From The Side of the Road… an introduction to bluegrass recording contracts
Registering contracts can be problematic for all parties involved, especially now that people have stopped, you know, actually paying for music.
Recording artists have long complained that contract rules inevitably favor the record companies over them, and to some extent, that’s true. This is as true, if not more so, in the field of publishing. Artists (and by the way, I’m using the industry term here, not necessarily implying that all recorded and published music is “art”) in most cases don’t have much power negotiation, especially the first time they sign a recording contract.
Big labels are notorious for getting new artists to give up all their singles royalties for album royalties, before artists realize the deal is set up so they never get those Royalties.
Here’s how most independent recording deals work: A record label signs an artist to some sort of multi-release deal. This means that the artist is then obligated to produce a certain number of recordings for the label, usually within a specific time frame. This tends to be one-sided, however, as the label is free to “drop” said artists before the terms end if it feels the contract has outlived its usefulness (read: artist is dead weight or just too boring). For this reason, labels would like to sign artists for as many releases as possible, while artists would like to be forced to do as few releases as possible.
I remember hearing someone in the 1980s bragging on stage that they had signed “a 12-record deal with RCA”, and I was like, “You talk about a 12-record deal like that, this is a good thing”. This is not the case unless the first one is a resounding success, and even then you would be better off with a shorter term deal because then you could negotiate something better the second time around.
But I digress: an artist signs a contract obliging them to X number of releases, the label often pays the recording, production and promotion costs (although this is not always the norm nowadays) , the album is released and then the artist begins the process of paying off that debt to the label, one sale at a time.
This is the part that most people don’t understand, including the artists who sign these deals: when CDs are sold (why are you laughing?), whether by mail order, at a roadhouse or elsewhere, the artist earns zero dollars on that sale, but a portion of that sale (often less than a dollar) goes towards paying the label’s initial fee, until some magical moment, usually after an arc- rainbow has ended right over the artist’s head, that debt has been cleared, and the artist will begin to earn royalties, also often at the rate of a dollar or less per sale.
Can you understand now why buying in person from the artist is so important to him? It’s because it’s the only way for the artist to make money from the release. Your Amazon purchase of your favorite artist’s latest CD is appreciated and all, but it actually makes the artist less money than streaming – most likely zero – unless that release is released on the artist’s own label. the artist.
Labels also love selling in person, because it means the artist will come back and buy more stuff, and these days it’s pretty much the only reliable way to move hard copies of the release. This is one of the reasons why an artist’s touring schedule is of interest to labels.
Although it varies from contract to contract, streaming and digital royalties are handled the same way.
If the artist fails to deliver a follow-up release within the agreed timeframe, the label is free to terminate the contract. If the label wants to keep the artist, however, some grace is usually given (especially during a global pandemic).
One area that has changed a lot is the size of the recording budgets provided by the record company. The reason for the lower initial budget is pretty obvious: indie labels (pretty much the only guy we deal with in bluegrass music) can no longer count on the revenue stream from any given release, so unless unless they have a legit hit artist on their hands, budgets of $10,000 to $20,000 are a thing of the past (you may need to cancel this plan for the full string section on your cover of cry cry honey).
Some labels still have the money, but many don’t, and some do, but have opted for in-house recordings to control studio costs. In these cases, some labels even ask the artist to pay the engineer (I would avoid the label which also charges the artist for the coffee from the label’s kitchen). It’s a tough business out there right now.
Many naturally wonder why aren’t artists making the money themselves, especially with the crowdfunding options available, and releasing their own music? It’s a valid question, and many do, ultimately making a lot more money from sales while having 100% artistic control of the process.
Many have chosen this option, but record labels offer some pretty valuable assets: they have the ability to professionally promote what you’ve recorded. That’s huge, especially if you don’t have the time to deal with it personally, or for example in my own case, you hate that aspect of the business. That’s what labels are good at, or if they’re not, it’s important to find one that is. There’s a lot to be done to release a professional version that people might pay attention to, stream, or who knows? even buy. Additionally, dismal hard copy sales have also affected self-released albums, making it harder for the artist to recoup that money, even at a higher rate per sale.
Also, especially for new artists, record companies lend credibility to your recording. You are associated with other (hopefully) successful artists on the label, and you benefit from the reputation of the label itself, which is very beneficial in a very crowded market with a lot of competition for sales, streaming and airplay radio.
When it comes to debt repayment and royalties, many artists don’t even care, especially in the current climate, considering they won’t make up that deficit and are just happy with the label’s support.
The original plan for this column was to present two hypothetical record deals, one ideal for the label, the other ideal from an artist’s point of view, but I see that I have exhausted the space that m was allotted (two square feet).
By the way, I love the label I’m with (Mountain Home) for people, and that’s really what matters to both the artist and the label. Any rumors that I signed with them for their excellent coffee machine (which they don’t instruct us to use) is wrong.