Indie Record Deals

A few things every artist needs to consider in negotiating a record deal

(In other words - Why you should hire a lawyer)

1. What Type of Deal is it?

a. Exclusive Recording Agreement - artist records only for label for a specified
number of albums or predetermined period of time
b. License Agreement – artist licenses an album (or multiple albums) to the label for
a specified period of time
c. NOTE: Recently, there have been more and more license deals in which the artist
pays all recording costs, and the label licenses the album from the artist.

2. What is the Term? How long is the deal?

a. Term based on a specified number of firm albums and option albums
b. Term based on a period of years
c. Term based on a specified number of masters
d. NOTE: This is one of the more complicated issues. You need to know when the
deal ends, and sometimes that is not clear.

3. Who owns the copyright?

a. Work for Hire – Label owns the Copyright
b. Assignment of Copyright – Label acquires ownership of the Copyright
c. License Agreement – Artist may own the Copyright but license exclusive rights to
the label for a period of time
d. NOTE: Sometimes the artist pays recording costs but the label claims ownership.
This should be carefully considered in your negotiations.

4. Who pays mechanical royalties? Mechanical royalties are the royalties paid to
publishers/songwriters for the right to record their songs. Currently 9.1 cents per
album/digital download
a. Typically the label will pay mechanicals
b. It is becoming common for the label to pay mechanicals, but to reduce artist
royalties by the amount of mechanical royalties paid to third parties.
c. Watch for a cap on mechanical royalties, i.e. 10 songs at 75% of the statutory rate.
d. It is also becoming common for the label to ask the artist to pay third party
mechanicals for any albums the artist purchases for resale.
e. It is common for labels to not pay mechanicals for controlled compositions (songs
that are written, owned or controlled by the artist). In other words, if you are artist
and songwriter, you won’t be paid mechanical royalties.
f. Labels often refuse to pay royalties for public domain arrangements.

{01129642.1 }
Stephanie R. Taylor | Attorney
Bone McAllester Norton PLLC
511 Union Street / Suite 1600 / Nashville, TN 37219
tel (615) 238-6309 / fax (615) 687-6995
staylor@bonelaw.com / www.bonelaw.com

© 2014 Stephanie R. Taylor

 5. Can the artist purchase CDs for resale at shows?
a. What is the purchase price?
b. Is there a minimum order amount?
c. Must the artist pay shipping?
d. If you want to be able to manufacture vinyl, will the label do that or can you get
the right to do that?

6. What is the label providing in exchange for the rights it is getting, and do these
benefits outweigh the detriments of the deal?
a. Distribution – is physical distribution important to your fans?
b. Marketing – what is the focus of this marketing and does it help advance your
career?
c. Radio promotion – in some genres, you can effectively do this yourself because
you have direct access to program directors.
d. Recording budget – these are getting smaller and nonexistent in many cases
e. Advances – these are becoming less common in indie genres
f. Prestige – often artist’s just want to be able to say they signed with a label.
g. Synch placement – placement in film and TV can come from label’s pitching their
masters. Some indies are actively pursuing such opportunities.

7. How is the artist paid?

a. Royalties – look at how royalties are calculated (wholesale price v. retail list
price) and what is taken out of that royalty before it is paid to the artist.
b. Net Proceeds – a percentage of profits after the label has recouped costs (be aware
of costs that are charged in this calculation, these should be limited to actual costs,
and not general overhead of the company or company salaries)
c. In relation to this, what is recoupable and what is not recoupable?
d. How is artist paid for streaming and other exploitations other than physical sales
and digital downloads?
e. How is the producer paid?

8. What revenue streams is the label taking a piece of as part of the deal? What is the
label providing in exchange for taking a piece of those revenue streams?
a. Touring revenues
b. Publishing (ownership and/or revenues)
c. SoundExchange Royalties (depending on the structure of the deal, the Artist may
be entitled to a piece of the Label’s share of SoundExchange in addition to the
Artist’s share)
d. Merchandise (ownership and/or revenues)
e. Ancillary Entertainment Revenue
{01129642.1 }
Stephanie R. Taylor | Attorney
Bone McAllester Norton PLLC
511 Union Street / Suite 1600 / Nashville, TN 37219
tel (615) 238-6309 / fax (615) 687-6995
staylor@bonelaw.com / www.bonelaw.com

© 2014 Stephanie R. Taylor

 9. What happens if the label ceases to exist tomorrow? What if the label refuses to
manufacture product or deliver product so that the artist will have product to sell at
shows?
a. Try to make sure you can get your masters/copyright/artwork back if they stop
doing business.
b. Try to make sure you can manufacture product on your own if they refuse to do
so.
c. Try to make it clear how manufacturing and delivery will be handled if you are
touring overseas.

10. Do you need the label’s consent to stream live audio and video at festivals and
shows?

11. Does the label have exclusive rights in both audio and video productions?

12. How is your deal impacted if a member of your band quits/leaves/gets fired?

13. Can you still do sideman work?

14. Can you reserve rights for territories outside the U.S.?

15. Make sure you have an audit right and make royalty statements are delivered
timely and are accurately.

{01129642.1 }
Stephanie R. Taylor | Attorney
Bone McAllester Norton PLLC
511 Union Street / Suite 1600 / Nashville, TN 37219
tel (615) 238-6309 / fax (615) 687-6995
staylor@bonelaw.com / www.bonelaw.com

© 2014 Stephanie R. Taylor