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Lecture Notes Record Contracts
- 1. Recording Contracts • Overview Business percent by label group • Do you need a label deal? • Some basic royalty computations • The 360 Deal
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- 3. Current Market Share Total Album Market Share 2010 9.57 9.99 UMG 32.06 SME WMG 19.07 EMI Indie 29.31
- 4. New Market Share TotalAlbum Market Share After Acquisition 9.57 UMG 19.07 42.05 SME WMG Indie 29.31
- 5. Do You NeedA Record Deal?
- 6. Subjective -> Dependson your ultimate goal? Where do you want to be in five years? Image by Jean Scheijer cc
- 7. Why Sign WithA Major Label? • Funding
- 8. Why Sign Witha Major Label? • Funding • Marketing Expertise • Image by Celal Teber cc
- 9. Why Sign Witha Major Label? • Funding • Marketing Expertise • Radio Promotion Clout • Image by Andre Habermann cc
- 10. Why Sign Witha Major Label? • Funding • Marketing Expertise • Radio Promotion Clout • Distribution Domestic Image by Abby M. cc
- 11. Why Sign Witha Major Label? • Funding • Marketing Expertise • Radio Promotion Clout • Distribution Global image by ilco cc
- 12. Global Presence ->Majors are globally integrated Image by ilco CC
- 13. In essence, ifyour ultimate goal is… • Radio Airplay • Physical Distribution • Mainstream artist regardless of most formats • Desire global presence circling back to physical distribution
- 14. The flip side An indie artist can leverage the power of the internet and social media to build a network and fan base
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- 17. Engagement with yoursocial network = viral promotion Image by Hilde Vanstraelen cc
- 18. Assumption TraditionalRecord Royalty
- 19. Record Royalty • Newartist 10% - 15% of wholesale • Midlevel 15% - 17% of wholesale • Superstar 17% - 20% of wholesale
- 20. • Wholesale pricefor frontline physical product $12.00 • Artist royalty rate 12% $12.00 X 12% $1.44 per unit sold
- 21. Escalation Clause always include in your contract
- 22. Escalation example Initialdeal 12% 0 – 500,000 units sold 12% 500,000 – 1 Million units sold 13% 1 Million + units sold 14% **If album does reach the escalation goal only applies for this album
- 23. What about digitalroyalties? Image by Abby M cc
- 24. Profit Opportunities • Digital downloads • Webcasting • Streaming-on-demand • Ringtones/ Ringback • Satellite Radio
- 25. iTunes Download iTunes price .99 cents Wholesale to iTunes .70 cents Artist royalty 12% .70 X 12% 8.4 cents per download to artist
- 26. Ringtones • Cost toconsumer $2.00 • Label receives $1.00 • Artist royalty 12% $1.00 X 12% .12 cents per download
- 27. Webcasting & SatelliteRadio • Licensed master • Royalty distribution rate set by the government • Collected by Sound Exchange • 50% to labels • 45% to artist • 5% to American Federation of Musicians
- 28. Why did the360 deal develop? the 360 deal develop 360 Deal Points
- 29. Historically Labelsonly made income from product sales and license deals • Image by Mansee cc
- 30. What happens whenyour business model is disrupted? • Image by Christian Ferrari cc
- 31. Two choices • Goout of business • Adapt
- 32. The 360 dealis the record label solution • If you lose close to 50% of total revenue in ten years while the cost of doing business is increasing…. • No choice but to look for alternative revenue streams
- 33. Record label revenue •Music sales physical, digital, licensing and any future delivery forms
- 34. Artist income sources • Record royalty • Mechanical royalty • Performance royalty • Synchronization royalty • Merchandise • Ticket sales • Publishing • Sponsorships
- 35. The 360 dealis a record contract within a record contract • In reality it is a revenue sharing model
- 36. 360 deal points •Label receives between 10% to 35% from all non-record sources • Always net income • Sources include: • Ticket sales • Publishing • Sponsorships • Merchandise
- 37. Good news forthe artist this is a passive deal • You have the right to sign with any support company you desire, i.e. publishing company • Usually……
- 38. The label could“recommend” their publishing company Image by Bob Smith cc
- 39. 360 Deal Variations •50 / 50 equity deal • Aggregate all label and artist expenses • Aggregate all label and artist profits • The difference is the net profit • Net profit is split 50/50
- 40. 360 Deal Variations •360 on steroids • Superstar deals • Madonna • Jay-Z • Signed with Live Nation received multi-million dollar advances
- 41. Is the 360Profitable? • Potentially, but over time • New artist income (on average) is minimal the first few years • The 360 becomes profitable when the artist becomes profitable
- 42. Comparative Numbers • Traditionaldeal label makes approximately $5.00 per unit • Assume sales of 250,000 • Revenue = 250,000 x $5.00 = $1,250,000
- 43. Add the 360Deal Points • Label makes on 250,000 $1,250,000 • Assume 360 deal at 25% of artist net income • Assume artist makes $500,000 in non-record revenue
- 44. Label Makes…. $1,250,000 Record sales $ 500,000 Artist income 25% Label Royalty $ 125,000 To label $1,250,000 $1,375,000 Total label profit with 360 deal
- 45. Leave you withthis thought… • Success is what you believe it to be not what someone else believes! • We are very fortunate to be involved in music in whatever capacity • Dreams can start at any age!
- 46. • Image by Leslie Watts • Image by Leslie Watts