Understanding 50/50 Deals
In a production deal, the artist signs a 50/50 deal with a producer. The producer agrees to produce the artist’s album, but retains ownership of the recordings.
A 50/50 record deal is an agreement between an artist and a label. The label finances the album and receives half the profits. The artist retains control, but also bears the financial risk.
Whether a 50/50 deal is beneficial depends on the circumstances. Smaller labels may offer them more than major labels.
In a typical 50/50 publishing deal, the songwriter receives 50% of revenue as writer’s share. The publisher receives 50% as publisher’s share. So the songwriter gets 75 cents of every dollar.
Many small to mid-size labels offer a “net 50” deal. After they’ve recouped their expenses, you and the record label split profits 50/50.
Record Label Investment and Risk
Per IFPI, a record label will typically invest anywhere from $500,000 to $2,000,000 in a newly signed artist. Here’s the basic breakdown of how these funds are allocated:
- Advance: $50,000 to $350,000.
In August 2016, Justin Lubliner, who had noticed Eilish’s talent back in 2015 when he first heard “Ocean Eyes”, signed her to Darkroom and Interscope Records.
Considering over 90% of released recordings fail to make a profit, this is a high-risk business for labels and artists.
Different Types of Music Deals
The 360° deal is the strongest commitment an artist and a record company can make in today’s music-industry environment. It involves marketing and touring support and the artist pays the record company a percentage of their earnings.
What is the 80/20 music deal? The 80-20 rule is a principle that states 80% of all outcomes are derived from 20% of causes.
Speaking as a record company, an 80/20 split on revenue seems incredibly high. A more typical artist royalty is in the 1-6% range.
Equally remarkable is what is happening in the head of industry’s demand curve. In 2011, 102 tracks sold more than a million units each, accounting for 15 percent of total sales.
A typical deal is an 80/20 percent split in favour of the label. Most independent labels have licensing deals with majors and incorporate 360 deals, paying for everything but recouping from performances.