Inna
5
All posts from Inna
Inna in $ Financial Freedom Chasers,

Signing with a Major Record Label: Pros and Cons

Many musicians are interested in making recordings to make some money from their music – revenue from physical CD sales and digital downloads. There's an important decision they need to consider: to sign with a major label or indie (independent) label? The way people listen to music nowadays is changing and many companies (i.e. EMI Records) went out of business. However, major labels are still more financially stable than most indie labels. (More on indie labels in another blog) Here are some things to be aware of regarding major record labels:

Pros:

  1. Money: The label pays you an advance upon signing a contract and then loans you lots of money to help you make the best recording ever. They'll get you the big-name producer, studio, engineers, etc in the world!
  2. Sales and Marketing: Distributes your CDs to major stores around the world, promotes the CD in magazines, on the radio, etc.
  3. Connections: Help you reach music career goals, become famous, etc

Cons:

  1. The record label OWNS you/your band. They will want a cut of everything you make, including royalties, money earned on tours, t-shirts, etc. Many musicians end up not seeing any royalties paid to them since a very small percentage of sales actually goes to the artist. (more details on this in another blog entry)
  2. Control over creative decisions: The label can now make decisions on what songs to include in the album, where the tour will be, etc. This hurts many musicians and this kind of deal doesn't work for everyone. That's why they call signing with a major label “signing a deal with the devil”
  3. You're not allowed to sign with any other label (it's a contract after all).
  4. The cash advance loan they give you that I mentioned above: Your goal is to make more money in royalties than the money they lend you. 2 scenarios:
    1. You get paid $1,000,000 advance and earn $5,000,000 in CD sales. $5,000,000 minus $1,000,000: So you/your band has now earned $4,000,000.
    2. You get paid $1,000,000 advance but only earn $80,000 in CD sales. $80,000 minus $1,000,000: You now owe the records company $920,000 because your CDs didn't sell well enough!