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Record Label Contracts: Types You Should Know

build your skills Nov 16, 2022

Record label contracts - everything you need to know!

Record labels can change the entire game of a musician in the music industry, either for good or bad. And, contracts aren’t exactly the fun part, for any and every musician, because, yes, it involves loads of reading, terms, and conditions that you’d probably end up skipping but you definitely shouldn’t. It is essential to know what kind of contracts occur between musicians and record labels to know which one may work best for you and your music career. We have shortlisted 4 such contracts here. Take a look! 



Exclusive Recording Contract


ERA - This contract means any music written by the artist before and during the term of the agreement, the record label company will get the exclusive right to record it. Here, the ‘artist’ means any recording and performing musician, and the exclusivity applies to that artist and the songs he or she would write. The exclusivity applies to the artist for the duration of the agreement and the music regarding copyright, unless, of course, the artist and the record label have different clauses upon which they have agreed. This is a great feature unless you are a musician who likes getting numerous calls for recording your tracks. The exclusivity removes the hassle of shifting from one recording to another under different companies since you will record all your music only under that signed label. 



Plus, an exclusive contract is a win-win situation for both the artist and the label, if your music is doing good, the label would increase your share (through compensation and royalties - read your documents), and having a famous artist’s recording exclusive to the company will mean a long-term reputation and better marketing. Once your music starts gaining more momentum, the recording contract that includes marketing and promotion of your music, will be done much better.


360 Deal Recording Contract


As the name suggests, a 360 Deal means that the record label will cover all aspects of you, the artist. That is, the company will have rights to you as a singer, songwriter, performer, composer, lyricist, arranger, and director of music in any film, television show, web series, or theatre. Speaking of shows, read our blog article on how to Get Your Music In TV Shows and Movies: Sync Licensing 101

In this contract, the record label will sponsor music merchandise of the artist, and endorsement rights in case another third party would like to use the artist’s name, interests, and those related to intellectual property as well. Furthermore, 360-type contracts have emerged as a result of recording labels' responses to 3 key patterns in the music scene in recent years. It revolves around the fact that profitability from record sales has been gradually falling, bookings for music concerts and lives shows have risen, as has fan consumption of merchandise, and finally, the reinforcement of gathering communities' and media companies' abilities, which converts into revenue from live concert and coordination getting increasingly important. Speaking of concerts, read our article on Artist’s Guide to Gigs and Tours: How to be a Touring Musician. 



Let us tell you why this is amazing for a new-age musician. A 360 deal contract means that the record label will act as your manager. You don’t need to hire one. A deal like this will also give you a much wider exposure that would ultimately lead you to greater opportunities. This also means that you will have easier access to working professionals in the industry. The 360 package typically applies to the majority of your costs, such as employing booking agents, producing your merch, and even scheduling an upcoming tour on your behalf. Sounds perfect?

However, if you are an artist who would much rather prefer to do your promotions and other marketing work independently, check out the Full-Time Musician Game Plan


Now, let’s see the downsides. A 360 agreement demands artists to pay a proportion of their income. The label is entitled to royalty checks from advertising revenue, merch, licensing, selection, and broadcasting. A few agreements even allow the label to purchase your copyrights. Want to know more about copyrights? Read our blog article on Copyrighting Your Song 101. 

There are chances that you could lose your legal rights to your music. But again, this rarely does happen. A contract like this will consume some sort of creative autonomy you would have as an independent artist. In other words, the company may or may not control how your music would sound and have the right to remove any part of the song as they see fit. Once you sign it, you cannot get out of it unless you pay the company the full amount of all the investments they have done in you and your music so far. Doesn’t seem that perfect, does it?


Music Distribution Contract


You need to have a new distribution method to communicate with all of your potential viewers. It assists you in expanding your brand's channel by approaching as many people as possible. With this contract, the producer of master recordings authorizes an exclusive right to distribute ‘records’ in whatsoever format (compact discs, vinyl record records, audio cassettes, digital recording tapes, DVD, etc.) for a specified amount of time (the Term) and in specific countries (The Territory).



Again, please read your terms and conditions here, because that’s where you would know the kind of rights the record label would be taking. Some label companies ask for only digital or online distribution, while some would be entitled to physical copies such as CDs and DVDs. Some deals will ask you to sign a clause where the company would promise to use all its best resources to circulate your music in the industry while asking for almost 20 to 30% of royalties. With the duration already specified, you could end up not incurring much income for yourself because the record company will be sucking the most out of it in the name of royalties. Hence, be sure to do your research on the record label offering you any distribution deal to make sure you are not taken advantage of. 


Composition and Recording Service Contract


A Music Composition and Recording Service Contract is an understanding in which a company hires an artist to compose, arrange, record, and make music for use in the company's production (television, motion pictures, video games, and so on). The artist is paid in compensation for the services offered, and all copyrights and claims are relocated to the company. The performer, on the other hand, maintains his/her writer's portion of live performances and gigs royalty checks obtained effectively from his/her performance right society. Speaking of performance royalties, read our blog article on Music Royalties 101: How Performance Royalties Work. 



The employer is given permission to use the artist's name, interests, voice, autobiography, and relevant information in connection with the company's production, and the artist guarantees that the music supplied to the company does not interfere with the copyright of any third parties. This agreement is beneficial for companies seeking to commission an artist’s audio tapes and compositions to be used in television, movies, and other media. 

Before signing any deal, make sure that you read all your documents and completely understand what the company is willing to do for you and what it expects you to do in return once you sign it. 


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