If you are an artist who is lucky enough to have reached a career point where you’re receiving offers from record deals, there are some things you need to know before going through the process of signing a contract.
Music Contracts are just that; contracts.
The most important thing to remember about entering a record deal is that you are signing a legal agreement. Before you commit to a deal, you need to make sure you know what to look for within the terms and agreements.
Here is an outline of points you may find within a typical record deal’s terms:
Transfer of Copyright
Royalty Divisions
Advances and Flat Fees
Exclusivity
Duration of Contract/Termination Clause
In the next several paragraphs, we’ll explain what each of these points means, what to avoid, and what to negotiate.
Tip #1: Transfer of Copyright
When negotiating a record deal, an important thing to request is a temporary transfer of your copyright ownership versus a permanent transfer. This would require you to create a licensing deal, where you license the ownership of your music to the record label for a specified temporary amount of time.
Be careful of deals requiring a full transfer of all your copyright claim or a work-for-hire agreement. To ensure that you are able to get out of a record deal that may not be working out for you, you should try and negotiate a licensing deal.
Otherwise, a record company would be able to retain the rights to your music for a long time.
Extra tip: be cautious of work-for-hire agreements in general. This means that any content you produce for the label to release would belong to them.
Tip #2: Royalty Divisions
Make sure the divisions of royalties on your music cover both digital and physical copies of your music.
The exact calculation of your share of royalties should be included as well. (This should be based on the Net PPD, or published price to dealer, which is the wholesale price for both mechanical and digital royalties.)
The percentage of royalties you should receive varies depending on whether you are signing with a major label or not.
For instance, a major-label may take around 20 to 25% of physical royalties and 25 to 35% on digital. This is a fairly standard rate across major label deals, so if your record deal asks for much more than that, make sure you know what you are getting into. As for smaller, indie labels, they may ask for 20 to 30% of physical royalties and 40 to 50% of digital.
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