Dealing with an independent record label

The real upside to signing with any of the major labels is that they have the money for big recording budgets, tour support, and the like. Also, the Big 5 labels have the marketing and promotion muscle to make sure your record is played on the radio in all major markets. However, the major record labels are a lot like a big cruise ship—once they get moving in one direction, they have a really hard time stopping or turning in other directions, such as niche markets that can be very profitable for all those involved. So even if you can’t get a deal with a major record label, you should not give up, because there are always the independent labels.

What is an independent record label?

An independent record label is basically any label that is not affi liated with any of the Big 5, and that uses different distributors than the major labels to get its music to the retailers. An independent label may be the only place you can go for a record deal, especially if your music is not in the mainstream or doesn’t have huge market potential.

But this doesn’t mean that these independent labels can’t help you out. In fact, often they’re better suited to niche markets and can adapt more readily to changes in the marketplace. Furthermore, an independent label may be much more willing to take a chance on developing an act even after the majors have passed it.

General considerations

Unfortunately, these independent labels have limited budgets, and therefore have a hard time keeping up with the deep pockets of the major labels. Obviously, lack of appropriate funding can be a hindrance to breaking an act worldwide. But on the other hand, if an independent record label sells 1,000,000 records, it is going to make a lot more money than a major record label can due to its lower overhead.

If you are offered an independent label deal, you will find many of the same deal points that you will find with a major record label, but there are some differences.

You want to make sure the independent label has the money to make a first-rate record, to market and promote that record, and to distribute it in the retail stores. You can make a really good record for a fairly good price these days, but don’t skimp on making a great-sounding record or you will end up with an inferior product.

As for marketing and promotions, if the independent doesn’t have much money to put behind your record, you won’t be getting much radio airplay, and therefore you won’t sell many records. Furthermore, if there is no video budget, you won’t be getting as much television exposure as you will need in major markets, so you will have to rely on touring to get your music across to the masses. Therefore, it is very important for the independent label to help put you on tour, or to find some sponsors to help with the costs. If it can’t do much to help you with marketing, promoting, distribution, and tour support, you are pretty much on your own. You may be better off putting out your own record.

Just like with the majors, your contract will have a term with options and a guaranteed number of releases. Your services will be exclusive to the independent label, but you can more readily negotiate appearing on other labels, making appearances with other acts, etc. The label will want as much creative control as possible, but you will have a little more negotiating power and may be able to retain more control over your career. In other words, there won’t be whole divisions of the record label putting in their two cents as to what would be more marketable. The label will want to sign you based much more on what you are than what they feel that you can become.

The independent record company may ask for a piece of your publishing or merchandising so that it gets a larger piece of that action, but you may be able to avoid any controlled composition clauses. It may require part of your publishing because it won’t have the same amount of revenue coming in as the majors do, and it has to make money so it can afford marketing and promotions. And the more money it spends on marketing and promotions, the better your chances for success. Just make sure the label doesn’t try to tie in your publishing rights so that it keeps your mechanicals as part of your recoupment. You at least need some money coming in for songs that you have written.

You may also want to limit the number of options an independent label can get, so that you won’t be stuck with that label if a bigger and better deal comes along. If you have a relative degree of success with your independent label, you will have a better negotiating position to get a better deal with the same independent, with another independent that has more money for promotion, marketing, and distribution, or maybe even a major record label.

Everything will depend on the success of your music and the efforts of the independent label. But you will find that an independent label will make you feel much more part of a team than simply a product, because you will be one of the few artists on the label. You don’t want to sign with an independent that has too many artists or too many different types of acts on its roster, or you could get lost in the shuffl e. In other words, if you are a rock band that gets signed to a hip-hop label, it may not have the requisite experience and contacts in the rock world to work your record with maximum effi ciency.

What should you check out about an independent label?

Make sure the independent label you’re considering has in-house staff that will budget time and money to promote your records to radio, or money and significant contacts with independent promoters that can get you airplay in the major markets. You should find out what other artists are on the label, and see if any of them have gotten radio play in the past. If they haven’t, you probably won’t either, so you won’t sell a lot of records. You should also ask about the label’s advertising and marketing budgets. Again, if you aren’t getting any support in these areas, you won’t be selling many records. You may sign with an independent just because of one person’s total commitment to you or your band. If this is the case, make sure that you get a key man clause in your contract. Otherwise, if that person leaves, your stock with the independent label could drop quite rapidly and you could fi nd yourself at the bottom of its priority list.

Finally, you should insist that you get some type of tour support. You’ll need to tour relentlessly to get your music heard, and unless the record company helps you out, you’ll have a hard time coming up with the cash to fi nance a decent tour so that you can reach as many people as you possibly can. An independent label should be able to think outside of the box and come up with new and different ways to get sponsors for your tour, or other ways to bring in the needed capital to fi nance your efforts.

Despite these common issues, there a few deal points that are especially important if you decide to sign with an independent label.

Assignment of contract

This clause is even more important with an independent label than with a major recording contract. Make sure that if your contract is going to be assigned to another label, it will be a step up, rather than sticking you or your band with a company that can’t do much for you. Make absolutely sure that any assignment will go to a major record label or an independent with gross sales that are comparable to the largest independent labels out there. If you get assigned to a label that doesn’t sell many records, you could be tied to that label for many years, depending on the options that you gave to the original label you signed with. You should ask to be let go from your contract completely.

Joint Ventures

Another real upside to an independent label deal is that you can sometimes get better terms for royalties and the like. And if your independent label can sell enough records, it may get a joint venture deal with a major label. Then you get the benefit of the major label’s money, marketing, promotion, and distribution, but still get the terms of your deal with the independent label.

Of course, the majors aren’t exactly bad businesspeople, and they understand the strength of their negotiating position, so they may ask to renegotiate the terms of your original contract so they’re more in line with their terms. Even if that happens, at least you will now be on a major label. Your chances for success will increase exponentially, even if that success doesn’t come in the form of royalties.

Assignment of trademark

When you sign a deal, the label may want to register your band’s trademark under the label’s name! This doesn’t happen very often, but it used to be a problem with some labels or management companies. This point is absolutely non-negotiable. I know of a lot of bands that have gotten themselves into bad deals, and when they were dropped from the label or their management team, they had to deal with some other guys out there touring using their original band name. Nothing adds insult to injury more than seeing less-than-talented people capitalizing on your good name and knowing that there is nothing you can do about it.

Register your band name and logo with the U.S. Patent and Trademark Office, and never assign it to anyone. Your name is your brand, and you don’t want to end up building a fan base all over again under a different name.