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Keep Your Eyes on the Ultimate Prize
By Cyrus Rhodes - 12/28/2009 - 04:15 PM EST

I know a Chicago based band that just signed a 5 year deal with a popular Indie Label. The basics of the Legal Contracts were each member (a 3 piece band) receiving between 200,000 upon signing, and 30% of money made from ticket sales, no royalty advances.  Before you think that this is a great deal think again. The 200 grand had to pay for all expenses for each band member over the course of a 5 year period, after taxes that’s about the 38 thousand a year in income. The 30% had to be split 3 ways, giving each member 10%. Of course there were a million stipulations attached to the agreement, but the bottom line was it was a deal that allowed each member to quit their day jobs and peruse a musical career.. I can show you bands that had similar opportunities, and at the end of their tenure negotiated a much more lucrative deal with a Major Label. I can also show you a few bands out there that underperformed and as a result didn’t get a new deal at the end of there tenure. The bottom line is – You have got to prove yourself worthy of the spotlight to remain there. It takes a lot of work just to get in the door, it takes twice as much work just to stay there. Take advantage of this golden opportunity to excel, and use it as a  stepping stone to bigger and better things later on.  

Most professional athletes are in the same boat. Say you’re a rookie Quarterback and you sign a 3 year deal with an NFL team as the starting quarterback.  At the end of the 3 year deal you have performed flawlessly – you can accept any deal you want to as a free agent, and pick and chose the best deal on the table. You can do the same thing with your Music Lawyer at the end of your indie tenure.

The most popular college rock band of the 80's, R.E.M underwent a steady, decade long rise to the top from underground heroes to the most sought after College Rock Band in the US. At the end of there tenure with Indie label IRS records, they managed to get a $10 million, five-record deal with Warner Bros back in 1988, the band had gone from playing hole in the wall Pizza Parlors to major arenas. Just recently R.E.M signed another five-album contract with Warner Bros Records worth an estimated $80 million, the largest recording contract ever awarded. Warner Music, the largest domestic record company, had the resources to outbid competitors and is the only firm that could offer R.E.M a sweeter return on future sales. The band will be paid a $10 million dollar signing bonus plus a $20 million dollar royalty advancement on future sales of its six-album catalog. The band is also guaranteed an estimated $10 million advance per album, plus a blue-chip 24% royalty on the retail price of each record sold - about $2.50 per record. The bottom line is - it's obvious R.E.M was in the drivers seat, and more than likely had a few  competitive bids on the table to compete with. In the end Warner Bros had to work to get them to onboard. 

Bands and acts like Rush, US, the Red Hot Chili Peppers, Jane Jackson have been around for over 20+ years, and have successfully proven their net worth giving them the bargaining leverage necessary to get the Ultimate Prize.

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