The Music Business Has Radically Changed – Should You Sign To A Record Label?
Whether you are setting goals or have an offer on the table, “Whether you should sign to a record label” is an important question to ask.
Before I can answer the question for you, you need to answer these questions for yourself.
What can a record label do for you?
I wrote last week about How to Get Signed To a Record Label. And it’s one of our most thorough posts ever. Be sure to click here to check it out!
Record labels previously monopolized the means of distribution in the music industry. The means of distribution were the ways music could get from the musicians to the fans. Previously, record labels owned or worked with distributors who shipped the physical product the music was on from the record labels or manufacturing facilities to record stores around the world. This physical product was CDs, LPs, cassettes, and so on. This physical product was the ONLY way fans could own the music for themselves so they could hear it when they wanted to hear it. Obviously, in the streaming era, this is no longer true. Are you able to get your music to your fans for them to purchase? (The answer, in case you didn’t know, is YES.)
Record labels also had a monopoly on commercial radio, limiting opportunities for independent artists to be discovered on radio. This is still fairly true, but radio itself is no longer the primary way fans discover new music. In addition, in a typical music business catch 22, if you can show media you are successful without their help, they’ll help you (*smacks head*). This means media is less interested in the record label promoting the music than the number of monthly streams on Spotify, Facebook followers, Instagram followers, and so on. Algorithm-driven Spotify playlists are more influential on new artist discovery than any modern commercial radio station, including Sirius/XM. Are you able to introduce yourself to new fans without a record label? (The answer is yes, but it isn’t easy!)
A record label will provide a team of experienced and talented professionals to help promote your release to media, streaming sites, and retail outlets. There is a lot of work to be done before, during, and after an album release rollout. And it’s more work than a single, independent musician can take on well alone.
In addition, an experienced record label team will leverage existing music industry relationships to create additional opportunities for your career. This is an “x factor” you may never be able to replace. Now, not every record label is the same. Some labels are solo efforts, side hustles for a music fan wanting to support music she loves, and possibly build a career as a modern record label mogul.
Learning who will be working on behalf of the record label to make your shared interests successful is crucial to considering if you should sign to a record label. Smaller record labels can hire third-party help for parts of the team they don’t have on staff. Are you able to put together a team of manageable, energized, and ambitious people to support your album release rollout?
What does signing to a record label mean?
Congratulations, you are a signed recording artist.
You have a signed contract between yourself and the record label laying out the terms of your agreement. This contract details how long you are obligated to fulfill these terms and what you and the record label expect from each other during this relationship. It is important you read every word of this contract before you sign it, no matter how boring a read it is. It’s also important you have an experienced music business attorney explain to you both what the agreement details for its expectations from you and what the “legalese” in the contract means.
As an artist, you have a right to have expectations about how much the record label will spend for the recording of releases, what income the record label is now entitled to, what rights the record label has to terminate the agreement, and what rights you have as an artist to terminate the agreement. And much more.
Be sure to temper your optimism and excitement for signing to a record deal with the realities in the contract. Your relationship with your record label WILL change and you want an agreement you will not feel trapped by except in the most dire circumstances.
Side note: having a great relationship with your record label takes efforts and compromise on your part and their’s.
How much does a record label pay an artist?
Getting signed to a record label is not like being hired for a job.
You are the artist and they are the record company. Each of you are companies with your own interests but have decided you can help each other. You will not be paid a wage. You won’t be paid based on how hard, or how much, you work.
A typical financial relationship between a record label and an artist is based on “recoupable advances”.
This sounds complicated, but it’s actually a simple concept. The record label will make a loan (the “advance”) to the artist they think will pay off. The amount of this loan depends on the record label’s confidence the loan will be paid off (“recouped”). Because the record label is taking a financial risk with the loan, their incentive comes from structuring the deal so the record label will keep the majority of the profits when the artist or album are successful.
Many independent record labels with limited resources structure their deals more like partnerships with the artist and won’t include advances. In this scenario, the profits will be shared equally, or nearly so. And many record labels will negotiate deals where they take little risk but still take the majority of the profit.
Getting a “better deal” from a record label depends on the work and success you have before you get signed.
And then having enough success as a signed artist you can renegotiate a current contract or negotiate a subsequent contract with the current or future record label.
Should you sign to a record label?
If the record label provides services you can’t source yourself, an agreement fair to both you and to them while incentivizing both to work hard for everyone’s benefit, and provides financial resources you need, then yes. You should sign to the record label.
If you have put together the distribution, promotion, and a team of people to help you, maybe not. Maybe not if you don’t need the label’s financial resources. If you can’t come to an agreement you are happy about, you should NOT sign to the record label.
As an unsigned artist, build as many of these components for yourself as you can. Both so you can build your career NOW and so you can negotiate a better deal with an interested record label later. When you don’t need a recording contract, you can walk away from a bad contract offer much more easily. And you NEED to be able to walk away in order to negotiate a better deal.