Record deal

A recording agreement trades money and infrastructure for rights. The label funds recording, marketing and distribution; in return it takes ownership of the masters, or exclusive control of them for a period, and pays the artist a royalty out of what they earn. Almost everything else in the contract is a variation on how much, for how long, and for how many records.

The terms that decide the economics are consistent across deals even though the numbers are not. The advance is money paid up front against future royalties and recovered through recoupment out of the artist's share. The royalty rate sets that share, usually as a percentage of net receipts, and it is often stepped so that it escalates once sales or streams pass agreed thresholds. The term is normally structured as an initial period plus a series of options, each exercisable by the label alone. Delivery defines what the artist must hand over — and what technically satisfies delivery is what starts the clock on the next option. Territory and the rights granted decide where and to what the deal applies.

Rates and advances vary enormously with leverage, and any figure quoted as typical should be treated as a starting point rather than a norm. The more useful comparison is structural. A traditional deal funds heavily and owns the masters. A distribution deal funds lightly or not at all, leaves ownership with the artist, and pays a far larger share. A profit-share or joint venture sits between the two and splits net income after costs, which makes the definition of costs the negotiation. A so-called 360 deal extends the label's participation beyond recordings into touring, merchandise or publishing.

Two clauses reach further than they look: cross-collateralisation, which lets one unrecouped project be recovered from another, and the controlled composition clause, which reduces the mechanical royalty payable on songs the artist wrote.