When does it make sense to sign with a label?
Label deals often get a bad rap due to unfair practices by major and some indie labels, but modern agreements can be more artist-friendly, offering funding and resources that help musicians grow beyond their current reach.
By Andrew Southworth
Hey friends!
There is a lot of anti-label sentiment out there online, and a lot of it is deserved. However there are a lot of good reasons why you might choose to work with a label in the future. So in this post i’m going go over why labels get a bad rap, why you might want to work with one, and what to look out for.
Why labels have a bad reputation
A lot of the negativity around labels stems from the major labels (the big 3) - Universal, Warner and Sony. They have a reputation for treating their artists unfairly, with bad splits, predatory contracts and recoup caveats that make no sense in the digital age.
For example, charging a band for broken physical units despite only selling on digital formats (this is a real thing).
Many high profile bands have had very public feuds with their labels, like 30 Seconds To Mars being sued by their label Virgin/EMI (subsidiary of Universal) for $30 Million for breach of contract. Despite selling two million albums the band were $1.4 million in debt to the label.
There have also been many predatory practices by indie labels. From 360 deals taking a cut of live revenue and merch, to flat out scams that take ownership of music without doing any actual work - there are a lot of sketchy people trying to make a buck in the music industry.
The modern deal
Fortunately many modern label deals have gotten much more artist friendly.
It’s very common to see a 50/50 net revenue split nowadays, meaning the artist and label split the profits 50/50 after the label recoups their investment. In some cases labels may do a licensing deal instead of a master ownership deal - meaning you get the rights back to your masters after a certain period of time. In some genres its even common to only sign individual songs.
But there are many that will argue it still doesn’t ever make sense to sign. They’ll say “why give away a percentage of your music to someone else to do work you could do yourself” - and it’s a valid question.
Why you might sign anyways
As you might expect, there are multiple reasons why you’d still sign with a label. First we’ll answer this question in the context of a smaller artist…
Not every artist wants to deal with marketing. It has a learning curve and it takes time away from working on the music. While you could hire a marketing company like mine, not everyone has the money to do that.
In the ideal scenario a label is investing money and resources into moving your release from A to B. It should be a partnership, and you’ll probably learn a lot in the process.
When you’re a small artist you have less to lose, but why would a slightly larger artist sign?
Often the answer is they’ve found they’re stuck where they’re at and need help to grow further. Maybe they view the label as largely a source of funding, maybe they view it as freeing them up creatively to take the music to the next level, or maybe the label has a key partnership or resource the artist could never attain without them.
There is a reason why if you look at the Spotify Top Songs charts, or the Billboard charts, most of the artists have label support. At a certain point it gets very hard to grow further without a team behind you.
Artist and label service companies exist for this reason, but that brings us back to the funding problem - a label not only provides services but acts like an investor as well. In some cases the label is just outsourcing the work too.
Now is this worth giving up 50% of your music’s income for? It depends if the label is doing their job. While 50% is a lot to give up, would you rather have 100% of $1,000 or 50% of $4,000?
What to look out for
As a broad piece of advice - always have a lawyer look over any deal you’re going to sign, ideally a music / entertainment lawyer. This is the real way to ensure you keep yourself out of trouble.
But there are some general things you can look for.
Is the label charging you money? This is a major red flag, they should be spending money on you, not charging you money.
Is the deal for 1 song, 5 songs, 3 albums, 3 years, etc? Always understand the term and scope.
What is the split? How are costs recouped?
Do they own the master, or is it a licensing deal?
What is the label actually doing for you? They generally can’t promise results, but you should know what they’re going to do when it comes to promoting the release / you.
What is their scope as far as royalties? Do they only touch digital? Or is it also physical, merch etc?
I’ve talked to artists who accepted 360 deals, where the label effectively owned their entire brand and due to poor performance stopped letting the artist release music. Effectively the label shelved the artist which shut them down.
That sucks.
I also know artists that signed deals because it freed them up and gave them a solid advance that helped them in other areas, only to find the label did the bare minimum to promote something they worked on for a year.
That sucks.
But I also know artists that are totally happy with their label deals, and are glad they don’t have to run their own Meta ads, or pitch to editorials, or upload to a distributor and have a partner they can hit up for advice and strategy.
SO with all this in mind the purpose of this post isn’t to be for or against labels. Some are great, some suck. You might need one, you might not need one. It really depends on your unique situation, and on the unique label you’re considering.
Whenever you’re ready, there are 4 ways I can help you:
My courses. Spotify Growth Machine teaches you how to use Facebook ads to promote your music on Spotify. YouTube Growth Machine teaches you how to grow a YouTube channel organically and how to use YouTube ads. Fan Growth Machine teaches you how to build a website, online store and grow your email list.
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1-on-1 consulting. You can book 1-hour calls with myself or my team here.
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