With the rules of the music industry constantly evolving up- and- coming artists have a number of options in recording partnerships that they can engage in. Whether you’re an artist looking for a long term relationship or just a short contract, the music industry has become flexible. This shift is largely credited to decline in record sales and expansion in technology. Choosing between becoming an independent artist or a major label artist is something that should be thought about in the premature stages of career development. This determines what business moves should be made by the artist and his or her management team.
So essentially what is the difference between the two? Who benefits from each? Through out this article I’ll be sharing the difference between each deal, the pros and cons of each deal and sharing successful and iconic deals made in the hip hop industry.
What is a Major Label Record Deal?
Many people believe there are many major labels but, the truth is that there are only three major labels: Sony-BMG, Universal Music Group, and Warner Music Group. These labels serve as parent companies to subsidiary labels. For example: Sean Puffy Combs’ Bad Boy record company which is connected with Sony Music division Epic.
Many years ago major labels offered artist standard contract agreement, which entitling the label to a percentage of artist royalties and publishing of records created under that particular project. This was a big deal for an artist to sign with a major cooperation that offered security of financial support in a project and artist development. Funds from the label are used to manufacture, market, promote, and distribute the product. The artists now have benefits of gaining exposure with major media outlets, endorsements, and other networking opportunities quicker.
An example of this is 90s record company Uptown Records, a subsidiary label of Universal .Uptown Records landed a $50 million multimedia contract with MCA. Label’s artists were given heavy music placements in television and film. Artist such as Heavy D, Monifah, and K-Ci and JoJo were played on Fox television network. This formula for artist success is still achievable by artists through this agreement today. Hustle Gang president Doug Peterson says, “Signing to a major is one guaranteed way to have a national and even international brand. Record labels sign so many partnerships with other large companies and in different industries everyday which is creating opportunities for its artist to reach audiences outside of their genre of music.”
However, with such large investments artists are often challenged to give up creative control to meet metrics in album sales. As Dean Rudd stated in What to Look For In An Independent Record Label, “Majors have a lot of money to work with and a distribution system that is second to none, but the nature of their business requires them often to follow trends, and market whatever will sell the most units at the time.” This is a major trade-off that every artist will have to consider in their careers.
What is an Independent Record Deal?
Independent record companies can be traced to the early hip-hop label Sugar Hill Records. The label were responsible for the birthed of hip hop pioneers Sugar Hill Gang. But it wasn’t until years later when independent labels began to forcefully burst onto the hip hop scene with labels such as No Limit, Death Row Records, Rap-A-Lot and the early Cash Money records.
Unlike major labels, independent labels are self-funded and have no corporate financial backing. Although independent labels may participate in contracts with major labels, they still own all the rights to their music and a larger percentage in royalties.
One of the more common pros about independent labels is the artist’s ability to maintain a creative control. Independent labels have also created a reputation of being very loyal to their artists. Because of this artist have rejected major label contracts to pursue an independent deal.
“When you first become an artist you may be so hungry that you want to sign any deal that is paying well,” said southern rapper Clay James, ” but once you become more engulfed in your craft you’ll realize that its more important to keep your voice as an artist than gaining the financial support of a label who wants to control you.”
Although indie labels lack the funding major labels offer, they still manage to push artists’ project to reach large demographics.
Because there is a smaller business structure and hierarchy, the artist is often working closely with the person who powers the distribution of their content allowing decisions to be made quicker. As stated in Kevin McManus’ IIE Solutions Performance Improvement issue,” Resources are better utilized in smaller companies because people have had to learn to be successful without the most up-to-date computers, the best analysis software…that larger companies can afford.”
Whether choosing to go independent or major there is a variation of agreements that the artist/producer can engage in. Every artist is looking for something different for their career. It is important to take strong consideration of the artist and brand needs before signing any contract offered by labels. Listed are a few common contracts offered to artist in the music industry.
Traditional Artist Contract: In traditional artist contracts record labels only receive money through music sales and distribution. Artists sign these contract usually for a number of projects rather than a period of time. During the rise of hip-hop this was the normal contract an artist received. Of course at the time labels were recuperating their investments and records off of album sales alone. These sort of contracts offered artists the opportunity to gain profit from other income streams such as tours and merchandise. Today’s music market rarely offers this agreement on a major level unless the artist is considered an A-lister. The rise of technologies and birth of music streaming changed how these contracts worked.
In a interview with Artist House Music, music entertainment lawyer Jay Cooper says, “Now that they [record labels] are seeing the record sales go down, so their way of making up for it instead of thinking through the business model and finding the way to protect their product they take away from their artist.” Finding a alternative way to secure investments labels formed a new way business was ran and created 360 deal contracts.
The 360 Contract: The American Bar Association defines a 360 deal as, “A contracts that allow the record label to receive a percentage of the earnings from all of an artist’s activities rather than just earnings from record sales.” Often times signing with a 360 deal comes with a larger advance and provides the artist with assurance of having a label that will provide support in development to non-music ventures. Some of hip-hop’s top artists engage in these deals such as J. Cole, Yung Thug, Migos and Fetty Wap.
However a largely successful 360 deal is Jay-Z’s and Live Nation’s $150 contract in 2008. This contract ultimately helped Jay Z build multi-million dollar entertainment management company, Roc Nation.
With 360 deals becoming more common in the music industry today they have created major controversies amongst the relationships artists have with record labels. In reflection of this labels have been known to not push artists who decline the 360- deal option. During the 2016 A3C Music Festival artist and producer Lupe Fiasco explains the burdens 360 deals has caused him and then label Atlantic Records.
Carnes, C.(2016). Lupe Fiasco discuss split with Atlantic Records over contract disupute during A3C 2016..
According to UCLA Entertainment Law Review, “Some experts envision a music industry, in the very near future, where the music produced is nothing more than a promotional total to draw fans to the artist’s brand instead of to his or her music.”
Distribution Contract: Distribution deals are agreements between artist and label; where the artist is responsible for the production of the product and the record company distributes the product.
There have been many independent labels to successfully sign distribution deals with major companies and/or their subsidiary companies. For example, Grammy nominated artist Wiz Khalifa recently signed a distribution deal with Atlantic/Warner for his independent label Taylor Gang . Artists on the Taylor Gang roster include Curren$y, Ty Dolla $ign and Juicy J.
Streaming companies have become key players in the music industry which have expanded options for artists from not only physical distribution but also digital distribution. Music marketing guru Inday of Interscope says. “Signing a distribution deal with a large streaming company seems to be the only way artist can connect their target audience without giving away free music on Youtube or Soundcloud.”
Companies such as iTunes, Spotify, Amazon and Tidal are now commonly offering artist for single, album and E.P distribution deals. However, there has been much controversy with streaming deals because artists are not being compensated for their music properly.
Single Song Contract: With album sales and the new digital era, new exclusive single song deals were formed. Radio consumption and singles thru digital platforms such as Soundcloud, iTunes, and Google Play. This has become a popular distribution contract between artist and labels.
Instead of the record label focusing on a larger project such as an album they push one self-produced single. According to Billboard cover story The Return of the Single Deal, labels are saying, “Change was necessitated by tighter radio playlists and the fact that hit singles can now last up to half a year on the chart, drastically reducing the number of singles that can be released from an album.”
Single deals are also used as a marketing technique to test potential artist target demographic. This deal benefits the artist in ways such as having less risk as opposed to a traditional contract, and the pressures of having to recoup a full on album. Atlanta native rapper K- Camp is one of the most recent examples of a artist who career is birthed from a single recording contract. The independent rapper received his first taste of mainstream success when he signed a contract to release popular ” Cut Her Off ” ft 2 Chainz song under Interscope records.
We got a chance to catch up with K Camp and his management team during his annual community giveback entitled #KCampsGiving. K Camp’s manager and CEO of boutique management firm Schweinbeck LLC Diana Schweinbeck says, ” focusing on creating single to gain mass exposure and notary has always been apart of our teams marketing plan. Gaining the demand of the fans from one single distribution helps us gain leverage when negotiating a record deal for Camp.” Schweinbeck is also responsible for several other popular independent artists such as Sy Ari Da Kidd and Mario Jackson. Schweinbeck says, “when you have minimal funds yo have to be creative and figure out ways to generate buzz at a minimal cost. If you take care of the demand the labels will pay to produce the product.”
Production Contract: Unlike the role of producer in other industries the duties of a producer in the music industry is defined as the the person responsible for creating the projects unique and overall sound. In todays music industry many producers go into agreements with artist and even longer agreements with labels to produce singles, Ep’s and albums. Artist often sign these agreements with producers with the hopes of the producer serving as a middle man to a potential contract with the label . Labels engage in these contracts with producers and utilize the producer to help give the artist a defined marketable and trendy sound.
One of the more recent artist birthed from a production deal is Kanye West. Prior to becoming the musical genius and fashion icon that he is now. Mr. West spent years laying down beats and producing records for what are some of hip hop and R&B acts such as Ma$e, Jermaine Dupri, Nas and Foxy Brown. It wasn’t until he Jay- Z‘s Blueprint album that he signed a major label production deal. Kanye later signed as a artist to Jay-Z’s Roc-a-Fella records.
Because of this producer/label relationship, artist often sign exclusive production agreements with producers in hopes to get their music to radio or major label. A good example of a producer breaking artist is music icon Swizz Beatz. Beatz got his start in the music industry by producing records for independent label Ruff Ryder records. Due to this contract Swizz became responsible for breaking some of hip-hop legends such as Eve, The Lox and Dmx.
This revolving producer/artist and label relationship is still popular in today’s music industry. Detroit artist and producer G3 recently signed a production deal with music heavyweight Jermaine Dupri on SoSo Def record label. According to G3, “Signing the production deal is a deal every producer strive for. Although you may have direction from the label and artist; this is an opportunity for you to impact the industry with a brand new sound and that’s the beauty of these types of contracts.”
How Each Deal Impacts the Music Industry:
Major labels provide major artists with the ability to cross-market and influence other entertainment markets. As stated in Bethany Klein’s, ‘The New Radio’: Music Licensing as a Response to Industry Woe, “As radio has narrowed and illegal music distribution has increased, the placement of popular music in television commercials has become an appealing option for artists and record companies.”
This cross-marketing allows artists to transition and expand their brand into other entertainment roles such as fashion designers, movie producers/directors, and even the video game markets. This type of brand advancement will help the musical culture expand. Powerful cooperation’s and major record labels have been known for their role in choosing the artists nominated and winners of television music awards such as the Grammy‘s. This creates an unfair playing field among artists. Major label artists have the ability to touch larger demographics and create popular trends however the majority of decisions must be approved by the corporate label.
Although the music industry is largely controlled by major label artists there are some independent artists that are changing the rules of the music industry. Independent artists have known to push the limits and talk about controversial topics in their music more often than major artist. Chance the Rapper is a current example of this. As an independent artist he has spoken about social injustices as well as utilized his platform to create a Democratic political voter’s registration campaign without having the financial support of a major cooperation. Because he was independent decisions such as this became easy to make.
Both journeys have their different advantages and disadvantages, it is up to the needs of the artist that help best decide what journey to be taken. As a fellow creative peer I understand how tough this decision can be and how they make effect future careers moves. I suggest when crossing this road and your journey to consider these few things: the long term effects each agreement holds, who financially benefits from the contract and how much creative control can you keep.