The ups and downs of a major-label record deal

There are many differences between working with the big names and working with more independent companies. Here is a list of pros and cons of working with major record label.

A guest post by  Tony van Veen of DiscMakersBlog.

Getting signed to a major label is a dream come true, right? Well, there are definite advantages, but your chances of career success are somewhere way south of guaranteed.

Welcome to part three of our series exploring the pros and cons of being signed to a label versus remaining independent. If you missed the previous post in this series, you may want to start there. Today, we explore the dream scenario for so many artists: getting signed to a major-label record deal.

As artists, we’ve all been there, right? Fantasizing about getting that big cash advance and recording our next album on the label’s dime at a fancy studio in LA or New York with well-known collaborators. I mean, why not? The label’s paying, right? Okay. So now, let’s wake up from that daydream and explore some of the realities — the pros and the cons — of today’s major-label record deal.

The pros of a major-label record deal

The advance

One of the first things that every artist thinks about is that big label advance and, indeed, many major-label contracts include an advance to help you cover the cost of up-front expenses, including recording.

This frees you up to focus on your music, which is awesome, but it is important to realize that this advance is not a generous gift from the label, it’s money the label would have paid you later in royalties that is being fronted to you, which is why it’s called an advance. So in essence, you are giving yourself that advance because it will come out of your future royalties.

Support team

One of the nice things about being signed to a label is that there will be a full support team to help you with the business side of your music career, which means less admin work for you. The label also has lots of creative resources to help you make better recordings. They have access to high-quality studios, top-notch producers, and a stable of songwriters to help you take your compositions to the next level. There are also A&R reps to coach you and graphic designers to make your album cover, posters, and merch look pro.

Promotional resources

Then, there are the promo resources. Every label has a team to manage your social media and your radio play and your marketing and PR. These resources are a huge deal, and they’re essential to helping an artist break out. Major labels also have dedicated distribution resources who can get your product into stores and get your music onto the right playlists.

Financial resources

One of the biggest advantages of being on a major label is financial. They have the budget to spend just about anything they want on recording or promotion if they think they’ll get a positive return out of it. A major label also has clout and connections to make things happen — from radio play to concert slots and magazine profiles — which is a big deal.

And labels are also able to offer you tour support, from placing you on a bill with established artists to marketing and transportation.

Prestige

Being signed to a major label brings a level of prestige to you as an artist. It validates your musical efforts, your talent, and your hard work by saying, essentially, that out of the millions of artists active worldwide, you are good enough to have passed the test to be one of just a few hundred to have reached the pinnacle of being signed. That’s a nice boost to your ego.

As you can see, there are many tangible advantages to being signed to a major-label contract. But there are also a number of cons to consider.

The cons of a major-label record deal

Financial ramifications

Let’s start by discussing the financial ramifications of being on a major label. Even though you are the creative driver, you will receive a relatively low royalty rate for your efforts. You already know that, as an independent artist, you make 100 percent of all the revenue you earn.

All your Spotify royalties come directly to you and so do your publishing royalties. When you sell a CD for $10 at a concert, you keep the $10 and make a $9 profit. When you’re signed to a major label, as much as as 90 percent of your royalties go to the record label, unless (maybe) you’re a superstar with some real negotiating clout.

When you hear a major legacy artist like Peter Frampton complain that, with tens of millions of streams, they only made a few hundred dollars in royalties, that is not because the streaming platforms pay so little, it’s because the contract Frampton signed with the label pays just a small part of the total royalties the label receives. And that’s likely to happen to you, too.

Then, when you go on tour and want to sell CDs, you have to buy them from the label at the wholesale price of around $7 a CD, rather than the Disc Makers cost of around $1 a CD.

Now, of course, the hope is that the label will drive so many more streams and sales that, even though you earn a fraction of what you’d earn per-transaction as an indie, you’re better off on the label because you’re selling that many more units. But, just do the math. At a royalty rate of around 10 percent, you would need to move 10 times the streams and physical product to make the same revenue as you did as an indie. Not to mention, your cost for recording and videos and the like will be higher than if you did an independent project.

Then, there’s the fact that the advance needs to be recouped. Essentially, you won’t be receiving royalties from streaming and sales and publishing until the advance you received is paid back to the label.

Loss of creative control

One thing I’ve heard from several signed artists is their frustration about the loss of creative control. When a label signs you, they sign you for what you can be in their eyes, not so much for what you are. As such, there’s a good chance they will try to steer your sound, your look, and your career direction into what they envision for you — not so much what you want for yourself. I’m sure you can imagine how frustrating that can get.

One artist told me that every time he submitted a new song for his album to his A&R rep at a major label, the rep kicked it back, saying “it’s not a hit, keep on writing.” This went on for so long, that his album was delayed by more than two years, during which time he was unable to release any music for his fans from his indie days.

That resulted in his fan base basically losing interest, so when his album finally came out, it flopped.

Loss of business control

In addition to giving up creative control, you can also experience a loss of business control. The major label contract restricts what you can and can’t do and, frequently, the label will want to control your social channels, your fan mailing list, your release calendar, and even some of your direct contact with your fans.

When you sign with a major, you often give up your intellectual property rights, or most of them, anyway. The label starts out by owning the sound recording rights to your albums and your singles, which drive most of your streaming and sales royalties. And just as importantly, the majors have all their own publishing divisions and they’ll want to own your publishing, too.

I know of a number of cases where in order for an artist to get a label contract, the artist has had to turn over the publishing and even the sound recording rights of some of their older indie albums to the label. As a songwriter, you will receive some publishing royalties, but the bulk of those revenue streams will go to the label.

Contract lock

When you sign a contract, you’ll be locked in. That’s the point of signing a contract, to hold both parties accountable. But these contracts are usually quite favorable to the label and you won’t be able to get out until you’ve delivered the required number of albums or/and you’re fully recouped, which can sometimes keep you locked in longer than the original term of the contract because you still owe the label.

These contracts give labels the power to essentially block your career because, if you still owe them albums, and they won’t release those albums, you’re dead in the water.

t’s a big pond

One of the biggest concerns for you when you’re a newly signed artist to a major is that you’ll be a small fish in a big pond. There are plenty of cautionary tales about the lack of attention that emerging artists receive at the majors because the bulk of their resources go towards pushing the blockbuster artists who are their cash cows.

Now, the major-label game has changed over the past decade or two in that today labels offer virtually no artist career development. Building an artist up into a major star over a decade or more just doesn’t happen anymore. As an emerging artist on a major, you are left to mostly fend for yourself while the label hopes to minimize their losses on you. That means most newly signed artists get a frustratingly small promo budget.

One artist I spoke to was so frustrated because the promo budget the major label had for his new album was smaller than what he had spent as an indie artist promoting his self-released album. And his royalty rate at the label was so low that he couldn’t afford to spend any of his own money to promote the new album.

Production cycles

Another frustrating part of being on a major label are the long production cycles. As an indie artist, when you’ve recorded your album, you can master it, design it, make CDs, get it on Spotify, and, voila! your album is out. The whole process takes weeks, maybe a month, from the time you’re done mixing.

Major label releases are notorious for taking many months, sometimes years, to finally get out into the market. I mentioned one frustrating part already — the label may not like the music and keep asking for more — and then there’s the production timeline. The time to get all the logistics set up, by itself, can take months.

Unfavorable contracts

One thing majors love to do with artists is grab every royalty they can even, if they didn’t contribute to those royalties. They have a benign-sounding name for this kind of financial overreach: the 360 deal. This money grab involves not just the royalties from your recordings and publishing, but extends to your concert and merch revenues, and any other revenues coming to you.

And then, there is the unfavorable contract language. When you negotiate your first label contract, you usually have very little leverage to negotiate. Your ability to have a balanced contract will frequently depend on the battle of wits between your lawyer versus their lawyers. And their lawyers do this for a living, every day, which is why you definitely want the most experienced music industry lawyer you can afford by your side.

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There certainly are significant pluses to being signed to a major label: the professionalism, the expertise, and the financial resources can propel your career to a whole new level. That said, financially, the deck is stacked against you. You’ve undoubtedly heard that nine out of ten major albums lose money. Statistically, your album is likely to be one of those nine.

When your album loses money, you don’t recoup your advance, you get record more label oversight on your next album, and the cycle just continues. So, should a label come calling on you, it’s definitely buyer beware. Actually, in this case, since you’re the seller, it’s seller beware.

The major label game is binary. Either you fail or you make it big. It’s just that there are nine failures for every success. If you’re willing to play those 10-percent odds, just make sure you have the best lawyer that money can buy on your side.