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Record Deals
| Term | Definition |
|---|---|
| Record Label | A company that makes and sells records. Usually sign artists exclusively for a period of time, during which the artist cannot record or release albums for any other label. Typically "work for hire" where label owns masters. |
| How do labels make a profit? | Maintaining a large percentage of record royalties. More deals have expanded label revenue to include royalties from areas such as march, endorsements, etc. |
| Artist advance make-up | Recording costs, producer's advance, artist's advance (if any), promo. It is not uncommon for a new pop act to have a recoupable total of between $750,000 and $1MM to pay back. |
| Suggested Retail List Price (SRLP) | The retail price to customers. |
| Published Price to Dealers (PPD) | Wholesale |
| US Basic Rate | Sold at full price, through normal retail channels, and by label's normal distribution channels. |
| Promo Copies | The copies for the radio, reviewers, band members, etc. |
| How do labels function as venture capitalists | Sink lots of money and services into a band, hoping that they will get a return on their investment (that is the band will become financially successful). Labels take all the financial risk in signing. |
| Investing in a band typically takes how much money? | $1 million |
| How many albums break even?` | 1 in 5 |
| Recording Industry Association of America (RIAA) | Trade organization supporting the major labels. |
| How do labels bankroll artists? | Primary source of income is from record sales, their strategy is to invest in many "projects" and hope that one breakthrough artist will pay for others and allow the business to continue to grow. |
| Technically and commercially satisfactory | Warranty that the album is recorded will and the songs are "good" |
| Record k term is measured in? | Albums not time (temporal duration of k) |
| Options | Songs/albums the label has no obligation to pick up but the artist can be forced into recording (exercisable by the label not artist). |
| Advance | A prepayment of royalties |
| Territory | Geographic location that the k is valid in. |
| Exclusivity | Can only record for this label |
| Firm/guarantee | Albums that must be recorded (exercisable by the artist and label). Only will guarantee the recording of an album. |
| Escalation clause | Get paid more for successful albums. |
| Rights in recordings | Label gets all rights to masters |
| Royalties | Usually between 10 and 15% SRLP, all-in |
| Cross collateralization | Lumping all recoupable funds on all albums together into one recoupable account so artist does not get paid until all albums are recouped (even if one is recouped, still does not get paid). |
| Free goods | Buy 9 get 1 free. Artist not paid on free goods |
| All-in | Artist's royalty rate includes producer's royalty rate |
| Packaging deduction (25% CD, 20% other) | Artist is responsible for packaging costs |
| Accounting | Semi-annual |
| Re-recording restrictions | Cannot re-record for 5 years, even if song was never released |
| Pay or Play | Label "buys out" artist's firm records instead of recording and releasing them. Cost to label is union wage |
| Reserves agains return | Label can hold a "reasonable" amount of the artist's royalty as a reserve against the return to the company for the records that stores don't sell. Because record stores have "full return privileges" to stock the shelves. Withheld for 2 years. |
| Controlled composition clause | Label will want to pay you reduced mechanical royalties to use your song on the record. Will limit in 3 ways: |
| Major label departments | Label CEO, Business & legal affairs, accounting, A&R, marketing, sales & diet., international, publishing, product management, art & production, radio/video promotion, publicity, ads, and special products |
| CEO | Oversees all aspects of label |
| Busi & legal affairs | Oversee all busi and legal aspects of the label |
| Accounting | Oversees company's financial records |
| A&R | Finds and develops new talent. Liaison. |
| Marketing | Draws attention to record |
| Product management | Coordinates between all departments |
| Special products | Catalog materials, licensing existing masters |
| Art & Production | Album artwork, posters |
| Radio/video promo | Airplay |
| Publicity | Outreach, live appearances, social media |
| Advertising | In-store displays |
| Sales & dist. | Make sure a record is in stores to purchase |
| International | All label functions abroad |
| Publishing | Owned in whole/part by the label |
| Labels of the future | Band-driven, primary source of revenue is streaming, focus on brand not individual record. |
| Majors | UMG, Sony, WMG. Huge clout, network, distribution, $$$, can push an album to the top of the charts, and control 80-85% of the music distributed in the US |
| Mini Majors/Major subsidiaries | Companies owned by major labels |
| Indie Labels | Not owned or distributed by a major label. Artist has more power to choose/creative control. Still possible to achieve major success (sometimes takes longer). Always on the frontline of innovation/new genres. |
| Recording fund | Recording budget and advance in one. If under-budget on recording, larger advance |
| Foreign sales | Canada - 85%, major territory - 75%, ROW - 50-65% |
| Consolidation of the music industry | Concept that over time, the industry is becoming controlled by fewer companies and begins to resemble a monopoly/oligopoly. This occurs because of company mergers and buyouts. |
Created by:
Matti
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