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| FREE ~ Lite Version Seminar 5
The Recording Contract
All Seminars Must Be Read In Order! |
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SEMINAR 5: THE RECORD LABEL…THE
RECORDING CONTRACT
Greetings!
As we continue on during this session, you will want to keep
in mind that you are still at the crossroads section...Part IV.
You are in the process of looking at some of the people/businesses
that hook up at this big intersection. Knowing the backgrounds
of all the players will help you to see the big picture.
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The record company is an enterprise whose business activities may include:
1) Acquiring the rights to material (e.g.,
songs, master records, videos, etc.),
2) Locating and signing talent,
3) Securing mechanical licenses,
4) Producing master recordings,
5) Manufacturing end-user commercial recordings,
6) Releasing end-user commercial recordings,
7) Promotion,
8) Distribution,
9) Sub-publishing,
10) Publicity,
11) Public relations,
12) Accounting for royalties collected,
13) Reporting to the IRS on Form 1099--MISC
certain royalties, independent contractor fees, salaries, commissions,
interests, rents, pensions, medical assistance programs or health,
accident, and sickness insurance programs, certain direct sales
of consumer products for resale, and other compensations paid
out. Each recipient is reported separately and the report must
include the recipient's name, address, taxpayer identification
number (social security number for sole proprietorships), and
the total paid,
14) Paying the required employment and other taxes to the proper
agencies, and
15) Distributing the proper royalty payments, accompanied by a
royalty statement.
Record companies may be large (majors or minors) or small.
Small labels have limited release objectives and capabilities.
It is the business of the label to exploit the rights they
acquire with the intention of making a profit. As the proprietor
of these rights they administer the related business and financial
aspects concerned.
The rights appropriated by the record company from the artist
are defined by written document. This document, called a recording
contract, contains many clauses because it covers a wide range
of agreement.
Record Production -- SMP Hot Link
Record Distribution/Sales -- SMP Hot Link
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A Recording Contract is a written document that outlines, identifies,
describes, defines, and governs the business relationship between
a recording artist (also called a royalty artist) or group, and
a record company. The contract is called an executory agreement,
i.e., it is an agreement that is yet to be executed or performed.
It is the business of the record company to exploit the rights
they acquire (from the artist) and try to make a profit. As the
proprietor of these rights they administer the related business
and financial aspects concerned.
The label will not usually sign an artist unless they are fairly
certain the artist will engender wide and strong acceptance. This
is because of the high cost (from $300,000 up) of breaking a new
artist.
The type of rights appropriated by the record label from the
artist are defined by the recording contract. The contract contains
many clauses because it covers a wide range of agreement.
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At the start, all terms of a contract are negotiable. Although
it is possible for a novice artist to acquire a "fair"
recording contract from an "honest" record company with
his first signing--it does not always happen. Even honest labels
are going to first look out for themselves and try to negotiate
a deal that is not detrimental, or potentially detrimental, to
themselves. The dishonest ones, however, look out only for themselves.
So, the depth of the contractee's music business experience is
important. Past experience helps in negotiating fair contracts.
Further, it is predominately a contractee's past track record
that will establish his bargaining power. For these reasons the
operation of contract bargaining between an artist and a label
varies greatly.
Here then, are two points of major concern:
1) Bargaining power, and
2) The contents of the final considerations of the agreement.
Attempts at exercising bargaining power and maximizing the
label's self-interests may become apparent at the outset. The
artist may be asked to sign an industry form contract that is
said to be "standard for everyone." He may be led to
believe it is only a formality, and told in so many words that
this is his "chance of a lifetime" and not to sweat
the small stuff.
If the artist asks any questions or proposes changes the label
spokesperson might accuse the artist of insinuating that he (the
label representative) is dishonest. This is a ploy by the label
representative to put the artist on the defensive. This enhances
the record company representative's position of strength and authority.
The artist is made to feel that any objections will jeopardize
the whole "deal."
Label representatives will also exert authority by having the
signing at their office. This further enhances negotiating strength
via the psychological edge of being on their own turf.
Many experienced artists will ask for time to read, study,
and go over the contract with their family, others who are directly
or indirectly involved, and with their legal representative. This
would enable a thorough understanding of the contract's content
and consequences.
Other artists will hire a competent music attorney to study
the contract for them and to do all the negotiations. For example,
the experienced music attorney brings with him, not only experience,
but clout. This would enable the negotiation of the largest advance
and highest royalty rates possible. He would seek over scale wages
for recording sessions. He would try to secure generous record
promotion budget provisions and guarantees for concert touring,
etc..
Also, having an attorney handle the negotiations would completely
remove the artist from any confrontations with the record company.
In this way, they are able to remain "friends" with
the management of the label while their representative hammers
out the final agreement.
Legitimate record labels will respect sound business procedures
implemented by an artist.
Experienced artists never rush into any contract without completely
understanding its ramifications both short and long run. Total
evaluation and understanding may take several days. After reading,
studying, and discussing the contract with a competent music attorney,
they often put the contract aside for a few days, clear their
minds, and then look at it again. They would talk to others who
are currently under contract with the record company. They would
try to look at all the angles and consider the worst possible
situations that might occur. Finally, they would try to minimize
the probability and possibility of these distasteful situations
ever happening.
Optimistic and positive attitudes are easier to maintain when
all the bases have been covered.
Sometimes laws will override things upon which agreements are
made. Sometimes agreements are made that are illegal and therefore
will not be upheld in a court of law.
Sometimes the law allows for devastating things to happen to
an artist even if it is not so stated in the contract. For example,
the meaning of some words and/or phrases used in the contract
may be defined by statutory law. These words and/or phrases may
seem insignificant to an inexperienced artist. They could, however,
result in long term grief!
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Life will be easier to face when all the bases have been covered.
Many of the roads that lead to burnsville can be avoided if
one has the ability to make competent business decisions. The
ability to work from a position of competence, then, is the bottom
line.
To help establish competence the content of what a good recording
contract would contain should be brought to light and be fully
understood. Well, "good" is relative depending on whether
the contractee is the artist or the record label!
The artist, who often enters the contract with little or no
knowledge of the business and law aspects of recording contracts,
usually gets all the surprises. A list of these possible surprises
would probably be as long as the contract itself--pages and pages!
And that is where the real potential for being burned lies, in
ignorance, and not in record sales. Many successful artists (successful
in record sales) are bummed out, broke, and held hostage for years
to past contracts singed in ignorance. Yes, these "surprises"
are almost always of the bad news variety. And many last a substantial
number of years or even a lifetime.
The record label, since it is an established business, should
already know the ropes. For example, record companies know that
the statistical probability of monetary loss from a recording
venture is about 9 to 1--in favor of the red ink! Because of this
reality, the label will protect itself as much as possible in
the contract. They will attempt to minimize their liabilities
both short and long term.
The content of most recording contracts will vary extensively.
This is because the negotiating powers in each situation are different
and because the parties involved have different needs and desires.
Granting these vast variations, it is still profitable to read
and study example contracts (called form contracts). It can also
be profitable to extract clauses, modify them slightly, and make
them applicable to one's own unique situation. It saves time and
provides more depth and accuracy in one's own draft.
An example recording contract can be procured from La Costa Music at:
Recording Contract -- Form Contract Purchase Online
Before beginning, it should be pointed out that every contract
would have the contract name, page number, and total number of
pages written at the top of each page. For example, "Record
Company/Recording Artist Contract-page 3 of 8 pages" would
appear at the top of page 3 in an 8 page contract (most recording
contracts are from 8 to 12 pages in length).
Contracts will often identify the involved parties by referring,
throughout the contract, to each party by means of capitalized
key words. For example, the artist or group might be identified
as ARTIST.
Contracts often sound funny or are hard to follow as you read
them. This is because the articles "a," "an,"
and "the," and some prepositions may be omitted. Sentences
are often compound/complex with run-on sentences and long lists
of particulars. This often makes finding the associated subject
of a verb near impossible!
The record label will often add words and redundant statements
to confuse and tire the reader. Their reasoning is, "the
more the words the more the coverage." And also, "the
more confused and tired the reader is, the less he is apt to object
and request changes to the contract!"
From the artist's perspective, all contract statements should
be short and to the point. This is in reality, however, usually
a pipe dream!
Here is where you will really need the SMP Membership Full Text Version of Seminar #5…this is because in the Full Text Version there is a list of the 58 most important Clauses of a Recording Contract! And there are also invaluable tips regarding contract negotiables, blank spaces, integratable statements, and the dreaded "non-related clauses" nightmare. Not knowing this information can put you in peril for many years to come.
Go To SMP Membership Full Text Version -- Index List of All Seminars
Get Your SMP Membership Password Here!
Legal info links:
CONCLUSION
This discussion will hopefully reveal the importance of you
knowing as much as possible BEFORE you sign any recording contract!
Also, remember that this has been just a general discussion…Do
not use this discussion to verify any position with respect to
any contractual situation. Do not sign any contract on this information
alone, use it only as a guide to get competent legal assistance.
Experienced artists always procure competent legal assistance
BEFORE they sign any contract.
Now we come to the end of Part IV where we have looked at the
"crossroads" of our endeavor. In the next session we
will check out Part V and get into Part VI as we tackle Publicity.
*R*
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