THE BLOG

5 Keys to Consider with a Label Deal in the Music Industry

04/21/2015 11:58 am ET | Updated Jun 21, 2015

As a child, somewhere in pages of a fairytale book, we would discover adventures that revealed a pattern for the characters in the story. The innocent-but-flawed hero eventually faced various challenges and villains to which perseverance and the eternal hope of good over evil would somehow manifest in the end. The storylines and adventures within these books were intentionally and thinly veiled parables for life to the mature reader. Even as an adult and many cobweb memories later, we deep down hope to experience a life that is worthy of an epic tale that with the right amount of embellishment could join that library of classics.

To some extent, the music industry is full of similar stories we've come to reference as the way it should be for the lowly and heroic emerging artist. Seemingly everyone I've met -- including myself -- trying to make their way in the music industry has an internal compass pointing to the fairytale North Pole of happy endings that drive them to continue. The catalog of music industry stories we cite in order to justify the tenacity to keep trying is riddled with enough hope to sometimes throw us off track to the reality of the business side of the music industry. We sometimes focus on the big payday and fame and forget that both of those are fleeting spoils of the war of making a living in the business. More importantly, we can get lost in the excitement of a label that shows interest so much that we overlook the fine print buried within flowery words of small novel called a "record deal" contract.

2015-04-21-1429608558-4456400-pianodollar.jpg

Now, I've spent the better part of my adult life negotiating sales contracts in various industries, including the fun of drafting them and having lawyers red-pen them many times. I'm not a lawyer, but the process of reading through these intimidating documents can be overwhelming to most. So for the sake of lending unsolicited advice to my reader, I figured to point out the top five issues to consider when entering discussions with a label of any size. These are not necessarily in priority order for every case, but they are in my personal preference order of importance when I have considered them for Spencer's career.

1. The Investment From The Label
The most important relationship matter to understand between an artist and label is that of the artist being a small business and the label acting as a managing investor in that small business. It is simply that easy. The label is investing in that artist and expects a return. As such, it is extremely important for the artist to look at a very detailed blueprint of WHAT is being invested, WHEN it's being invested, HOW it's being invested, WHO is investing it and WHERE it's being invested. These are standard questions to ask and understand clearly before entering the agreement. Too many artists regret signing a record deal because they didn't understand the investment structure in the light of these. In most cases, a label won't include an actual dollar amount they will invest or when. They will often verbally say they will do this and that, but when it comes to the actual contract, an artist should be comfortable that the wording holds them accountable to the investment plan you verbally discuss. It will be a critical part of whether they can succeed with helping the artist's career reach the levels both parties expect.

2. Term Of The Contract
It's also very critical to understand how long an artist is bound by the contract being offered. Be extremely careful to not miss sections of the agreement that are worded so that even when the term of the agreement is legally finished, some rights of ownership may extend after the label and artist part ways. Things like use of artists music, likeness, name, etc., may affect the artist down the line. Certainly anything that has financial upside for the label may appear as something that extends beyond the life of the agreement. Be very careful to find these sometimes less than obvious clauses within a contract.

3. Creative Control
One of the more difficult areas an artist faces is the reality that once a label invests in them, they essentially lose creative control over their music. The label can simply veto the artist's preference in their sound, style, lyrics, mix, live show, etc. Simply, when the artist signs the agreement, they are signing away their creative rights to the label's management team who can preference making profit over the artists desire to be unique in the marketplace. It may not be possible to word an agreement to protect the artist's creative rights, but I certainly recommend they try. A good entertainment lawyer may provide some practical language to help the artist have a voice in creative decisions.

4. Label Ownership
Face it, unless you're dealing with the big three labels like Universal, Sony or Warner Brothers or their direct subsidiaries, you're likely dealing with an independently owned label. Making sure you understand WHO is on the hook to enforce the contract is absolutely critical. Just because you may have a good relationship with the A&R or label representative, the fact is that people come and go and you may have to live with their replacement who may not have knowledge of the verbal conversations you had when negotiating your deal. Knowing the ownership as best as possible is critical. Do your homework and investigate them. Research any public records and get referrals from anyone in the industry who may have dealt with them before. Most importantly, if possible, make sure they have the financial wherewithal to uphold the agreement they are making with you.

5. Day-to-Day Support Staff
In today's music climate, many labels are creating 360 deals where they are entitled to a piece of many of an artist's income streams. While the artist may be ok with this financial model (which is a tough pill to swallow sometimes) the support of the artist in the areas the label is benefiting from financially should be carefully understood. If, for example, the label is getting a percentage of an artist's tour and merch income, they should be equally required to provide administrative staff and support for the artist in exchange for them participating in the income from those areas. In the most traditional sense, a label is an investor in producing and distributing music. Their sole income should be coming from music sales. When a label extends their income areas from other areas of an artist's income streams, they need to provide an equal investment against receiving that income in a tangible way like staff support.

I'm certain that another person's list may have other priorities to consider, but after now reviewing and experiencing nearly a dozen label offers the past four years with Spencer's young career, I've learned to ask a lot of questions and spoken with a lot of industry veterans on both side of the contract in order to gain valued insights into the potential pitfalls facing both.

A fairytale ending can certainly happen for an artist in the music business, but it usually comes in the form of having a wise and learned advocate who can point out the dangers that lie ahead in hopes of helping them navigate the landscape -- call it a good entertainment lawyer or a collective set of advice from those who have been there, done that. Either way, having a set of priorities planned before finalizing negotiations is the real formula for a happy ending.