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Songwriting Guides
Record companies
The recording contract
There are basically three types of recording deal. The exclusive deal, the licensing deal and the development deal.
The Exclusive Deal
The exclusive deal is regarded as the Holy Grail in getting signed and it's the deal that most artists are looking to secure.
In this kind of deal the record company makes a commitment to invest in an artist, and in return the artist ties him or herself to a company for a certain period of time, with conditions laid out in the contract. These conditions are dependent on certain factors. Chief amongst these is how much creative control an artist wants. Since the company is investing its money in the artist, they will want to recoup that investment - which includes the advance - through record sales and other ways of exploiting the artist's work.
Usually a contract is for a year, with an option for extending it. If the contract is for a single only, this could be less, for example six months.
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Artists who are starting out tend to have less bargaining power.
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Once in place, this contract restricts what you can do, and prevents you from working for other companies. Once you've signed, you won't simply be able to tear up the contract if you don't like it. However, it should be should be fair; or, in legal terms, there should be no unreasonable restraint of trade.
Terms in the contract include delivery dates and standards, the advance, royalty payments and release commitments. You can find a complete rundown of terms of a contract at OneMusic.
Most record companies will want you to sign over any copyright to them. Depending on the deal, that copyright could stay with them indefinitely. Artists that are starting out tend to have less bargaining power - unless there is more than one company chasing them - and handing over copyright means that the record company has a better chance of recouping their advances and other investments over time. If there are restrictions over what copyright the record company can own, then the advance is likely to be smaller.
The advance is not money that the record company is giving you. It is essentially a loan which the record company expects to recoup through record sales, royalties and licensing of your music for other uses.
The Licensing Deal
The licensing deal allows the record company to hold the copyright of an artist's work for a period of time, but ownership of copyright reverts to the songwriter once that contract has been fulfilled. Licensing deals do not attract big advances, so anyone doing a license deal will not be in a position to rely on a record deal to live on for the next 18 months. However it does give artistic control, and mean that over a period of time the artist is able to exploit those rights as he or she prefers.
This kind of deal can also suit singer/songwriters with an existing publishing deal where their songs are making income by being used in film, television and commercials or are being covered by other artists.
The Development Deal
The development deal is really what it says on the tin. The record company is prepared to invest in helping you get better, but isn't quite ready to commit to a full-blown recording contract. Development deals might be the only deal on offer but the advances and investment in recording are low - maybe around five tracks - so not an album, and they won't spend much on other outlays such as a video, or supporting you on tour. You will also be expected to assign any copyright on anything you record with them to the company. You could state that you would like these returned in the event that you don't reach an exclusive deal, though in this case you may later have to pay back some costs in return.
One consideration against a development deal is that it is relatively easier and cheaper to make your own recordings independently. You may prefer to make and distribute your music yourself and wait until an exclusive deal is offered.
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 Songwriting Guides
Writing a Song
Performing
Working with Other Writers
In the Studio
Publishers
Record Companies
Who's Who?
What's in it for me?
Money
Approaching Record Companies
Recording Contracts
Getting Advice
Advances
Management
Staying on Track
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