Music Business/Law Tips - "Independent Deals" (Part 2)

Production Deals. In this type of deal, the artist signs on with a production company (usually headed by an established producer). These deals are normally structured like a regular recording agreement. In essence, the producer will record the act's music and then attempt to obtain a deal with a record label. If the production company is successful in procuring a deal, the royalty paid by the record company to the production company on records sold will be divided between the production company and the artist.

Pressing and Distribution Deals (P&D Deals). In this situation, the artist delivers a fully mixed master and finished artwork to the record label, which in turn manufactures and distributes the records. One advantage of this kind of deal is that the artist should be able to obtain a higher royalty on sales because the act has already paid for the costs of recording the product.

Since it seems that major labels prefer to see what the public responds to before making a large financial commitment, many artists are considering independent labels, distribution deals, production deals, and P&D deals in order to prove that they do appeal to a record buying audience. As a warning, some of the operations listed above can be suspect. Thus, an artist should make sure that any deal made is with a reputable entity/person.

Ben McLane Esq
benmclane.com

Music Business/Law Tips - "Independent Deals" (Part 1)

In today's rapidly changing music business, major labels are hesitant to sign new, unproven acts to their rosters. However, do not be disheartened; a major label deal is only one avenue to obtain mass exposure for a musical artist. This article will explain some alternatives to signing a recording contract with a major label.

Independent Labels: These labels tend to specialize in a particular style of music and obviously have smaller rosters. This can work to the artist's benefit because the act should receive more attention. Also, an independent will usually have some form of distribution in place, which is necessary to put records in stores. Many independents have become successful subsidiaries of major labels, which has provided them with major label distribution.

Distribution Deals: Here, the artist delivers to a record company an agreed amount of completed product (e.g., compact discs). Then, the label will distribute the product to stores. Sometimes, the label will also market and promote the product. Otherwise, this duty is left to the act. For its services, the label will collect a percentage of the selling price of the record. Digital distribution these days is normally part of any such deal.

[part 2 next week]

Ben McLane Esq
benmclane.com

Music Business/Law Tips - "How Distributors Pay" (Part 2)

The artist will only be paid the remaining 75% of the monies for records actually sold and paid for in/at the store. Although it is a bit complicated, a distributor normally has an arrangement with a store whereby the store can "return" any record it orders for a refund or credit from the distributor if it cannot sell the record over a certain period of time. Since there is no way for a distributor to know how many records sold to a store will ultimately be sold to customers (and hence not returned), the distributor will hold back a "reserve" of the sales monies it was paid by the store for a period of time to see if there are returns (which are common). This is how a distributor protects itself so it does not overpay the artist. To combat this, the artist needs to provide in the distribution agreement that there is a return limit. (The average is 25% for an album and 50% for a single.) Also, the artist needs to provide that the reserve can only be held back for a limited time; the shorter, the better. Note that there are/should be no reserves hold back against digital sales.

Finally, once a distributor is paid by the store for the record, the distributor has a duty (after its fee is deducted and reserves are accounted for) to pay the artist his or her share. Generally, the distributor will pay the artist anywhere from between 30 to 90 days after it is paid by the store. Obviously, the sooner the better.

A distributor is a necessary cog in the record selling wheel if the goal is to maximize record sales. Therefore, an artist should seek out a reputable distributor for its product.

Ben McLane Esq
benmclane.com

Music Business/Law Tips - "How Distributors Pay" (Part 1)

For an artist to increase his or her chances of selling records, a record distributor should be utilized. This article will attempt to simplify how the artist gets paid by the distributor.

The artist/distributor relationship at its most basic is as follows: (1) the artist records a record; (2) once the record is manufactured, a distributor will sell/ship the record to a store (brick and mortar or e-commerce); (3) the store will, in turn, sell the record to a record buyer. Hence, the distributor's main job is to sell. Ancillary to the function of selling, the distributor will also warehouse the record (if CD), ship the record, collect the money from the store, and pay the artist. Occasionally, a distributor will also promote and advertise an artist, but that is the exception.

Once the distributor receives an order from a store for a physical record, it will sell the record to the store at a wholesale price (far less than the retail price), but for e-commerce the record is basically in the "cloud" waiting to be downloaded/sold.

From the wholesale price it is paid by the store, the distributor will then deduct its fee, which is generally about 25% of the wholesale price.

[part 2 next week]

Ben McLane Esq
benmclane.com