What to look out for when signing tracks with record labels

Signing tracks with a music label can be an exciting step in a music producer’s career. It offers the opportunity to reach a wider audience and benefit from the record label’s expertise and resources. However, this step needs careful consideration. There are several key points you should pay attention to before signing a contract. In this article, I will cover the most important aspects to keep in mind to ensure that you protect your rights and interests as an artist.

Before sending your tracks to record labels, you should first ensure that the label aligns with your music and whether it will support your artistic vision. Only after confirming that the record label represents the vision and sound that fits you should you move on to the next steps. If you want a general overview of what music labels are and how their business model works, check out my previous article on labels in the modern music environment.

I’d also like to point out that with small independent record labels, contracts may not always be send out. In such instances, it is critical to discuss the following points ahead of time, even if only verbally, to ensure that you are on the same page. However, it is of course preferable to have these details documented for future reference.

The rights you transfer: Master rights vs. publishing rights

One of the fundamental aspects of a music label deal is determining which rights you are transferring. Ideally, you should only transfer master rights – the rights to the original recording of your track which is used for sales and streaming. Your publishing rights – meaning the rights to the lyrics and composition – should remain with you. These rights are valuable because they ensure that you can benefit from future revenues through PROs or music Publishing.

If the label also wants a share of your publishing rights (in the form of a publishing deal), you should be very careful and analyse what the benefits are for you. Therefore, it is crucial to carefully review the contract and ensure that you only transfer the rights that are absolutely necessary.

Review contract duration and renewal clauses

Another crucial point is the contract duration and the exclusivity it entails. It’s important to distinguish between two types of contract durations: the exploitation period and the exclusivity period binding you to the record label. In the electronic music realm, exclusive contracts and agreements that bind you to a specific music label for multiple releases are relatively rare. Labels typically sign finished projects, such as EPs, albums, or individual tracks. The electronic music scene operates differently from the pop world for example, where labels develop artists careers and work with them over several years. But then they usually also pay advances.

The duration of the exploitation period is a different matter. Ideally, from a label perspective the label wants to exploit your tracks for as long as possible, which is why labels may attempt to secure lifelong exploitation rights. However, since nowadays it often just takes a few years to determine if a release will be successful or not, shorter durations of around 10 years are also common. The shorter you can negotiate the exploitation period as an artist, the more freedom you will have to potentially re-release your tracks after the period expires, especially if you were dissatisfied with the label’s work and want to try with another.

Also, pay attention to the conditions for renewal. Many contracts automatically extend if neither party actively opposes it, which can result in your release being tied to a label longer than you originally intended. 

It’s also important to understand your options if you want to terminate the contract early. Some labels may require a minimum contract duration or impose high penalties if you wish to exit before the contract ends.

The split: Is it fair?

Another important aspect is the so-called split, which refers to the division of revenue between you and the label. A 50/50 split is common with smaller indie record labels, but other splits (often more favorable to the labels) are also possible. If the label offers a split that is worse than 50/50, you should review it carefully. In such cases, it’s crucial to check what additional benefits and services the label provides to justify this split. For larger, more established music labels, the split may be closer to 70/30, or even 80/20 with major pop labels. These music companies often justify their split by arguing that their brand and standing will bring more benefits to you as an artist. It’s up to you to decide individually, but of course, artists should always aim to keep their share as high as possible.

Services: How does the label operate?

A crucial factor to consider, which also justifies the label’s share, is the marketing efforts they can provide. It’s important to closely examine the strategies the record label employs to promote your music. A good music label will not only release your track but also actively work to make it known. In the digital age, electronic labels typically focus on things like playlist placements, DJ promotions, track premieres, social media campaigns, and special placements on DSPs.
It’s wise to ask specific questions about what the label has planned, as these efforts ultimately justify the label’s share. While you might not get a clear picture of the label’s work until after a release, you can review the label’s previous releases to see how they were marketed and how they performed.

Royalties: Payment thresholds and timelines

An often overlooked aspect of contract negotiations is the question of the payment thresholds and timelines for royalties. Some labels set a minimum payout threshold, meaning you will only receive payment once a certain amount has been reached. Additionally, it’s important to know how frequently the label makes payments – whether semi-annually, quarterly, or perhaps only once a year.

As an artist, it is crucial to maintain a clear overview of all your releases and regularly (e.g., every six months) check in with the label to inquire about the status if they do not proactively reach out. Additionally, it’s important to understand any costs that the label deducts before paying out royalties, such as mastering or marketing expenses. The specifics can vary depending on the deal, so ensure you are aware of all costs that need to be recouped before you receive your share.

Conclusion: Better safe than sorry

Signing with a record label can elevate your career as a music producer to the next level, but it’s crucial to carefully review the contract terms. Always keep in mind which rights you are transferring, how fair the split is, what marketing efforts will be made, and how the contract duration is structured. A well-considered contract can be the key to a successful and long-term collaboration, while a poorly thought-out contract can quickly become a burden. So, be cautious, take the time to understand everything, and don’t hesitate to ask questions or consult a music lawyer if necessary.