Major Vs. Indie: What Really Happens When You Sign A Record Deal

This post was written by Jon Ostrow and originally appeared on the Bandzoogle Blog. 

As the recording industry continues to battle against the steady decline of physical album sales, and now steady decline in digital album sales, it can be difficult as an independent musician to determine the best path to take for long-term growth and success.

Ultimately this crossroads is met with three separate avenues:

1. DIY (Do It Yourself)

2. Independent Label

3. Major Label

There are pros and cons to each avenue, which should be weighed carefully against what type of musician / band you are and how you expect to see growth.

DIY Pros and Cons

Pros:

100% Creative Control: No label means you have complete control over the direction of your music. You also have complete control over your marketing, and the free will to say yes or no to any opportunities that come your way. Simply put, this is the most ideal scenario possible for an artist.

100% Rights Retention: Without a label, any revenue generated from things like album sales and sync licensing deals goes right into your pocket.

Build Your Own Team: While DIY means Do It Yourself, it doesn’t mean do it alone. You are your own boss, so you can surround yourself with the people who share in your vision and have the skills to help you to move your career forward.

Cons:

Limited Resources: No label means any money for things like recording, distribution, marketing, etc. all come from your pocket.

Limited Network: One of the biggest benefits to a label is the access to their existing network which can open significant doors and create opportunities for you and your music. Without a label, your network can be limited to those who you know directly.

Independent Record Label Pros and Cons

Pros:

A Team that Believes in Your Music: Indie music labels are smaller companies who are less likely to be pressured by a board of directors to sign a specific sound, or promote a specific look just for success on the charts.

Personal Relationships with Your Team: Independent record labels tend to have much smaller artist rosters, allowing you to get more face-time with your team to discuss things like strategy and execution.

Pro-Artist Contracts: Indie label contracts are known to be more artist-friendly, giving the artist more money for their work through either profit-sharing programs, or simply a larger percentage of revenue than given by the major labels.

Cons:

Funding: An issue for independent labels, being that they can range so greatly in size and success, is funds. A lack of funding means a smaller budget for recording, production of physical disks, packaging, distribution costs, tour support, merchandise, etc.

Size: Although a smaller size allows artists to form stronger relationships with an indie record label, it also means that the label itself has less influence and reach within the industry.

Major Label Pros and Cons

Pros:

Funding: Although budgets are not what they used to be, the majors still have far more money for things like marketing and production.

Networking and Connections: Long-standing reach and influence comes with a deep-seeded rolodex of contacts across all aspects of the industry.

Reputation and Influence: Obviously size can make a significant difference when dealing with the biggest names in music. Being signed to a major label has its benefits, in that larger media outlets and bigger opportunities may be more likely to take interest in you.

Cons:

Significant Turnover: Contrary to popular belief, major labels do sign many artists, but much of what is signed quickly gets turned over and dropped by the label.

Artist Unfriendly Deals: Being that major label record companies are a business, they likely do everything they can do profit as greatly as possibly from their investment in you, your music and your brand. Not only does this mean the possibilities of small royalties, but it means the artist does not get to keep the rights or even the creative control over their music.

What Type of Deal Should you Sign?

If you determine that a label, either an indie or a major, is the right path for you, there are several types of deals that you can sign. Here’s a breakdown of 4 of the most commonly seen:

1. Production Deals

Rather than signing to the label, with a Production Deal you would sign on to work with a specific producer who has an agreement to develop artists within a label. Think of this as an artist development deal. You gain the benefit of working one-on-one with the producer, but you also take a big % cut, as it’s possible with these deals for the producer to take up to 50% of the royalties.

2. Distribution Deals

This type of deal is simple. You are often expected to create and produce your album from start to finish, and then the label helps you to get the product into stores. This deal could include getting music videos, albums, and singles onto the label’s own major digital channels. Most often, this deal includes no advance (payment given up front, used for recording purposes, which is paid back by the artist through album sales), and could take up to 25% of the money generated.

3. Major Label ‘Standard’ Record Deal

Formerly the most common type of deal, this is what most musicians think of when getting ‘signed by a major’. In this deal, the label would be part of the artist development, recording, pressing, distribution, and marketing. And in most cases, the label would pay the artist an advance. Once the advance is paid off, artists commonly receive a royalty rate of up to 15% of revenue generated.

4. The 360 Deal

Seen by many as the future of label deals, this is a new(er) type of deal offered by labels. With a 360 deal, the label gets involved in all (or most) aspects of the artist development, including touring and brand development, in exchange for taking a % of all revenues generated across all channels, not just recorded music. The benefit here is that you have the label’s network and influence to help you generate further revenue opportunities. The downside is the label can dictate all aspects of your career and will take a cut of even more of the money you make.

So Where does the Money Go?

The purpose of signing with a label is of course to record and sell music. Here’s what you can expect as a breakdown of percentages from music sales:

CD - In the making of a CD, here are the key players and the percentage of sales that they get: Artist (6.6%) Producer (2.2%) Songwriters (4.5%) Distributor (22%) Manufacturing (5%) Retailer (30%) Record label (30%).

ITunes - Selling an album on iTunes has less key players and the percentages are split a bit differently, though the artist doesn’t see much more at the end of the day. Apple takes 30%, and the label collects the remaining 70%, of which they pay out about 12% of their end to the artist (about 8% of the total purchase price of the album).

Which Path Will You Take?

Now that you understand the different paths you can take as a musician, it’s time to weigh the pros and cons and decide which one makes the most sense for you. There is no right answer, it all just depends on where you feel you could use the help and how you can see yourself moving forward most comfortably and effectively in the future.

Jon Ostrow is the Director of Sales at Bandsintown, Founder of MicControl, lover of all things music, a raging Phish head, and a coffee addict.

Major Vs. Indie: What Really Happens When You Sign A Record Deal