In Their Words: Everything You Need to Know About Record Labels

How do you build a fanbase? Are 360 Deals really that scary? Should you sign a record deal? We spoke with music power players about the pros, cons, purpose, and functions of record labels, A&RS and, contracts in this new era of music.

Prince once compared the music industry to "slavery."

In 1993, when he battled against Warner Bros. Records over his record contract, Prince changed his name to “the Artist Formerly Known As” and “the Love Symbol” in an effort to “emancipate” himself “from the chains" that bound him to Warner Bros. The rift lasted for two decades, until he and the label reconciled in 2014. But the late legend went on to level the same criticism against record labels in 2015, proclaiming, "Record contracts are just like— I'm gonna say the word— slavery. I would tell any young artist... don't sign," adding, “Once we have our own resources, we can provide what we need for ourselves.”

In a recent interview with Vibe, Steve Stout, founder of distribution company UnitedMasters, proffered an equally critical but more pragmatic approach for artists to consider when deciding on signing with a label or staying independent. When asked if he thought record labels were still a necessary part of the music business, Stout said:

If you want to build a business and own your rights and own your masters and be able to hand something down to your kids, if that matters to you, you shouldn’t sign to a record company. But, if you’re looking to stay in the best hotels, fly fancy, and all that other stuff, and that matters to you primarily... then you should probably sign to a record company.

After executing one of the most successful independent runs in hip-hop history, Nipsey Hussle, who vehemently championed ownership, later leaned into a label partnership with Atlantic Records in 2017. He leveraged the years of artistic agency he built before securing his ideal deal to support the release of his debut album, the Grammy-nominated Victory Lap.

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Hussle cited independent pioneers like JAY-Z' Roc-A-Fella Records, T.I.'s Grand Hustle, and Ludacris' Disturbing Tha Peace as inspirations. “Those labels started off as boutique operations, reached a boiling point in terms of cultural relevance and then partnered with a major to help take things to the next level. My vision is to build something like that,” he told Billboard. “We’re not just taking a check and giving up all the credit for the work we’ve done to get here.”

In February, Meek Mill shared similar sentiments on ownership, tweeting, “All records labels should start letting artists have ownership or you will be viewed as a slave master! Make it even for both sides the ones putting money up and the creator!!! Is even too much?” That same month, up-and-coming Los Angeles rapper Blueface wasn’t sure what label imprints he is currently signed under. He's signed to four. 

The confusion and critiques of the recording industry have persisted across genres and generations. But, new models to look to and learn from have emerged. In recent years, the struggles and strides of being an independent artist are championed, with the remarkable but romanticized, less-realistic model of Chance The Rapper’s career serving as a prime example.

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With the advent of social media — the one-stop-shop for sourcing and branding talent or appeal— many have ostensibly rendered record labels obsolete, while others still see immense value in them. Labels and executives are culling social media for stars — and popular internet users can leverage their audiences into careers in music — and music streaming has upended the old ways of selling music. Spotify recently launched a self-upload feature and a royalties dashboard for independent artists, allowing them to essentially bypass labels and distributors. Now, with executives culling the depths and surfaces of social media for stars, labels aren’t necessarily looking to sign artists, they’re looking to sign successes.

Historically, record labels have always either been held in high regard or in contempt, by artists who have either reached immense success by proxy of a good deal or suffered as a result of a bad one. Many have grown disenchanted and impatient with what was once deemed necessary but is now sometimes a non-determinative factor to an artist’s success. But “success,” like much of everything else in music recording, consumption, and business, doesn’t quite look the same. The changes have prompted those in and outside of the industry to reexamine: what purpose do record labels serve in 2019? And how have their functions changed with the times?

Okayplayer talked to industry experts and insiders, Wayne “Wayno” Clark, Marat Berenstein, Connor Lawrence, and Rebecca “Dimplez” Ijeoma about the pros, cons, purpose, and functions of record labels, A&Rs, and contracts. It is, quite literally, everything you need to know about record deals in this new era of music.

Wayne “Wayno” Clark on 360 deals and what labels can offer artists.

Is signing with a label something artists should still aspire to?

That's all particular on the artist's situation. A lot of people will say, "Well why would an artist sign with a label?" Artists might want a certain type of backend, or they might want certain financial support. There's two ways to be independent: you could be independent where you're just doing everything out of your pocket, or you could be independently doing it through an independent label. An Independent label is the same as a major record label. The only thing is that they take less percentages. They get money, and they put money up— they just don't put up as much.

If you don't really have leverage— meaning if you don't have a record that's already moving, or you don't have a project and you're not doing shows — you can expect a low investment. Doing a record deal is like buying a house. Depending on where that property is that you want to buy, the bank is only gonna invest X amount of dollars based on your credit; your credit is your leverage.

With doing a record deal, if you have a buzz, you can kind of capitalize off that buzz and strike while the iron's hot, and you can charge your record label a lot of money up front. But if you charge them a lot of money on the up front, then you'll get bit on the backend when it comes to 360. They're gonna wanna recoup that money in all types of different ways.

I wouldn't advise an artist to look over their contract themselves because in order to fully understand a contract you have to understand law language. That's what you hire a lawyer for. Not saying that you can't educate yourself on these things, but it's better to have a lawyer explain those things to you.

What is the dreaded 360 deal in layman's terms?

Let's say if you needed money for rent, and somebody says, “I'm going to give you $2,000." You say, "OK, I only have one source of income." The person will say, "You need to have more than three. If you're able to get four incomes, I wanna collect off of every single income you have until I get my money back." That's basically what a 360 deal is.

If the [record] company investing money ends up saying, "Yo, I want 10% of your ancillary money — your ancillary money can be if you do a sneaker deal — 20% of your shows, and 5% of your merchandise, that means that they're collecting from you in three different ways, but they're collecting in all of those ways to get their money back.

Marat Berenstein on what labels look for in artists.

What are the common terms artists should look out for?

Some common terms are: “length of term,” “ownership of copyright, — which in the case of record deals refers to the “masters” which the label will monetize — “financial commitment” i.e. “advance/recoupment/budgets.” If an artist already has their own “masters” then it might be the kind of offer where the label may want to license exclusively and monetize for a period of time.

How have you seen the search for talent change over the years?

Labels have teams of people who conduct research. They study numbers, stats, patterns from socials to streaming. It’s a real-time, real-world way of doing a focus group. Evidence collection of current sales that points to the potential of future sales. In the past, all potential had to be measured by the instinct that labels possessed. Now, we’re more than several years into the Moneyball of recorded music. That would, of course, lead us to a place where we can find stars who don’t have a lot of artistic value but are extremely popular and can sell anything if packaged right.

Can you define “artist development?”

Artist development in layman’s terms is the time and patience required for an artist to explore their craft, to live life and find inspiration, to meet other like-minded people, to be challenged creatively, and to make mistakes as well as learn from them.

Is artist development something independent artists should still be expecting while being courted by labels now?

No. Labels are buyers and investors who look for an artist to have already reached a certain point of artist development. 

Labels look for artists who have already shown that they are selling on a real level in the marketplace which currently is defined by streaming platforms. Until the marketplace changes, artists must demonstrate selling potential in a real-time market-tested way.

What role do A&Rs currently play in the sourcing and building of artists?

Real A&Rs bring the human instinct factor that can’t be measured by research. They bring their gut feeling, their intuition, their ability to get an entire building behind an artist’s project, diplomacy, and, hopefully, the trust of the artist to feel comfortable working with an entire team heading towards the same goal.

Connor Lawrence on the intersection of data, artist amplification, good label practice, and the future of the business.

There is knowledge of labels looking at social media followers and online streaming numbers when looking for artists to court and sign. How much do these types of metrics matter?

Data without culture is meaningless. In tandem, data only works when it's contextualized with culture. I think, in general, labels look for holistic trends that signal that this artist's music is reacting, that this artist's music is sticky, that this artist's music is meaningful. And I think you can tell those sorts of moments that a song is meaningful if you see people gravitating towards it across platforms.

If you're gaining, each week, 500 followers on Instagram, Twitter, Spotify, YouTube, across the board, that's going to be super meaningful and perhaps more meaningful than if you just have a huge spike on one platform. I think it's important to recognize that the long tail of artist growth, at least to me, is more important than the quick, big jumps. Because I think today, labels want to sign an artist that's going to be here in 20 years, still engaging with fans, still monetizing their music and their content.

Obviously, sales numbers still are kind of important. Radio, they look at a little bit, but it's a lot of streaming numbers. For streaming, they try to designate between active listening and passive listening. A lot of labels, from my understanding, get reports from Spotify based on the actual difference. Like how many listens came from which playlists. Mood playlists, from what I understand, are generally more passive listening, whereas other playlists are more active. A playlist like RapCaviar is going to be more like active listening.

People are concerned with who labels are signing and this idea that they're looking for microwavable artists. But they can capitalize more off of an artist if they have them for a longer period of time.

If you look at label history, it's no different from any different era. You're going to have your acts that are popular for one song, and labels like to push that and squeeze as much out of it as they can. But I think you also have people like Tunji [Balogun]at RCA, or Derrick [Aroh] at RCA — who signed GoldLink — who are looking to sign and develop artists that will be here in the long tail.

Good label practice is when labels invest in artists that are going to be here for the long tail.

What do you think artists should do to market themselves before a label steps in?

How do artists gain fans? That's a question that I've woken up every day and asked myself because I think that's such an important thing that artists need to do to: connect with fans and then build content and music that they'll appreciate. It's really hard. It's the kind of thing where there's no real one answer on what an artist can do.

A lot of artists are almost better at marketing than some marketing companies. Artists and millennials understand social media and they understand how to manipulate and build media companies. You go on YouTube and you see all these different channels with millions of subscribers, from kids that just built it on their own. A lot of that comes with experimenting and trying things constantly. I think it's making sure that when you release music, you try to push it as much as possible.

Finding third-party playlists on Spotify. I have a couple playlists that I built out myself with a few thousand followers, and artists every day DM me about it on Facebook and Instagram saying, “Hey, I found your playlists on Spotify. Would you listen to my song...and perhaps playlist it?” I think that sort of hustle is where artists win. When they're thinking holistically. They're doing research on each platform to see how artists like themselves are moving. Like, “Oh, if I'm trying to be the next Khalid, how did Khalid do it? What channels did Khalid hit to get new fans? How can I incorporate that into my strategy?”

I think today's artists and managers have to think super strategically about what they're doing and move quickly but forcefully across platforms. That means finding Facebook pages with a lot of likes that have audiences that will like your music. There are Twitter accounts like that. There are Instagram accounts certainly like that. If you're a rapper and you get on WorldStarHipHop, on their IG or on their YouTube, that's an amazing opportunity for you to get exposed to fans. And then obviously based on how good the music is, it determines whether or not people will follow you or people will interact with you.

And then of course, if you can get into big press outlets, or get on tour with artists, or play local venues, or even getting to the big playlists on Spotify or the big playlists on Apple, that's where you're going to see a lot of fan engagement and gain. Audience development is what I think that term is. Trying to build that is hard.

What trends do you predict coming from the end of this era of music— on the label end, on the social media end, and on the marketing end?

A lot of times we're programmed to think what's the hit? There might be 10 songs with five million plays, but what's the one song that has a hundred million plays? I believe that a lot of niche audiences online are going to grow. There's a lot of weird, niche audiences. You're going to have your mega hits and they reach everyone, but more and more we're going to find ourselves when someone says, "Oh, do you know about this artist?" you're going to say, "No, I haven't heard of them," and you're going to pull them up, and they're going to have like 20 million plays.

These subcultures and these niches are going to exist, and I think they're going to hopefully be able to sustain a lot more artists in those circles. Labels [will be] figuring out ways to participate in those circles, help, and partner with artists that might not have the global hit but have the audience, and the diehard fan base that they can sell merch to and they could tour off of.

I think artists are going to be able to build their brand online way easier and sustain themselves with the expansion of streaming.

Rebecca “Dimplez” Ijeoma on the relationships and role of A&Rs, label executives, and artists, advance money, and the different types of record deals.

Can you break down the process of signing an artist to a label? How has that process changed as the music industry has changed?

Signing an artist to a label in [2019] is wild.Oftentimes it’s as a result of work or buzz the artist has been able to generate to get on the radar of the respective A&R or label head; other times it's all about connections. Who do you know?

The signing process is similar to a courting process. There’s a series of meetings; the label rep has to build a relationship with an artist— as signing requires championing the artist internally. That rep now returns to the label and presents the music to the conferring teams or label head. The A&R gets approval on agreeable terms, i.e. a $20K single deal, or $100k album deal, etc. If the artist is amiable, a contract is drafted. The artist typically comes in to meet the label executives, and shortly after that, sometimes even during that very meeting, the contract is signed.

This process has changed because before it was about identifying talent: diamonds in the rough that required ample development. Now, that runway is a bit shortened. The expectations today are different. There's a level of preparedness expected upon signing a new act as most labels don't have the bandwidth to truly develop a new artist.

How has the role of A&Rs changed over time?

An A&R's job right now is to stay in the streets, internet, or whatever and identify what sound is working, bring it or the artist home, and develop the resolve further. The role has changed now. The internet has given light to artists and sounds that traditionally would not have seen the light of day. Some A&Rs will chase those. But a true A&R will still take the time to develop a soundscape of the artist's own.

What would you say are the most common types of record deals?

The most common deals today are one-album deals, with options— or single deals. If your first album has potential for continued growth, or has been released and does well, but you were only signed for one album, the label has the "option" to negotiate extensions. The single deal has more to do with a single song, and if the label feels like there's potential with the artist they usually come back and double up. A label will invest what they feel with the label's belief in you, the projected life-expectancy of your career, and how great your entertainment lawyer is.

What are some key terms and meanings artists should familiarize themselves with before signing a deal?

There's a “standard deal,” which is a one-album with options. There's the 360 deal, which is really just a “Multiple Rights Deal.” 360 gets a bad rap, but it's basically stating the label will handle multiple things like recording, touring and/or merch among other ancillary items. Single deals, where you have a song that the label believes in, so they redistribute it with hopes to make it bigger with potential to exercise options. There's a profit split — which is like a [joint-venture] — but with way more transparency on the artist side as it relates to money. The profit split allows an artist to be a partner, be more involved with budgetary decisions as they split the profits. License deals are where you can license your catalog for commercial rights— for sync and other commercial opportunities.

Can you explain what an advance is and marketing budgets?

An advance is the money an artist gets when they sign, and is usually an advance against royalties the label thinks you'll eventually earn. For developing artists looking for million-dollar deals, don't do that. You want the least amount of up-front money possible because advances is money you have to recoup within your deal.

Marketing budgets depend on the release and what goes on within a quarter and projected activity for the year. Major labels traditionally give less than $50K towards marketing an album for its entire life-cycle. Label marketers usually have to fight for every single dollar used to spend marketing your videos, running ads out-of-home or digitally.

What are some tactics artists should be employing when negotiating their deal?

Renewed deals are negotiated near the end of the life-cycle. My advice to an artist is two-fold: shop around and go where you are celebrated. Advances, budgets, and splits are all terms that are negotiable. What you can't negotiate is a team or label executives that believe in you. Don't sign a deal until you meet the team that would be working your project. See that the passion is there before making your decision.

On deal durations, do [labels] usually want long-term access to artists or is the turnover more frequent now?

Most deals I've seen in the last few months are between two to five years in length because the label wants to retain their rights to access you first if you blow up.

But that isn't the length of time artists should worry about. The more interesting component is the label's obligation to deliver your project once you've turned it in. Once you submit your album to the label, they traditionally have 18 months to schedule and release it. If they fail to do that, they are in breech and you can usually get out of your contract. Unfortunately, in that incidence, the label will still own the album.

The scheduling process from when an album is turned in is usually live within three months, or so. It never usually takes that long for a project to come out — unless something happens — because with how fast media and music are consumed.

What purpose do you think labels served in the past, and what purpose do you think they serve now?

In the past, labels served as a development tool. Labels would take rough talent, help them create a sound. Now, the label is the big bank and acceleration to your goals. The internet has leveled the playing field to the point where it's the artist's prerogative to be prepared for whatever opportunities may arise and to have a vision before they walk in the door. Labels no longer have the ability to build a superstar, however, they have the finances, distribution services, and bandwidth to refine one.

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Laura Alston is a New York-based multidisciplinary artist best known for her photography and graphic design. She is also Okayplayer's Senior Marketing Associate. You can follow her work here.