It is every musician’s dream to get that call that their dreams are about to come true. That one of the major record label wants to sign them as one of their recording artist. Of course you may think, “But, do people still get excited about a recording deal from major record labels?” The answer is YES. Many artists in this technological age still want to be signed and/or affiliated with a major record label for many reasons including usage of the connections and reputation the record label may have as well as the prestige that comes with saying: “I have been signed to Universal records”, for example. In all this excitement and desire for prestige, the artists forgets or is ill informed when it comes to the obligations which the record label will place upon them and the return on investment for the record label and blindly signs the Recording Contract.
The Recording contract, like all contracts, is there to regulate and govern the relationship between the Parties, i.e. the artist and the record label, to it and it places certain duties and obligations upon each party. In the instance of a Recording contract, the obligations normally placed on the record label to are record, market and distribute the artist music. The artist has the duty to record the music in accordance to the terms that the record label may dictate. It may seem “easy and basic” to fulfil but the Recording contract may be complicated with convoluted terms and conditions which even a seasoned entertainment attorney has difficulty making sense of.
This article hopes to highlight the problematic clauses in the Recording contract which the artist needs to acquaint themselves with and ensure that they do not get trapped into an agreement with the scales tipped against the artist. Hereunder, a brief summary on some of the problematic clauses to look out for.
Firstly, the artist must look out for the Duration or Term of the contract. This clause states the length of the contract whether it is for 1 year or 3 years or perpetual. It also states whether the record label has an option to automatically renew the contract following the termination date and the period of such renewal. When you are entering into any contract, the duration of that contract important as you and the record label may not have a good working relationship but you are in a fixed term contract which specifically states that there is no right of termination in the first two years of the contract or that cancellation can only be done where there is material breach of the contract. You may find yourself in a position where there is no material breach of the contract but your working relationship with the record label has reached an unamicable state. In terms of the option to renew, the artist should ensure that there renewal option is only one option to renew for a period of one year, if any option. This is so because the artist may have signed the contract as a new comer, for example, who has since gained international stardom but their contract does not reflect their current value to the record label.
The second clause to look out for is the Exclusivity clause. This clause ensures that the artist cannot record any music with any other record label and/o individual without the written consent of the record label, for a fee known as an “override” royalty payable by the other record label and/or individual. This clause further grants the record label the sole right to manufacture, distribute and sell all the albums produced from the master recording as well as the sole right to licence others to do so. If you are going to agree to exclusivity, you need to ensure that the period of exclusivity is limited to a period, following which, the artist can do with the master recording whatever the artist desires. This however is also linked to ownership of the master recording and intellectual property, which is the next important clause to pay extra attention to.
The artist needs to ensure that the ownership of the master recordings and rights to intellectual property vest in the artist or negotiate a favourable split in ownership. This is generally more difficult for a newcomer who is looking for stardom but accomplished artists normally own their masters and all rights to exploit their intellectual property.
The fourth clause to look out for is the Product Commitment which states how many albums the artist must record for the record label which in some agreements, time frames are provided. The artist needs to be aware of this clause and ensure that the requirements for the Product are not stringent. In addition, the duration of the contract may be three years but the product commitment may be 5 albums. If the artist fails to fulfil its obligations of 5 albums, the contract may only terminate upon fulfilment of the obligations.
The fifth but by no means the final clause to look out for is what I terms the “Financial Clauses”. These are those clauses dealing with Recoupment fees, Record Royalties, Recording Costs and Advances. A Recoupment fee is that amount which the record label deducts from the artist’s Record Royalties to recover the monies the record label may have incurred and expended in Recording costs and other related costs such as marketing and Advances. The reason I have termed them the “Financial Clauses” is because of their interrelated nature. The negotiation of the “Financial Clauses” is often the most contentious and the clauses that result in artists owing the record label money and sadly dying paupers. The artists only pay attention to the Advance amount but do not read the fine print which comes with the Advance. The consequence thereof is the artist not receiving any royalty amount from the sale of the album and/or record due to the record label recouping its costs from the artist.
The above clauses were dealt with as they are the clauses which mostly result in artists entering unfavourable recording contracts. Every clause in the recording contract is important such as the Duties and Obligations of the Parties; the Territory of release of the album; the Warranties, Termination and Creative Issues. The other clause to be familiar with especially where the record label is signing a duo or group, are those clauses which regulate the group’s obligations and the impact of one group member leaving the group has on the recording contract with the remaining members.
The artist must realise that the record label needs the artist as much as the artist needs the record label and must therefore negotiate favourable terms and consult with a music law attorney before signing the recording contract, like with any other contract.