DECIPHERING THE MUSIC INDUSTRY

If you are an artist, you really need this Information before you sign a recording deal contract.

When you finally meet with your entertainment lawyer and manager, here are some key points in the recording contract you’ll want to discuss:

A. Term:

This refers to the length of time (or the number of albums you will have to record) you’ll be exclusively signed to the record label. “Exclusive” means that you can’t record for another record label without the record label’s permission. Your entertainment lawyer will seek to reduce the amount of time you’re exclusively signed to the record contract and/or add language that allows you to terminate the record contract if certain conditions are not met. One such condition that can be negotiated into the record contract obligates the record label to commercially release in the US and Canada an album within 6-12 months after said album has been satisfactorily delivered otherwise, you will have the right to terminate the record contract. This is called a “release guarantee.” Keep in mind that remaining signed to the recording contract and releasing multiple albums would be beneficial to your long-term career if your albums are successful because it’s a sign that the record label is doing its part by aggressively marketing and promoting you and your music. Also, your entertainment lawyer and manager should be able to renegotiate the material terms of the recording contract based on the commercial success of your album.

Let’s tackle one of the most critical aspects of any record contract…

B. ARTIST ADVANCE

What is an Artist Advance? This is the upfront payment or “advance” made to you when you sign the record contract. First rule – get your entertainment lawyer and manager to get as much of an advance for you as possible because it may end up being the only money you get from a record label, especially if they never commercially release your album! Traditionally, advances were paid to an artist so that they could focus on recording their album without having to keep a job. However, these days, you may still have to keep that day job since advances are not as big as they once were. Keep in mind that advances are “recoupable” (not a “loan”), meaning that the record label will recoup the advance from record royalties payable to you on sales of your records

C. Record Royalties:

Reflected as a percentage of the “standard retail list price” (or the “published price to dealer or PPD”) of an album, this is the money a record label will pay you based on the sales of your records. The “all-in” royalty (which includes the payment to a producer and other third parties) for a new artist ranges from 12% – 16%.  Obviously, your entertainment lawyer will try to get you the highest rate possible, especially if you’ve got a nice “buzz” in the music industry. However, you won’t receive a dime of record royalties until the record label has recouped all of the costs it expends in recording, marketing, and promoting your album. So don’t get mad if your royalty accounting statement does not contain a royalty check unless you’re selling records like Adele!  Lastly, beware of a clause in a record contract where you’re receiving 50% of the profits generated from sales of your single/album. It sounds fair, but be careful of language in the record contract where all the costs of recording, marketing, and promotion of the album is recouped from your 50% share of the profits!

D. Co-Publishing: 
If you write or produce your own songs, this clause gives the record label a co-publishing ownership interest in those songs. The record label will exclusively administer and own 50% of the publisher’s share of the copyright, which means they keep 25% of the publishing income, and you keep 75% in perpetuity, i.e., forever. This language is hard to get deleted, so your entertainment lawyer will seek to limit the record labels ownership interest to only those songs actually “recorded and commercially released” while you’re signed to the record contract.  Any songs that you write for other recording artists will be 100% owned by you. Also your entertainment lawyer can also try to get an additional co-publishing advance paid to you by the record label in exchange for their co-ownership interest in your song.

E. Merchandising:

When you sign a record contract, you also give the record label the exclusive right to use your name, image, and likeness for promotional and commercial purposes. In this case, the merchandise clause in the record contract gives the record label the exclusive right to manufacture and sell posters, t-shirts, baseball caps, etc., incorporating your name, image, and likeness. In some cases, your entertainment lawyer might be able to get that clause deleted, but most of the time, the record label will insist it remain in the record contract and offer you a 50/50 profit split of merchandising income.

These are the key factors that you need to keep in mind.