Insights #009: Record Label Partnerships & Deals…. Are they Sustainable?

In the intricate landscape of the music industry, a significant transformation occurs when an artist collaborates with a major record label and subsequently extends their influence by signing another artist under their imprint label. A little-known fact is that, in most cases, the major label gains ownership of these artists as assets. To navigate this terrain judiciously, it becomes imperative to establish a Buy/Sell Agreement, leveraging the accrued leverage from building an extensive catalog roster. Regrettably, imprint labels initiated by renowned and accomplished artists within major labels often lack such agreements. Consequently, the major labels can exhaust the label's value, resulting in the termination of the imprint label, while they retain the artists and compel them to recommence their journey sans the advantage of a Buy/Sell provision. These are pivotal terms and strategies that the industry elite safeguards to curtail the equitable distribution of wealth among the innovative minds contributing to the thriving catalog market of today.

In an illustrative scenario of a $1 million signing deal, after due deductions for taxes and commissions to essential team members such as managers and lawyers, a net sum of approximately $350,000 remains at the artist's disposal, given an ethically sound agreement. Notably, many artists relinquish almost complete ownership of their entire present and prospective catalog in exchange for a loan, which is subject to reimbursement. Furthermore, a word of caution is warranted for artists deliberating over record deals, as the "Option Period" supersedes the primary stipulations in significance. This is particularly pertinent for artists poised on the brink of superstardom, wherein the label's exercise of irrevocable options can potentially tether them to the label for the duration of their career. The discretion of the label can dictate the artist's continuance with the label until the culmination of the initial term, exhaustion of all option periods, or at the label's discretion.

In today's times, artists need to be knowledgable about what's happening in their music business, regardless of their affiliation with a major label. A record label deal, and/or partnership is just the beginning of the real work. Artists need to ask more questions, call the shots, and be more informed about the real business behind the music. When you first sign a record deal, you can deplete your budget without knowing about it.

At the end of the day, an artist associated with a label shoulders the ultimate responsibility for their own success. An ideal situation is one where the artist retains control over every facet, encompassing collaborators, creative direction, aesthetic choices, and operational protocols. A discerning artist should exercise restraint even in instances where the label extends invitations for lavish dining experiences, little do artists know that the label is invoicing money spent on these dinners straight out of your budget; diminishing the budget you think you have to market and produce your art. It remains the artist's responsibility to reimburse the label for the advance provided and fulfill the contractual commitments as an integral facet of their agreement.

What do you think, is this a sustainable model for musicians trying to make a living off of their work?