This is the question I am asked most frequently-- obviously by people who don't know me, because those who do know me ask me how they can sell more records on their own, not how can they get into a slave contract and become a sharecropper. But once again, for those who don't want to do for self, I will attempt to break it down from my vantage point.

I basically see three ways to get a deal in this industry; and let me preface this by saying that I AM talking about a rap record deal with a reputable record label that has a track record and that has experienced some success in the rap music industry through selling records.  I'm NOT talking about the bogus labels that spring up daily all over the country with a business card printed last night at Kinko’s that says they are a record label.  

Real legitimate record labels have a staff, they have proper financing to market and promote their releases after they record them, and they have experience and connections in the music industry with radio, retail, and promoters.  The bogus labels should be avoided at all cost until they have a proven track record, as most of them can't even do as much for an artist as the artist can do for him or herself. And I'm certainly NOT talking about the labels or pseudo distributors that already exist within the industry yet can't seem to sell more than 30,000 records, even with a talented artist.

So, I see three ways to get a deal (that you'd want to have) in this industry:

1. Get put on by an established artist (but bear in mind that you may only be as successful as that artist. It's rare that someone puts you on and you blow up larger than they are). This means coming up under Busta Rhymes, Jay Z, Kanye, BG, Jeezy, T.I., 50 Cent, Nelly, Eminem, Dr Dre, etc. With any luck, the artist who puts you on is fair and doesn't do to you what was done to him when he was coming up.

2. Create a buzz. In a perfect world, you want everyone in the industry and on the streets talking about you before you get signed. Young Buck was a perfect example of an underground artist who had a very strong buzz when he was coming up. The trick is to keep it going til you get signed and then turn it up a notch so that the whole industry is buzzing about when you're going to drop (50 Cent is a great example of someone who kept up the buzz). This option usually takes many years to land a good deal.

3. Sell units. This is, of course, my favorite method because it proves to the labels you can sell, which reduces their risk and gives you negotiating leverage.  Therefore, you have more control over the "fairness" of your deal, and often a choice of labels to sign with. In a perfect world, you want to be with a label that not only believes in you, but has an experienced hard-working staff in every department that can really make your project happen.  Plus, a nice bidding war never hurts…

The average record deal for a new artist starts around $125,000 and 12 or 13 points (which really means 12 to 13 percent of the retail selling price after you pay back all the expenses) for an independent label or a subsidiary label, and $300,000 and 16 points at a major label.   There are far more indie labels and sub-labels than there are major labels, so it is obviously more difficult to get signed directly to a major label.  The plus of being directly with a major label is that there is no middleman.  Dr Dre’s label Aftermath is directly with Interscope which is a major label.  Eminem’s Shady Records is signed to Aftermath which is signed to Interscope.  50 Cent is signed to Shady via Aftermath at Interscope.  That’s a lot of hands for money to pass through, even figuratively.  

Most money spent to sign and promote an artist is recoupable.  “Recoup” means paying back most of the expenses before you receive any back end payments (points are back end payments). I can count on one hand the number of rappers I know who've ever even seen a back end payment such as a royalty check.  Most rappers make money by getting advances prior to working on the next release, always in an unrecouped position of owing money to their label.
 
The way to increase the figures in any deal, in favor of an artist, is for the label to realize that their risk is reduced. A label takes a risk when signing any new artist (risk meaning that the label could dump hundreds of thousands, or even millions, of dollars into an artist's career and the artist might only sell 10,000 records, which means the label loses a lot of money), but anything that can reduce that risk is considered a plus, and rewarded.

This even applies to established artists. For example, when Snoop Dogg was shopping for his new deal after his deal with Priority ended, he was able to say he had Dr Dre producing for him again, he was expanding his awareness into mainstream America by appearing in a full length motion picture (in 2001), and he had an autobiography out at the time in bookstores called Tha Doggfather which got great reviews. That's the way to maximize opportunity.  A more recent example would be T.I., who dropped a CD and starred in a movie that released in the same week (2006).  This would backfire if the movie got bad reviews (Outkast), so it would be more of a slam dunk for an artist who had a track record of success in film already, like Mos Def, for example.

A newer artist might reduce the perceived risk for a label by having access to well known successful producers, or by bringing a hit single with a superstar producer.  This affiliation is one that the label would see as reducing their risk at radio.  Radio is overcrowded and expensive these days, so having a Jazze Pha, DJ Toomp, Kanye, or Cool & Dre track goes a long way for recognition with radio.  Labels like this.  By the way, this backfires if there are already many singles at radio by the same producer.

These are all proven ways to get the little "extras" in a record deal. Those extras could include more upfront money, more points on the back end, a better “stat rate,” less stuff to recoup, etc.  Upfront money is a double edge sword because upfront money is recoupable, therefore it is just more debt. You want to get upfront money for a number of reasons:
To invest in something yourself that will bring more money like a studio or real estate,
To force the label to make your project a priority by being so far in debt with them that they have to work your project hard to get their money back,
To make certain you make money from a record label that has a reputation for not paying royalties or back end money, etc.

If you have a deal with a reputable label that seems to believe in you and you are confident that you are a priority, you may want to reduce the front end advance in favor of a larger split on the back end. With Trick-Trick’s deal at Motown, he took less money upfront in order to get 40% to 50% on the back end. Of course Trick had a slam dunk single with Eminem called “Welcome 2 Detroit” and had already shot a tight video for it.  He had a follow-up single with Jazze Pha, and starred in a movie that he knew would be in theaters in the Spring.  Most joint venture deals don’t work financially in the artist’s benefit because there is often a production company in the middle collecting the money.  In this case, Trick co-owned the production company, further reducing the risk for Motown to do business with him.

When I negotiate a deal, there are times where I secure money upfront for the artist that will be dumped back into the artist's project because I know the label won't. For example, in almost every deal I've ever negotiated with a major label, I've gotten between $25,000 and $75,000 for the artist to hire his own street team to work his project. Most of the radio driven majors don't understand the importance of building the artist on the streets first, so very often the artist has to do this for self. These funds are never recoupable. An artist shouldn't be taxed for an area where the label is weak, nor should the artist be taxed for something that falls under marketing of the record, like a street team. But in order to negotiate something like this, the artist must have something that the label deems worthy enough as leverage.  You need some kind of leverage to get a good deal.

I guess what I'm saying is that you shouldn't take just any old record deal, you should have a deal with as many extras to guarantee your success as the label gets to guarantee your profitability to them. You are taking a risk with the label as well, but they NEVER see it like that. They always only see their risk.

Regardless of the level of your recording contract, you need to go into your deal with the attitude that the label is your partner (even if you never make a dime, because it is YOUR career).  If they drop the ball, you should be able to pick up the ball and run with it. They have many artists on their label, but you only have one career. Don't let yourself become the topic of an article in a magazine about "whatever happened to...!!" Bear in mind that the REAL hard work begins after you get a deal.

You set the tone with your label. If the label has 3 artists, and 2 are lazy and never show up to stuff that they set up, but one is hardworking and arrives on time for everything, guess which artist will get the best push REGARDLESS OF THEIR LEVEL OF TALENT!  Human beings work at record labels and it is human nature to work whatever causes the least resistance and least stress. If it's easier to work a T.I. record than a Twista record then that is exactly what will happen. If it's easier to work a T.I. record than a B.G. record then that is what will happen. It has nothing to do with the level of talent or the sound of the music. This is a business. That's why it's called the music BUSINESS.

Learn as much as you can before getting into the industry, ask as many questions as you can to people who are successful and legitimate, and have a really good entertainment attorney on your team.  A successful team, and a little bit of luck, are the true secrets to success in this industry.  And if you are an artist who has limited business sense and all you want to do is just make music, PLEASE find someone with some real business savvy to add to your team.  If you don’t, you will see the ugly side of this business which is a wicked pimp and ho game.  And, uh, you won’t be the pimp…