1. Who is the record company?
Make sure you know the company with whom you are contracting. Major companies are well known but many productions companies and smaller independent labels are not. Full investigations should be made of production companies, particularly to see how records are distributed and to ensure that there is a proper cash flow from the distributor through to the artist.
2. What will be produced?
Ascertain the product commitment. It is better to have a commitment for an album than a single, as the company will spend more money on making and breaking an album than they would on a single, which of course increases your chances of success as an artist and means your publishing income is likely to be higher.
3. When will it be released?
Consider the release commitment. It is no good having a product made and not released for sale; there should be a firm commitment in your home territory and in the major preferably in the major territories of the world.
4. How much will the artist be paid in royalties?
Royalty is the term used for the amount of money that the artist will receive from the record company for each record, CD or cassette sold. The royalty is normally defined in terms of a percentage of the amount that the record is sold for. Royalties should be paid on 100% of all records sold, not 90% as some companies attempt to do and the artist should be careful to ensure that the royalties are on net retail as opposed to publisher dealer price. If they are based on published dealer price then they should be scaled up (increased).
Consider how record companies will take away the royalties already given, such as reductions for twelve inch singles, TV advertised albums, club sales and CDs and DCCs. These items should be gone into most carefully as on many occasions there is no validity for reducing artists' royalties by record companies, all they are doing is increasing their profit base at the artist's expense.
5. What about advances paid by the record company?
Deal with the question of advances and recording costs carefully as all of these items are recoupable (taken out of earnings) from royalties. Advances should be sufficient to ensure that the band can work at their recording career and survive and should enable the band to purchase whatever equipment is needed in the first years of their career.
Recording agreements should be subject to budgets mutually agreed between the record company and the artists. Control should be imposed to ensure that the record companies do not allow the budgets to run away, which eats in to the artist's royalties.