How Much Is A 4 Year Old Supposed To Weigh Record Deal Vs DIY

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Record Deal Vs DIY

In response to recent information floating around the blogosphere about the old record deal model versus the new, more profitable DIY model for the artist, I thought I’d throw out some aspects that might not be considered.

There are 4 pieces to this puzzle that must be weighed before an official judgment is made one way or the other.

  1. The business of a record label
  2. The record contract and finally the individual contract
  3. Owner of the master registration and mechanical rights
  4. Comparison of costs Label vs. DIY

1. The business of a record label

Let’s start with an understanding of the business of being a label. Most labels focus on building their catalog by master recording and owning the publishing rights to their original music. You may think they are in the business of developing artists and certainly that plays a role, but ultimately they are building their catalog of music. The value of the company comes from the catalogs in case they are bought out or absorbed by a larger company. Labels look for artists who can prove to be potentially hot sellers, deliberately increasing the value of their catalog.

It is important to view a record deal from this perspective to understand what any cash advance, large or small, if any, is actually buying. They are buying your master recording. And every label also wants a piece of the publication, whether you own your own publication or another publisher owns the rights to your music. Most deals won’t happen unless you, or your publisher, share ownership of the original material, the copyright. As a composer, this is great and must be taken into consideration while weighing and comparing the value of any contract.

2. The record contract and contract

As you consider all the known benefits of working with a label, you think, great, they will pay for the art work, the manufacturing, the radio promotion, the print media promotion and maybe even some tour support to help find acts there. the road promotes the new registration. Then you and hopefully your lawyer actually read the record deal. In the contract, any standard file contract, you will find the packaging clause that tells you that the artwork and the photo shoot are recoverable. The Manufacturing Clause also states that the manufacturing of the CD is a recoverable item along with the Promotional Budget-all. recoverable.

A recoverable expense is one that the label puts out, but in the end you pay them back as the CDs get sold before you get to pay any royalties. While going through this contract, almost everything that is paid for in advance is recoverable; tour support and even that fabulous advance to record the CD first.

One of my favorite clauses in any record deal is the cross collateralization clause. Say you sign a 2 or 3 record deal and do the first recording. Since it’s your first CD and you’re just growing your fan base, you’ve sold a few but not enough to cover all those recoverable costs. But it’s time to make the second CD and the label feels good enough about how the first one is going to give you another advance for the recording, they manufacture the second CD, promote it and start selling it. BUT, the first CD has not yet recovered all of its costs, so any sales from the second CD and the first CD will now all go towards paying the costs of the first CD. The result- No royalties for you from the first CD anymore because the contract says the label can take any money from the second CD to help cover the costs of the first. This will then continue for as long as the contract is in effect, CD after CD.

So when do you make money? You can make some money selling your CDs from the stage or your website while on tour IF the label allows you to sell from the stage or your website. Sometimes you may not, since that would cut into label sales at the distribution point. Oh, and I mentioned you have to buy the CDs from the label sold at a price a little better than a distributor, but not much. But if you want to have your record sales count as royalty units (sales count toward your royalties), then the artist’s price will go up a few bucks.

When we talk about royalties, they are generally calculated on the wholesale price of the recording. Let’s just use $15 as the retail price. Wholesale would be about $9.25 which is where your royalties could start calculating. But then there are distributor prices that are usually 55% of retail, so now we are down to about $ 8.25. Now, what do you or your lawyer, negotiate for your royalty rate? If you are a hot artist already, this rate could be 10% or a bit higher, but mostly you will get the royalty rate from 7%, 8% or 9% of the royalty rate, $9.25 or the distribution rate, $8.25. This will vary, but it is low.

Now when you could get paid, if there actually is anything to be paid? Contracts are usually set up to pay twice a year. You will receive your royalty statement and any amount due thirty, sixty and sometimes ninety days after the end of the accounting period. Then you open the statement and look at what you could get paid and you are shocked. Where is all the money? And what is this 20% that they kept to cover returns?

Ah, yes, the return clause that says, even if they shipped 1000 CDs to some distributor, the distributor could ship them back even after a year if they didn’t sell. So your label does not want to pay you for something they may not get paid for, so they keep a percentage to cover this possibility. You only get paid for what is actually sold, not shipping.

3. Ownership of Master Recordings and Mechanical Rights

As mentioned above, the label owns the master recording in most label deals as well as a portion of the copyright or mechanical rights. Let’s say you recorded a CD with ten songs, just to make it simple. Nine of these songs are your own originals and one is a cover by another artist. The label must pay the other artist or the artist’s publisher for the mechanical rights. Somewhere in your contract is the Mechanical Rights Clause that describes exactly how many songs the label will pay for and it’s usually not 100% of the songs on the CD, but more like 70%. If one of these songs is a cover; This means you will get mechanical royalties on six of your songs instead of seven. You just won’t pay for two of your songs at all.

That is not even the most important aspect of the common portion. The most important part is that if and when your contract ends or if and when your contract is canceled or you try to cancel your contract, depending on how the contract is written, the label still owns those masters and a portion of copyrights, sometimes “in perpetuity” (in perpetuity). There are these situations when the artist is offered a contract, they start recording music that the label is paying for, and then in the middle a change in the leadership of the label happens and the new president doesn’t like some of the acts already. signed They can and do shuffle the decks, once in a while, as happened to RCA a number of years ago. New leadership came in and canceled the 30 act contract. But what happened to the music, these recordings, are still working in the studio? They entered the label vault. The artists’ creations were not available to them now because their contract stated that the label owned the rights to that music, whether it was published or not.

4. Price comparison label vs DIY

I like to present these comparisons in terms of getting a loan, since essentially that is exactly what a record deal is, a loan to cover the costs of registration. Now that you have some of the royalty figures from above, you could say that with a very generous 10% royalty rate, and 100% of the potential pie at stake, your loan costs you 90% interest.

Compare this to most loans you could face in life, a car loan or a home loan where interest rates are now at an all time low of 3.99% – 4.35%. Even exorbitant credit card interest rates of above 35% are even better. At least when you pay off your car or house, you own it. In case of label agreement, you do not.

The DIY scenario

Continuing with the loan analogy, maybe you borrow the registration money from your folks or Uncle Joe or a really great friend or even an investor and they agree to a 10% interest rate. This means that on every CD you sell, you keep 90% of the retail, wholesale, whatever. Once the loan is paid plus the 10%, or to use similar terminology as a label, once investors recover their initial investment plus interest, you own the master and all publications on your original material. Now, on every sale, you keep 100%.

Yes, the cost of recording, manufacturing, CD promotion and touring is yours. Now with the Kickstarter campaign and lending, your CD is yours as well as the rights to your music.

Now there are distribution costs. Most distribution companies charge 55%. Some actually get your music out there and sell it but some just keep your product in storage waiting for enough demand for the music to make a sale. Just because your label has a distribution deal and has delivered product to the distributor, doesn’t mean it will sell. Just because you there is a distribution contract, it also does not mean it will be sold.

In today’s online world, music distribution companies take what might seem like a big cut for seemingly doing very little. But even if they take 30%, they only take this percentage on actual sales and you get paid on a regular monthly basis. In addition, your music is available worldwide depending on which online service you can access. If you are using a company like CDBABY to broadcast your music to various online sales points like iTunes, and get it to others like Orchard or TuneCore for example, then you have your membership costs, but again, that is a little comparatively, and again they pay you every month.

You may think that these online companies are doing very little to get a piece of your pie. Once again, they make your music available in a large online world. The costs are in keeping the technology updated and ahead of the technology-wave. This allows you to reach a far wider audience than ever anticipated. Now, with some savvy marketing and focusing on your particular niche audience, you could sell very well without even touring. But throw in a great CD Release concert, some well-managed tours and your ability to sell out at every gig and you’ll be recouping any costs and paying off any loans in no time. And when you do, you’ll own your master, you’ll own your publishing, and you’ll be making money to save for your next recording, month after month after month.

Weigh the facts and the real costs of this recording business, either doing it on your own or with a record deal. Take the emotion out of the equation and deal with the numbers that are actually involved. When you take all these things into account, then and only then, you can make an educated decision about which works best for you. When you understand what you have to gain and what you have to lose in each scenario only then can you be comfortable either way. A scenario may be good for one artist and not for another. Begin this process with a full understanding of what is at stake, and you will simply make a better decision.

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