Five Types of Record Deal

There are currently five main types of record deal. There are also a number of hybrids which take various elements from each type of deal.

Which deal is best for the artist or the record company will vary depending on the circumstances. In this article, we look at the benefits of each.

1. The Licence Deal
Under a licence deal the artist will licence the record label to use the recordings made by the artist. The licence would usually permit the record company to manufacture, distribute and sell named recordings. A licence deal might be appropriate where the support required of the record label is limited, e.g. where the artist has already made a recording.

In recognition of the fact that the record company undertakes less work under a licence deal, the record company generally accepts a reduced royalty rate and reduced packaging deductions are payable.

2.  The Exclusive Recording Contract
Under this type of deal the artist exclusively appoints the record label to manage the music recorded by the artist during the length of the contract. An exclusive recording contract typically lasts for 1 year, but provides the label with the right to renew the contract for further periods of time. The label will generally require the artist to record one album during the contract term.

In return for exclusivity, the artist can expect a significant investment of time and resources from the label. This could extend to include the recording of videos and marketing and promotion costs.

3.  The Development Deal
The development deal is a hybrid of the exclusive recording contract. However, rather than require the artist to record an album’s worth of material, the deal is that the artist will record a number of demos or singles. The label can then make a decision to extend or terminate the relationship with the artist on a ‘suck it and see’ basis.

The fees payable to the artist under a development deal are limited and may only cover recording costs. However, the development deal provides an artist with an opportunity to impress the label. In theory, the label gets to see the creative best from an artist who will be hoping to secure a full, exclusive recording contract.

4. The Production Deal
The production deal is another hybrid of the exclusive recording contract. In a production deal, the artist does not contract directly with the record label, but with a business that makes recordings. The recording company then licenses or assigns those recordings to a label. Typically, the record label is an offshoot business of the recording company.

The production company will generally expect exclusivity from the artist for as long as copyright in the recordings is available. During the term of the contract, the production company will look to develop the artist by recording several tracks and will then ‘tout’ their artists to the bigger labels in the expectation that the production company’s rights will be acquired either through a licensing deal or assignment.

The advantage to an artist in signing up with a production deal is that the artist may enjoy greater creative freedom and benefit from a greater degree of focus from the owners of the production company. However, the down side is that most production deals are 50:50 net profit deals – where the artist only receives 50% of net profits. This is minimal when compared with the royalties that are potentially payable under an exclusive recording contract.

5. The 360 Deal
A typical exclusive recording contract will allow the record label to make money from selling the recordings of the artist. Under a 360 deal the artist agrees that the record label can make benefit from all areas of activity in which the artist is involved. This could include royalties received from areas such as merchandising  and ticket sales. More importantly, the 360 deal may also extend to cover monies received through other areas of an artist’s life, such as acting, writing or promotions.

An alternative to the 360 deal is a 270 deal which is the same as a 360 deal but excludes publishing.

To discuss any queries regarding record deals on an informal basis and without obligation, please call Mark Roberts on 0161 826 9309.

 

Mark Roberts

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