How To Respond To A Record Company Offer

Welcome musician friends and friends of musicians!

This is Part II of the article; “How To Get A Record Deal.”

Find the first article after this one by just scrolling down.

To mount a full-scale campaign for your career in music, check out the e-book "Brilliant!" 

In Part II, we’ll look at what might happen when you generate the interest of a label, or they offer you a development deal or a record deal. And if things really heat-up, we’ll discuss ways to negotiate should several labels become interested. This is a scenario that you love and the labels hate, called a “bidding war.”

We’ll recommend some steps you could take to strengthen your bargaining position so that you can end up with a win for everyone involved.

And we’ll compare the strengths and limitations of a major label, compared with a qualified independent label. As always, with Moore Hits, we will show you how to leverage the power of the major music business for yourself, should you decide to build your own music recording and distribution organization.

But first a quick review of the first article.

You asked yourself

whether you really want a record deal with a major label and
whether it might be smarter to record through an independent label or build your own.

You learned to “Discover Yourself,” and build your own successful music entertainment company whether recording on your own, or through a label.

You already know that the historic music business model has changed from selling only “hard goods,” to selling those plus “digital goods,” and how to use digital goods to promote you and your music.

And you learned how to develop a following and how to present yourself to a label.

The big offer ...sort of

Now let’s suppose you have been contacting label A&R departments (through your lawyer or manager) and that one of them is expressing interest. You’ve sent them a 3-song demo, along with a cover-letter telling your strengths in a nutshell.

Or perhaps they discovered you through your “my space” location or your profile at Taxi.com.

They are impressed with what they’ve seen and heard so far and want to take it to the next level.
Often, what they’ll do with a completely un-tried act is to offer a “development deal,” aka a “demo deal.” They typically advance you a few thousand dollars to go in with a competent producer and cut several “demonstration recordings” to give them an idea of what you will eventually sound like on a professional recording.

This is a good thing, because they are expressing enough interest to lay down some real money (which they would eventually like to recoup). But it’s not the same as a full recording contract. And it puts you in a fairly weak bargaining position.

There are several important points to negotiate here, even though there’s no big money on the table. What you agree to at this stage will profoundly affect how you step up to a full recording contract either with this company or a different one. Therefore you MUST seek counsel from a qualified entertainment attorney at this point.

One common negotiating tactic that label lawyers (called “business affairs managers”) use to take advantage of you is to stall. They know that most artists are one car payment away from bankruptcy, so the longer they can make you wait for the agreement, the more foolish clauses they can get you to commit to. It’s kind of a legal version of “water-boarding.” In one case, with a major label group who I won’t name, it took us 5 months just to hammer out a simple demo deal! And in the end, what happens with the deal is not up to the lawyers anyway.

The fate of your deal and the demo’s you cut for that label are totally in the hands of the label heads who are grooming you! Fortunately, the president of the label in this current example was a benevolent gentleman who gave us what we needed.

Mind you, not all labels do this. Some actually try to create a financial comfort-zone for you in hopes that it will give you freedom to create. They figure that the better they support the artist, the greater the music that will result and this might attract superior-quality artists. It’s a matter of the label’s quality of leadership.

For an excellent layman’s explanation of the important deal-points in a demo negotiation, see Donald Passman’s book; “All You Need To Know About The Music Business.”

The “real” offer

Ideally, you’ll never have to worry about a development deal, if the label has enough confidence in you to offer you a full recording agreement.

Does this tell you something?

What it implies to me is that a label wants to feel confident that when they go into business with you, that you will have the professionalism, the talent, the backbone and the organization to go out and make your music a success!

You don’t need an MBA to do this. You just need to be a good person with music that the world wants to hear and the ability to surround yourself with other good people who have a passion for you and for their particular skill-set.

For example, don’t just hire a “bass player” who keeps time and plays sensible notes. Make sure your bassist is a passionate student of his instrument. An inventor of musical style! Someone who has mastered the basic skills, then takes it to a new level with their own artistic creativity!

Same with your manager. You need someone with a talent for leadership, a head for details. A visionary, who can help you imagine your future and define and help you execute the baby-steps to get there. This person must be a trained negotiator, who can win the respect of the label and your other business partners. It helps to know a lot of people (be wired, as they say) but if you can’t find someone who is connected, it’s more important to have an honest person who truly understands leadership and business management. One fantastic book on this subject is simply called “Leadership.” Written by Rudy Giuliani about his time as mayor of New York.

Giuliani credits his success, managing New York City’s recovery from the September 11th disaster to “relentless preparation” and “teambuilding.” Likewise, NBA Basketball coach Pat Riley wrote a definitive book on the subject of teambuilding called “The Winner Within.”

Choosing your manager will be one of the most important life-decisions you ever make, because often times you will confide things between each other that nobody else can know or appreciate.

Your manager must march into the business world truly prepared to represent your interests and desires and to maximize every aspect of your career. He/she must be willing and able to push other priorities aside to accomplish your goals.

Now having said that, here’s what the label wants in a manager for you.

Mostly, they want someone who knows the business and is well-connected.
That’s because they want you to have people who can help them to build you in the marketplace!
Someone who can “get people on the phone!”
Someone who wields “leverage,” maybe from having major artists on their roster.
They want someone who they can control and who doesn’t ask for too much.
They might try to convince you to get rid of your manager and replace him/her with one of their friends; someone they can control. The downside of this is usually that their “major manager” never has anything to do with you. Instead, they assign you a “day-to-day” person, basically, a glorified secretary, who runs your career. It is “on-the-job-training” at your expense. Very bad scene.

If you don’t have a competent manager, don’t worry, it is still possible to build your music, your following and your value in the market before you find one. And usually, a good manager is financially inaccessible to an unsigned act, because you have nothing to pay them and it is too much work to ask them to do it for free or on spec. If you have a mom, dad or someone else close, who has the skills, this is ideal, because they usually have your interests at heart.

So here’s what you can do right now to prepare for the day when you receive your label offer. Read Passman’s book. I don’t benefit in any way from it. Yet I recommend it strongly because it has exactly the information you need to understand the road ahead and plan accordingly.

A few things that might surprise you about a label deal are:
1.
Your “advance” is usually just a recording fund. Often you are required to use it to pay for your demo’s and master recordings and nothing else.
Though the label pays the up-front costs of marketing, many of those costs are charged-back to you before you ever see a royalty check (this is called “recoupment”).

2. If it costs $1 million to launch your first record and you sell say 300,000 copies, you probably won’t break even. And because of “cross-collateralization, you might actually owe the label money when you start recording the next album. It could be years before you start seeing income from the sale of music, so you must generate other revenue streams in the process, such as touring and merchandise.

3. What we refer to as “recording contracts” are actually just “options.” The label secures the first rights to record and release your next (typically 7) albums over the course of 10 to 14 years. However, this is a one-way deal. At any point, the label can decide not to pick up your next option and they don’t even need to tell you why. Although most of the time it is because of inadequate sales.

Controlled Compositions - If you’re a truly “creative artist,” and write what you sing, you actually get penalized for this. The label gives you a reduced rate for your mechanical royalties as songwriter (over a certain number of self-penned songs on an album), arguing that it is they who have made your songs valuable enough to buy. In english, that means they pay you less than they would an outside songwriter!

To further exacerbate the song problem, there are powerful political dynamics going on between the label and certain publishers, who need to have their “cuts” on your album!

After you’ve negotiated your base royalty rate that the label will pay you for the sale of your recordings, then comes a list of transactions that discount that rate or delay your payment even more, including;

free goods
promo’s
mid-priced recordings
record clubs
returns
reserves
packaging deductions
and the list goes on

It’s not that the labels are inherently evil. Most of what you hear about decadent rock stars and evil record labels is uninformed hype from jealous weasels who complain about anyone trying to earn a living. The truth is that business ...all business works on a risk/reward and supply/demand basis. The risk that labels take with a new artist is as great as any risk in any business imaginable. They just want to get paid for it.

The complexity of recording deals is based on about 100 years of labels, artists and lawyers working-through issues that come up which cause problems between the labels and artists.

Stripping-away all the wrong information in the marketplace about recording for a major label, it is still a good thing. But like any other business, you must go into it with your eyes open, having studied the facts.

How to negotiate your deal

First of all, don’t even think about responding to it yourself.  To quote Mary-Chapin Carpenter, they're the windshield, you’re the bug!

But still, you want to understand your offer, so you can help your lawyer or manager work it out. That’s why you read Passman now. The more of the deal basics you know, the less your lawyer will have to charge you in billable time to teach you.

The second way you can prepare is to build a strong bargaining position.

How can an unknown, local artist build bargaining clout?

1. Develop a large and rabid fan base before you seek a record deal.
   
2. Sell thousands of cd’s or 10’s of thousands of downloads.
   
3. Learn how and when to say no.
   
4. Contact and develop interest from several labels at the same time.
   
5. Hire a competent entertainment attorney to negotiate.
   

Those first 2 items were discussed in part 1 of this Moore Hits a-log and in the e-book “Brilliant!” I show exactly how to do them.

Item 3 is a very important negotiating tactic. In fact, the phrase “no thank you,” dropped at the right time and in the right tone in the process can raise your value dramatically. For example, if the label is offering you a $150,000 advance and if you’ve done your homework and know that this label has signed many complete unknowns with a $225,000 advance, you could contrast your results if you have sold, say 15,000 downloads and another 5000 cd’s at live shows and 10,000 people on your opt-in list. Here, you might ask $300,000. And in the scenario described in #4 on the list, you could ask for even more!

But “no thank you” is just one of many negotiating gambits you can use to sway terms in your favor. This is why I recommend item 5 (competent lawyer). A good lawyer is a world-class horse-trader. One secret to strong negotiating is to know the current value of comparable artist deals.

You must be careful with the advance though, because what you settle on there will affect the many other deal-points in the contract. So part of your preparation is to find out exactly what you’re worth, what you want from the label.

If you get, say, $275,000 in the scenario above, the label could come right back and stick you with a higher percentage of the cost of your videos (ouch). This is why you need a lawyer to help you see the big picture and help you define exactly what you want, and need!

You think I’m a lawyer groupie? Trust me, as soon as you see a label contract offer,
you’re going to want to seek wise counsel.

You sign the deal!

This is a very sweet moment in your career. You might send the contract back and forth 15 or 20, even 30 times, but finally, you have an agreement you can live with. It may have been a little nasty during the negotiation and frankly, some of what they ask for may seem a little mean-spirited. But you just need to understand that’s business! Now you must quickly shift gears and forgive any hard-feelings you may harbor from the negotiation process.

You’ve won! You have your record deal. It’s time to take a breather, celebrate with your team and sit down with your manager and your new label to do some dream-building and update the game plan.

Next, you must offer your A&R person your full attention and cooperation. If they want to try a few things creatively, just do it. If they work, great. If they don’t, you want to steer back to the kind of music that they signed you for in the first place.

If you’re having serious creative differences with the producer they assigned you, be clear and direct with him/her. Meet with your A&R person frequently to go over demo’s and pre-production. Make sure you’re on the same page. Your a&r manager walks a difficult line between supporting your creative vision and making a record that is going to sell ...remember, they need to hit their quarter! They are on your team. But be careful that they don’t strip you of who you are, creatively. This is a tug-of-war and your creative vision must prevail, otherwise you end up with someone else’s album. Then, since marketing is an outgrowth of the product, you’ll find that they are marketing something that doesn’t exist. This will come off as artificial to your fans and your launch will be a misfire.

This is why it is important to know who you are as an artist and let your personality, your values, beliefs and style drive the music you ultimately create.

In the next Moore Hits A-Log, we’ll visit the yang to this yin; building your musical career your own way through independent recording and distribution.

If you're ready to crank your career up to 11, download "Brilliant!" now. 

God bless you!

Michael Moore
Moore Hits Productions
Nashville, Tn.

615-400-4656
rawtalent@moorehits.com
www.moorehits.com

How To Get A Record Deal

Discover Yourself!

Get Brilliant!

The first question to ask yourself about getting a record deal is, are you sure you want one?

Not long ago, being on a major label was about the only way to get meaningful recognition in the marketplace. but now you have options like never before in the history of music. If you’re reading this, you’re probably serious about getting your music to the next level. So here are a few very important concepts that you’ll need to know about growing your act. If your music is a hobby, fantastic, you’ll probably always enjoy it more that way. as a profession, it is difficult, but not impossible. However, if you want to become a full-time recording artist, you’ll probably need to change your preconceptions about what that is.

You may see “being discovered,” or “getting signed,” as your path to a music career. because what that does is automatically put the responsibility for your musical growth on someone else. That, my friend is a false premise!

The most powerful thing you must learn about your career is that nobody else will ever care about your music as much as you do. Record executives, a&r people, publishers do care, but they may not be ready or able to work with you “at this time.” And let’s face it, “this time,” right now is the only time that matters to you! I mean, how long do you want to wait, till the time is right for a label?

Now you can begin to see why it is shakey to look for some “expert” to “discover you.” The strongest advice i can offer you, from working with top artists from several genre, and from working to establish many new artists is to discover yourself!

“The business” is a business! The major labels are controlled by wall street! CEO’s are held accountable to their shareholders to have ever-growing profits. They have a report card every quarter. Therefore, their focus is not on making great music. It used to be, but today, it is on making more revenue this quarter than they did last quarter and more this year than last year.

To fit your act or your band into a major label, you must ask yourself how you can help them do that! Now, 8 years after the explosion of Napster, the decision-makers at the labels are just trying to figure out how to keep their heads above water, while their next-generation core customer base is stealing them into oblivion.

Now you may be starting to see why i asked that question at the top of this a-log; “are you sure you want a record deal?” Okay, I admit it, I have an alternate agenda with this article. It is to teach and encourage you to reduce your dependence on mommy record label and to begin to envision your act as self-sustaining. Mind you, there are still healthy record labels out there and a recording contract can still be a good thing for you, if you take responsibility to grow your act, yourself, with or without a label. In other words, there is no “mommy record label” out there anymore. And I’m not sure there ever really was.

The hardest lesson every artist has had to learn, is that your record label provides a service that represents only a part of your career picture. The label has never been “your whole career.” To illustrate that point, let’s see what your first album on a label might look like, financially.

Let's suppose in yr 2008, your debut album sells 50,000 copies. Gross record sales revenue is something like $750,000.00 Based on typical record label formulas, your share of that will be something like $90,000. but after a 10% hold-back for returns, you're at $82,500, your share of the video is $50,000, so you're down to $32,500, 10% free goods takes you to $25,000 and there are about 70 pages of this kind of stuff in your contract. Being generous, let's say you end up with $25,000 from your first album. Well, the label advanced you $250,000 for your first album, so you still owe them that. After the next year or so of touring, you make your next album with a negative $225,000.

Most new artists fail to ever get past this negative balance with their record label and end up being dropped, their debt to the label forgiven.

Occasionally, a new artist will sell a million copies of the first album and end-up enjoying a lucrative and long-lasting career. But the odds against this are enormous.

But let's say that you decide to go independent, and over let's say 18 months, you sell 50,000 albums yourself, that you press and distribute, your share of record sales would increase dramatically. 50,000 albums is nothing to a label. In fact, if that’s all you sell after the first album runs its sales cycle, you’ll probably be dropped before the second album. But if you sell 50,000 pieces yourself, without the help of a label, you could possibly keep $200,000 or more from just record sales! And this doesn’t even count the other revenue streams that you can generate as you begin to establish your act.

So whether or not you decide to pursue a recording contract with a major or indie label, it is imperative that you see your career in music as you, growing a business. Your mission is to make it a success, artistically, financially and for those depending on you. Then, as you build it, you will naturally become far more attractive to a label, because when they look at you, they are seeing someone who is already successful. The question then becomes, can the label help you reach your goals quicker than what you’re doing on your own and does what you lose in revenues from your percentage of record sales justify what you will gain from their marketing machine? Maybe.

This article is titled “how to get a record deal,” so now that we’ve sorted-out “why” to get one, let’s talk about “how.” You’ll hear “experts” tout that it’s not about what you know, but whom. Well, this is a very misleading statement when it comes to getting an offer to record for a major record label. At any given time, there are thousands of unsigned artists trying to get the attention of labels. And for that matter, tragically, many who are trying to get the attention of the label they’re already signed to! I'm not kidding. But that’s for another A-Log.

What the labels always want is a “buzz band.” someone who has been out their in their home market, creating excitement on their own. And there is no greater buzz-currency than sales of recorded music. If you’ve sold 8,000 cd’s from playing clubs or worship gatherings in your area, or if you’ve sold 40,000 paid downloads from your “my space” page, that is hard currency that an a&r person can impress their label heads with.

If sales of recorded music are the “benjamins” of a&r currency, the “$20” would be response to live shows. But a&r people are often skeptical of reports from live shows, because they can be so easily hyped. What can’t be hyped is ticket sales. If you’re a local band who can headline 2000-seaters in your area at say $8 a pop, that is also “hard currency.” It tells the label that a lot of people think enough of your act to pay good money to see you.

The third "buzz currency, which is way down the list, is opening for big headliners. It seems like every local act has a few of these on their bio. If you’ve played a few shows opening for well-known touring acts, in your local area, this is a good thing and it can help your local recognition. But most likely, the fans are buying tickets to see the headliner. A&R people know this, so saying that you opened for (phil & the blanks) is not really a deal-closer.

Having said that, labels like to believe that they’re still in the business of making great music and not just filing happy quarterly reports. There’s a difference between an “artist” and a “singer.”

An artist is someone who creates a new piece of artwork that is unlike what people have seen before. Blue Man Group is "artistic." Britney Spears is a singer. Though my examples above are a little grandiose, artists are an easier sell than singers. And they tend to last longer and make a bigger impact. Singers are far more expensive to launch into the market, because the only thing that can really differentiate them in the early days of their launch is the amount of money and marketing power that the label is willing to commit to their project. If you are a singer, what then distinguishes you from others who do what you do?

Just being a “good” singer isn’t enough to get the attention of a label. Hundreds of those are coming at them every day! Ask yourself and those who know your music what is it exactly that makes you different from other “singers.” If you can create a presentation (vocal demo) that distinguishes you in a powerful way from others, without gimmickry, this can generate interest from a label. One way to do that is to sing well-written, original songs that are written in your key, that play to your exact vocal strengths. Sing the demo from the bottom of your soul and draw out its depth of meaning. I don’t mean holding notes for unnecessarily long measures or warbling one word up and down 3 octaves… vocal calisthenics. In fact, that is just gratuitous crap and good a&r people know it. Just sing from your heart and express what the song really means to you.

In a world of hype, something simple, honest and well-done can be a powerful differentiator! However, if you’re an “artiste,” it’s going to be easier to distinguish yourself, because your creative muse has already done that part. what you must do is focus on being “good.” Even though your music is unlike others’ by design, you probably have artists who have inspired you. It would be a good idea to listen to them and ask yourself “why.” Unlike a “singer,” you are operating on various levels at the same time. You’re probably a songwriter with a unique message, a clever musician and a skilled vocalist. Now the question is, how can you capture all this in a demo that is going to really represent what you’re trying to do? That’s hard. What you might do is send feelers out to producers until you find someone who shares your vision and can “get you” on a recording. Another avenue you could try is to approach music publishers for the prospect of becoming a “staff writer.” Explain to them that you are striving to become a recording artist and if you get in as one of their writers, sometimes they will demo you and pitch you to the labels themselves. This is very much in their interest, because if one of their “staff writers” becomes famous, his songs will self-pitch! And they will tend to pull-in lots more publishing revenue.

Whether you're an artist or a singer, on your initial pitch to a record label, keep it down to 3 or 4 songs. Take the advice of great managers and “always leave them wanting more!” my experience has been that 3 songs is plenty.

Don’t make the common mistake of trying to sing Caruso on one song, Metallica on the next and Celine Dion on the next. this will go straight into the “thank you for your submission, but…” pile. Labels don’t want “variety” artists. They just want someone who is amazing at what they do.

Who You Know

Okay, if you’ve got all that so far, now it’s finally time to approach a label. Like with anything else, use your head. If you’re a female pop singer, don’t approach the label that already has 4 successful female pop singers. go for the label that “needs” one! Labels are like ships. If they get too many artists on one side, they start to list (roll-over). That’s because they’re competing with themselves. Each label only has the capacity to work 1 or 2, maaaybe 3 artists of any one type at one time. So choose a label that is light in your particular style.

Next you’re going to need someone to represent you. you’re probably aware that labels routinely send-back “unsolicited” submissions, but do you know why? There are several good reasons, but the main ones are, 1) they don’t want to get sued because you made a copyright booboo. 2) they have people who they trust to bring them the best, new stuff. these are usually lawyers or established managers, producers and even other artists. 3) the amount of incoming is just too overwhelming for them to assimilate. So the most direct route to getting the attention of a label is to ask a qualified attorney producer or artist manager to present you to the labels.

A less direct route that might work is to build your band to a good degree of success locally, then begin sending correspondence to select a&r people who might have a reason to become interested in you. If you happen to be family friends with the president of a label, you might just luck out and get him to listen to your demo.

What if you receive an offer? You probably won’t just get an offer out of the blue. It is more likely that if someone at your label becomes interested, they will call to get to know you a little bit, or ask for more music to listen to or even to find out if you have a gig coming-up where they can check you out, live. They’ll probably want a little “get to know you” period, before they actually come with an offer. After all, they’ve seen more than their share of fruitcakes by now and they want to find out if they can feel comfortable with you and trust you.

But let’s suppose that you’ve chatted for a month and they’ve come out to see one of your shows and finally, they decide to fly you to New York, or wherever their headquarters is so that the rest of the label heads can meet you.

One of the artists i worked with was actually put in this position twice. Once in the president’s office at MCA in Los Angeles. and the other time at RCA in New York. At RCA, they actually brought the whole A&R staff, plus the label president and the head of publishing in for a “let’s put her on the spot” audition, much to our surprise! But it was okay, because she was so well-prepared and knew her songs so well, that she was able to choose the most relevant songs and put them at ease. She smoked the audition and secured a good offer. It helps to be prepared!

What happens when you get the offer? You’ll find that out in the next Moore Hits A-Log! If you know an artist who needs to see the A-Log, please please pass this along to them, or you can just click through to http://www.moorehits.com/.

Or, you can create a development plan for your own career, using the concepts in my new book;

Brilliant!

God bless you!

Michael Moore

rawtalent@moorehits.com

KudoSurf Me!