Your band is ready to commit to a new manager or a reputable label has offered you a record deal for your original album. Your dreams are finally coming true, but you must slow down and take time to protect yourself before signing on the dotted line.
Review these entertainment contract red flags to avoid compromising your intellectual property and income as your star rises.
You should not have to pay anything upfront to make a record if a label offers you a deal. A record label that believes in your work should expect to recoup the costs of making your album with sales, tours and other streams of profit (merchandise, for example).
Do not sign a contract that does not reflect an oral agreement you have made. For example, if a record label offers you a $10,000 advance, that amount should clearly appear in the legal documentation. Carefully check the terms to be sure they reflect your understanding of the deal and ask a trusted professional if you are unsure. If the company tells you that you must sign the contract without a legal review, consider that a major red flag.
Pay careful attention to the costs the label or manager will charge against your future royalties. Some entertainment contracts may include a deficiency payment clause, which allows the label to make additional charges against your earnings without your approval. You should attempt to negotiate down the expenses, which can include touring costs, recording costs, distribution, marketing and countless other areas.
Avoid signing a multi-album deal, especially if you do not have the utmost confidence in the label. Doing so can severely hamper your future ability to make money from your music.