The Million Dollar Deal - Hip Hop Creation Article

The Million Dollar Deal
By RapDrums.com

There is a common belief among many rookie producers and non-industry civilians that a million dollar record deal is, well, worth a million dollars. If you are in that group of people, keep reading this article. We’ll teach you what a million dollar (or any dollar amount) record deal really is, and what it means to you.

A one million dollar upfront payment would be a dream to any artist or producer. Simply record an album and make a million bucks, easy enough. However, what most people don’t know is that the one million dollars that the record company pays you is not a fee for your services. It is simply a dollar amount valued at the estimated cost of all recording and mastering costs and expenses. The record companies would never ever think of paying out a flat amount, but can you blame them? They have theoretically no way of knowing whether your album will be a hit on the charts or a hit to their bank account. The record companies try to assign a dollar amount that will be able to balance with the revenue that your album makes. Thus, the more noteworthy artists usually receive a more highly valued deal.

Here’s the catch. Not only does the money that is assigned to cover recording costs not belong to you, but it also must be paid back to the record company. How do you pay back one million dollars? It comes right out of the royalties that you earn from your album. This brings up an interesting dilemma: what if your album fails to earn one millions dollars? To put it frankly, you don’t get paid. This situation is more common then you’d think. Before you can even start earning any revenue at all, the entire stipend given by the record company must be paid off completely unless otherwise stated. This could mean that it could take years after an album’s release before you can even see a penny.

If your album fails to earn enough revenue to pay off the stipend, it’s okay, you’ll get another try with your second album. Wrong! Here’s the second catch: more often then not, record companies will make you continue to pay them your royalties until you have earned enough revenue to completely pay off all of their stipends. This means that you may be using money that you have earned on your second album to pay off the debt accumulated by your first album. If it’s possible, always try to make sure that there is a clause in your contract that says that all stipends will be cleared after a new project has commenced. This could make or break your financial situation, so be persistent!

There are so many financial variables such as this that go into signing a contract that it is highly ill advised to agree to any deal that the record company is offering you without the approval of an attorney. Some people shy away from using lawyers because of the simple fact that they are expensive. Yes, legal advice is expensive, but paying a record company all your revenue for the rest of your musical career is also expensive. You have to think ‘short term vs. long term’ to be successful in the business. You may not be able to get that new big screen TV you wanted, but hiring a lawyer will be well worth the money. You may have scored many amazing deals over the years without the help of a legal team, but it only takes one deal, big or small, to ruin your career and put you in a financial situation that may take the rest of your life to free yourself from.

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