As a former musician, I enjoy helping other musicians negotiate their record contracts. What many artists do not realize, is that often times, small record labels tend to use the same contract forms with all of their clients. Because each artist is different, there are terms in those contracts which should be negotiated. This article will go over a few of the provisions found in recording, distribution and management agreements that all musicians should keep in mind when negotiating with their record labels.
First and foremost, the term of the contract needs to be laid out. While the initial term for a first agreement with a label or manager is typically one year, this may be longer depending on the circumstances. The contract will also most likely give one or both of the parties the option to extend the contract. It is usually best for the musician if his or her consent is necessary in order to exercise this “option.”
Advances are also an important term in record contracts. While it may appear beneficial to receive an advance of tens of thousands of dollars, a musician certainly needs to be aware that this money will eventually need to be paid back. These advances are typically against royalties on the amount of cd’s sold, but sometimes the contract will say that the advances are against all sums owed to the artist, which, of course, is much broader than just royalties on sold cd’s. It is wise to keep this distinction in mind when negotiating a record contract.
Another important provision deals with mechanical royalty rates. Put simply, mechanical royalties are royalties paid to songwriters and their publishers from the sale of cd’s. This means that a record company putting out an artist’s cd is obligated to pay the songwriter royalties for the music manufactured. While the mechanical royalty rate is set by statute in the U.S., it is not uncommon for an artist to receive only a portion of that statutory rate, as specified in his or her contract with the record label. In any event, it is advisable that an artist should not accept less than 75% of the statutory rate.
The above are only three of the many provisions to keep in mind when negotiating a record deal. While it is definitely an exciting time for artists, it is important to keep in mind that the recording, distribution, and management agreements in control will heavily influence how an artist goes forward with his or her musical career. As a result, it is wise for artists to ensure that they are protecting their interests.
For more information in connection with your company, please contact the VC Law Group at info@thevclawgroup.com or 858.519.7333.