Recording Contracts

5 December 2004

Recording Contracts

In dance music, contracts can vary from a simple one
sheet that just states what share of the income from the record will go to artist
and label, to a full blown massive contract handling every aspect of expenditure
and earning.

There isn't really such a thing as a "standard
contract." There are many conventions that appear on most contracts, and
there are serveral spots on your normal contract where the Shadiness usually
occurs. When someone cheerfully states that its a "standard contract"
and that there is nothing to worry about, you should cheerfully remark that
"yeah its all good you know, let me just take it home, look over it and make
sure I understand everything." Just because you want to go through the whole
thing and try and understand it all (good luck) does not mean that you are
accusing the person of some kind of trickery, and it does not mean that you
aren't smart enough. If you have never had a chance to really learn contracts,
you need to take your time and read it. If you are looking at any fairly large
deal, it is a neccessity to have it examined by a professional. In some cases it
is neccessary to have the entire negotiation handled professionally. That costs
200-500$ an hour, but might easily pay for itself in extra earnings if even a
percentage point is changed or a standard deduction altered. It all depends how
serious the relationship with the label is and how much money is really involved.
It might well be possible to get professional advice without paying out that
much.

It should also be said that if someone is going to
rip you off, doing it through a legally binding contract is fairly tricky. Its
much better just not to pay you and not return your phone calls. The RELATIONSHIP
with the label is your primary protection.

CONTRACTS MUST ADDRESS
1) what percentage of the sale of each record goes to the artist	In underground situations where the label has virtually no expenditures besides manufacturing costs, 50/50 splits of the profit (total income - total expenditure) sometimes happen. With more developed "normal" labels, percentages of the retail or wholesale price are specified (12%-25%), minus "standard packaging deductions", minus expenditures. also specified is a rate at which the ((mechanical royalties#Royalties% will be paid by the label to the artist.
2) how much of an advance on those earnings to give	If the advance exceeds the eventual income of the record, the artist is not required to pay any money back. However, any further records done for the label will have to pay back that amount before paying the artist further money (though they many receive another advance). Many labels are capable of precisely guessing how much money will be earned. The advance is also the method used by big labels to convince naive artists that they've hit the big time, and then give them a poor deal elsewhere, or keep them in debt to the label. They never see money after that. Note that the advance is usually the figure that hits the magazines.
3) when payments and accounting will happen	you should get regular reports with exact figures, anything else is shady.
4) if the artist is retained exclusively by the label	In most music situations, exclusivity is desired by the label. These days it is usually seen as a good thing to allow the artist to work elsewhere, as that further publicizes their career, which can only be good for any sales by that artist. Sometimes a project name is chosen that exclusively records for that label. If you sign a contract with a label in the state of california and its for 3 years or 2 records or more the label by law is obligated to pay each band member a minimum of $9000 per year if they want to keep you around, or its not exclusive. This is not an advance, it is money that they straight out pay you ! Apparantly it favors major labels who can afford to hold an artist like that. Any indie label can't come up with the money, and the Major if interested can usually get the artist in question without further wrestling. It is very common in indie rock (RIP) to have a buyout clause stating the exact amount of money (usually well over 10,000$) that is needed to pay the small label off to relenquish their artist. Coming soon to a techno contract near you ! I know several labels who benefited nicely by Sony buyouts.
5) if the tracks in question are granted exclusively to the label	Usually the tracks are exclusive to that release. any future releases of the tracks are licensed by the label to whatever other label is going to use them (eg. CD compilations).
6) how many releases the artist is bound to	In some cases just that release. "options" mean that it is the label's option to do further releases with the artist, but if they wish to then they can drop the artist. This can be a problem if the artist is unknown, signs a deal for several albums, and then does really well on the first or second. There is no chance then to renegotiate the terms of the contract, they are fixed. So you would actually wish to get less albums or just a single release deal.
7) In the event any of the tracks are licensed to another party, the share of profits from that are specified.	usually 50/50))minus any expenditures
8) It is also usual to state that clearing any samples is the responsibility of the recording artist.	I'm still waiting for the Winstons Vs. Jungle court case.

Costs paid out by Label

Note that there are recoupable costs and non-recoupable
costs. Recoupable costs are expenditures like advances, tour support, etc. These
are things that are paid for by the artist from their royalties earned on records
sold. Non-recoupable costs are expenditures like advertising and promotion. These
are things that are paid for by the label; none of these costs are passed on to
the artist. Because these are usually small in a basic 12" dj vinyl
situation, the royalties paid to the artist should (and usually are) higher.

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