of being signed? It's interesting

MilanPan!c

ClutchIt wrote: »

Could you tell us more about your experiences of being signed? It's interesting

Well... a solicitor/A&R guy heard us randomly, he played us for a friend (who was the guy that discovered PJ Harvey). That guy told the solicitor that we had commercial talent, essentially... oh to add he also owned a label which was essentially a feeder label to a major... and was financed by that major...

we were signed to a development deal by the major...

the people that the solicitor knew through his label started working with us on demos of songs, etc...

but...

unfortunately for me, during this process our singer had a nervous breakdown (related to this and to living in London, which she hated) and the band struggled to find a good enough replacement...

I spent a year auditioning singers and never found a good enough one, essentially...

then I moved to Ireland and spent and took and put it back together with a different singer, but it didn't really gel properly and, to be honest, the time wasn't there to take it seriously (I had gotten a good paying job and it was eating all my time...among other things)...

after a couple of years I was made redundant and decided to use the time I had to jumpstart the band again... I had been auditioning people and it was seemingly going nowhere, but then, after 60-70 auditions I found a new singer... and we've been recording a record for the last 6 months...

So, we'll see... we're doing this on our own... kinda. We're working with an English producer with very sound connections in the industry in the UK, I have decent connection here and in the UK as well, and in the US, where I was in a few bands on Indies...


So anyway, that's a lot on probably extraneous info ... sorry for that...


essentially.... we lucked out in some respects as we didn't end up in any real debt, because the label didn't really spend a meaningful amount of money on us... but, I got a HUGE amount of experience and connections in...

That being said, I have a few friends in bands you may have heard of, on real labels, and I hear a lot about their experiences... and it's a pretty difficult business to be in...

Oh and I used to produce and be a mix engineer and worked very closely with a few bands, which gotten chewed up by **** Indies, so I saw that happen, first hand... sad stuff..

If you have any more questions, based on all of that ^^^ just ask...

ClutchIt

Thanks for the info. It really seems like a cruel business alright. Best of luck with your current venture!

MilanPan!c

ClutchIt wrote: »

Thanks for the info. It really seems like a cruel business alright. Best of luck with your current venture!

It's tough alright, but like all BUSINESSES, risk is just part of the game... try and limit it by producing a good product and having a good team, don't make bad business partners, whenever possible.. and be persistent.