Music and the Law
The Role of a Record Label
Getting signed to a record label is (and has been) the proverbial dream for many aspiring recording artists. However, what does the term “signed” mean? And, perhaps even more important, what exactly does a record label do?
Back in the day, record labels held the key to recording music because recording an album was a scientific, prohibitively expensive process. As a result, companies with deep pockets were the only way for musicians to record a commercially viable record. Today, professional recording equipment has become readily available; consequentially, any recording artist—with a modest budget and the willingness to learn—has the opportunity to record a professional record relatively cheaply.
Modernly, there is a wide and varying range of record labels that provide services to artists in exchange for their rights in return. In many ways, major label deals can look very different compared to independent label deals; however, the role that a label plays, generally speaking, is still the same.
WHAT LABELS DO GENERALLY
In a broad sense, a label’s job is to exploit the sound recordings or masters (i.e., generate revenue from the recordings) of a recording artist. Labels accomplish this by facilitating the recording and marketing of music, funding the recording, and marketing the songs and/or albums for artists while using the label infrastructure and relationships to distribute the music.
Most labels are involved in the recording of the music they will eventually release. Typically, a label is expected to pay for the recording by either giving the artist an advance (money up front for the artist to use to record) or setting a budget with the artist. Sometimes labels will own and operate recording studios so that artists signed to the label can record their music. Some labels will also connect their artist with producers, other artists, or songwriters to help facilitate the process.
Once the recordings are completed, a label will work with their distributor to distribute the music to Digital Services Providers (DSPs) like Spotify and Apple Music, along with physical distribution to retail stores. The three major labels—Universal Music Group, Sony Music, and Warner Music Group—all have their own distribution entities while independents typically work with third party distributors or, in some cases, directly distribute to DSPs and retail. Regardless, it’s a labels job to coordinate the distribution of their artists’ music and make sure all credits and digital tracking information are correct.
An album sitting on a store shelf or released on Spotify doesn’t do any good if there isn’t a consumer willing to listen to the music. So, it’s a record label’s job to market to the demographic of an artist to expand the artist’s listener base. A wide degree of marketing services can vary depending upon the budget, scope, and scale of the labels and artists involved. Typically, labels will create marketing plans, pay for album artwork, distribute press releases, and hire a publicist and/or work with their in-house team to reach their goals.
- Ownership of the Masters—Sound Recording Copyright
When a label pays for and/or records an artist at their studio, the expectation is that the recording artist gives up certain rights to the recordings in return. For a recording, the copyright is called a Sound Recording Copyright or SR for short. Depending upon the scope and scale of the artist and label, the label might own the masters outright or just license the masters from the artist for a certain time period. Of course, it’s better for the artist to negotiate the shortest-term license possible, while it is in the best interest of the label to own the masters outright
Another big-ticket item in record deals is the exclusivity of both the recordings and the recording artist. For example, record deals typically have an exclusivity term where the artist may only be allowed to release music with that label for the term of the agreement. Similarly, there is usually a longer re-recording restriction that prevents the artist from re-recording the songs released by the label right after the term.
An option is when a label gets to choose whether or not to record an artist’s next record at pre-determined terms. The option is unilateral, meaning that only the label gets to decide whether or not to exercise the option. In my experience, I have noticed that there is a common misconception about options; oftentimes, artists will express their excitement about being offered recording deals with multiple options. However, options are always beneficial for the label and detrimental to the artist because if an artist is successful, they will likely be able to renegotiate their next album with their label (or a different one) on much better terms than the option. So, options are essentially upside protection for a label and a limit on opportunity for the artist.
- 360 Deals
As a starting point, labels deal with the master recordings as outlined above. However, it’s becoming increasingly common for both major and independent labels to act as a music publisher, receive a percentage of merchandise and/or live shows, and even manage artists.
Whether a record deal is right for you depends on who you are, where you’re at in your career, who the label is, what they have to offer, and what rights you are expected to give up in return. When you’re presented with a recording agreement, hire a music attorney to be sure you understand the rights you’re giving up.
About Brian Witkin
Brian Witkin runs a boutique entertainment law firm in San Diego. He is also an award-winning musician, producer, and CEO of Pacific Records. Brian has spent nearly two decades in the record business and is a Grammy® Voting Member of the Recording Academy. Brian’s father, Joe Witkin, was the original keyboard player of Sha Na Na, who performed at the iconic Woodstock Festival in 1969.
Note: This article is for general informational purposes only and does not establish an attorney-client relationship. The information is deemed reliable but not guaranteed. Every situation is different, and the general information contained in this article may not apply to your specific situation. The author and publisher assume no responsibility for actions taken based upon the contents of this article. Seek the advice of counsel for your specific situation.
©Law Offices of Brian A. Witkin 2022.