Demo Deals And Development Deals

Many record companies these days, before they offer a new artist a multi-album recording contract, will offer an artist what is known as a "demo" deal or a "development" deal. These are basically different names for the same fundamental thing, although the terms of a demo deal might be shorter. In these deals, the record company pays you to record a quality demo, and if the company likes it, it has the first right to sign you to a full record contract. If it decides not to sign you, you get to walk with the demo. With the escalating costs of signing a new artist and the substantial expenses often involved in recording an album (not to mention the astronomical cost and expense of promoting and trying to "break" a new artist's first album), record companies often want to get a little taste of what an artist can do in the studio before they make the big commitment. A demo or development deal is usually just a few pages long (as opposed to the long-form record contracts which can be as long and cumbersome as the RJR Nabisco leveraged buyout paperwork), but it is still a binding legal commitment so it's best for you to understand what you are agreeing to when you do a demo deal. Such deals are usually appropriate only for a brand new artist. Established artists have a track record and experience of which the record label is already aware. A new artist, however, may have to make some demos with a label before the company is ready to commit to the bigger numbers necessary to record an album. If the demo deal is properly negotiated, there is usually no down side for a new artist to go this route. Same for the development deal -- in a development deal, the demo making period may last a little longer, which gives the A&R person more time to work with the artist, but the fundamental legal concepts in both agreements are the same. The deal usually consists of two parts: The first part states the conditions surrounding creation of the demos, and the second states the parameters of the "option" granted to the record company after the demos are completed. We'll go over this is detail in the course of this article. In rare instances, a deal memo (i.e. short-form) or long-form record contract is attached to the demo deal with the representation that those will be the terms of the record contract if the label decides to sign the artist.
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