To Sign Or Not To Sign? That is the question.

New musicians may wonder whether they should be part of a record label or pursue an independent music career. The answer is, as my Entertainment Business Law professor used to say, "it depends". Here we will discuss some points that may help you clarify that question.

What is a Record Label?

A record label can be considered many things, however, we could define it as an investment company.

The company invests in the artist to cover expenses agreed upon in the contract, with the hope of recovering the amount invested (just as a bank does). The money given to the artist is known as an "advance".

When and how should you pay this money to the label? Well, it depends on the terms of the contract you sign.

There are two types of record labels.

1. Major labels (Universal Music Group, Sony Music Entertainment, Warner Music Group)

2. Independent labels

BEFORE PROCEEDING, PLEASE NOTE THAT THIS IS NOT LEGAL ADVICE.

It is important to have a good "manager" or and a lawyer specialized in the subject before making a decision on whether or not to sign, and with whom. If you don't understand "legalese", the language lawyers use, you may sign a contract with terms that are not convenient for you or your band.

Today I will tell you some pros and cons (and a bonus at the end) of choosing one option over the other. Keep in mind that every case is different and all labels are different, maybe none of them apply to you.

Pros

• The label has staff to handle all the administrative and financial duties, therefore you have more time to produce music.

• There are the funds, resources and means available to release your music, videos, etc.

• They can help you with the process of developing your career much faster.

Cons

• The label may determine that the song and/or any product created through the label belongs to them, not the artist.

• In a worst case scenario the advance you were given must be repaid from the royalties generated by all works produced. This is called "recoupment". It works just like a bank, they give you money and you have to pay back the money they lent you.

• If not negotiated correctly, the label can keep you signed for an indefinite period of time (unless you live in California where they have a seven year rule), as well as get rid of you if you are not generating a return on their investment.

BONUS

The "Seven Year Rule" or California Labor Code Section 2855 states that a contract for personal services of a “special, unique, unusual, extraordinary, or intellectual character” that have a “peculiar value” such that the “loss of these services cannot be adequately compensated in damages” cannot “be enforced against the person contracting to render the service, for a term [that] exceed[s] seven years from the commencement of service under it”.

In California (legally) a record label cannot have the artist work for them beyond a period of seven years.

Don't go in empty handed when negotiating, show them that you are a viable candidate and why they should respect your terms during the negotiation. Likewise, respect their offers and their time.

Educate yourself on the value of your intellectual property and demonstrate professionalism when negotiating, this is an important point in your career.

Finally, should you sign? That depends on your short- and long-term goals and how quickly you expect to meet those goals.

Take into consideration the pros and cons, educate yourself, and make a decision based on knowledge (not emotion).

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