THE RECORD DEAL – 5 ESSENTIAL CLAUSES

The record deal is one of the most symbolic contracts of the music industry.

Perhaps because it encapsulates a turning point in Music History (the Album era), or perhaps because it is a milestone in an musicians’ career… [or perhaps I am alone in giving poetic meanings to legal documents].

The record deal is known by many names… the recording contract… the production contract…the artist contract… the sound recording agreement… but generally refers to the same thing:

The maker (often the record company) retains the exclusive services of the artist for the purpose of recording one or more albums, which the maker owns and exploits in exchange of paying royalties to the artist.

Here are five essential clauses in a RECORD DEAL:

1. Exclusive services 

A record deal will generally stipulate that the artist will provide their performing services exclusively to the record company for the duration of the contract. Indeed, few record labels will agree to invest money in an artist’s career only to have them record with a competitor…

That said, it is important to ensure that the contract does not prevent you from being an accompanying musician to other artists.

:: Can the contract be limited to the featured artist’s exclusive services? In the case of a band, can the contract be limited to performances played by any combination of three to five of the members? Can the contract be limited to performances played under the band’s name? What happens if the record company sells its business or assets to a third party – will the artist be tied to the new owner for future albums?  ::

2. Term

Generally, the duration of a record deal is calculated in terms of number of albums or recordings. The artist guarantees their services for 1 album; for 1 album and 2 options; for 4 options [not recommended], etc.

As the master recordings belong to the record company, they can exploit the recordings forever. For the artist, the important thing will thus be to limit the length of time for which they are tied to the record company. By reducing the number of album options, they will be able to approach another record if their experience has not been conclusive.

It is also important for artists to ensure that the refusal (or omission) of the record company to exercise an option will cancel subsequent options, if any.

3. Budget

Although record companies rarely offer it firsthand, artists should always try to obtain a guarantee: how much will they invest on the album(s)? If their only response is “it depends on grants” or “we have $500 to start with”, seriously ask yourself how badly you need a record need.

4. Royalties

In my experience, there are two main schools of thought on how to compensate artists:

  • Some record labels prefer to pay a percentage from each album sold after recovery of production costs. For reference purposes only, this, in Quebec, is generally between 10% and 16% of the wholesale price;
  • Others prefer to share net revenues of exploiting the albums after recovery of production and marketing costs. 50/50, for example.

It is essential you obtain the advice of someone experienced in reading and negotiating such clauses. Many subtleties can be found in how they are written.  At the very minimum, if you find the word “recoupment” (reimbursement of expenses) in your contract, look for (or ask for) a clause in which budget expenses must be overseen by the artist respected by the record label… otherwise, your royalties may never see the light of day!

5. Sources of revenue

The concept of the 360 deal has long been the subject of much debate; loved by some, criticized by others. For a record label, it is a way to reduce final risks in making an album… simply, to prosper.

Before signing a 360 deal, the most important question to ask yourself is this: what can this record company do for me? It is offering to cover the publishing, management and show production, in addition to making a record, but can it really do all that? Is it a publisher; a show producer? Does it have staff with experience in these areas? Could others do it better? Just by thinking it over, you might have answered the question.

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From your accountant-turned-maker to Universal Music, record makers and record deals, come in many shapes and sizes. As this contract will greatly influence the trajectory of your career, you should always seek the services of a lawyer to review and negotiate your rights.

Come by the office, coffee is on me.

:: Translated by Emily Alberton / Photo credit: Nick Hillier

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