Intro to Music Biz Articles
by Frank Imani Jamal
Cornbread Productions
Negotiating Terms in a Record Contract

When an artist signs a record deal--either with an independent or a major label--they should ALWAYS insist on negotiating minimum clauses in their contract which serve to ensure their success, protect their finances, and safeguard their career. These minimum terms could be viewed as "negotiating points" for the artist, and should be carefully reviewed and examined. As I mentioned in "The Role of a Producer," points are the negotiating percentages charged by producers towards the record projects they work on which give that producer a cut of the profits above and beyond his up-front fee. The more points a producer receives--which, by the way, he receives even BEFORE the artist receives a dime--the less likely the artist will begin receiving profits from the project any time soon. When a new artist is presented a contract, he and his representatives--manager, attorney, etc.--should see that these minimum clauses are included, for they serve a similar purpose as the "points" negotiated by producers. Although these terms are included as ideal clauses to have inserted in a contract, NOT EVERY ARTIST WILL BE IN THE POSITION TO HAVE THEM INCLUDED! The information is listed to let the artist know what would, be ideal to have, and to at LEAST seek their inclusion.

No Publishing "Cross-Collateralization": Publishing "Cross-collateralization" is the procedure by which record companies use profits from songs written by the artist to offset money still owed by the artist from prior RECORD sales. The songs an artist writes should have no bearing on the profit flow from CD sales, and no attorney would advise their client to agree to such a matter. Song writing falls under "publishing" and for purposes of accounting, should not be mixed with CD sales.

Duration: Most new artist contracts are for one year, with options to extend it in one- year increments given to the company and to the artist for up to 4 periods. Options can also be detrimental to an artist’s career if the company chooses to use them that way, so it is advisable to seek to limit the options to as few as possible. You should have at most a contract which grants only two additional one-year options.

Royalty Rate: A new artist should not settle for a royalty rate less than 6 to 10 per cent of sales based on 100 per cent of domestic retail sales. For sales outside the U.S, this rate should be at least 75% of the domestic rate.

Production Budget: Even the smallest of record companies should spell out how much they intend to advance the artist for the production of their project. This figure is open for serious negotiation, but some money should definitely be fronted for production of the CD and, where applicable, the music videos.

Releases: A contract should stipulate the minimum number of releases per year, and should also state how many songs are to be delivered by the artist to the company. Even with this clause, however, most record companies still insist on having the right to delay the release for marketing reasons.

Promotion: What constitutes adequate promotion of the artist's material should be detailed. Promotion also involves allocating the necessary people to do the “legwork” in promoting the artist’s projects.

Ownership of Masters: During the term of the contract, the record company normally owns the master recordings of the artist’s songs. What should be included, however, is how ownership will revert back to the artist if and when the artist no longer records for the label. Having this “recapture clause” included in your contract IS VERY IMPORTANT for an artist's catalog has the potential of making money for generations to come if that artist ever becomes successful!

Publishing Rights: Some record labels try and persuade their artists to sign over publishing rights to songs the artist writes to a publishing company owned by or affiliated with the label. When at all possible, artists should attempt to enter into a co-publishing deal, thereby earning money as a songwriter AND publisher from the revenue of the songs. At the very least, an artist signed also as a writer should negotiate a deal that terminates BOTH contracts in the event that either of the deals ends. For instance, if the record deal ends, the artist should contractually have it stated that his publishing deal ends on the same day. This is called a “co-terminus” agreement.

Right to Audit: The artist should be allowed to examine the accounting statements of the record company at LEAST twice a year to ensure all royalties and costs charged to the artist are correct. This has become a hot button issue over the past few years when it was discovered that many of the major labels had “forgotten” to forward royalties to artists like Willie Nelson, New Edition, Tom Jones, and others. These royalties owed ranged from a few hundred to tens of thousands and even HUNDREDS of thousands of dollars.

Even after the labels were caught in their “creative” accounting practices and forced to pay the royalties, they still came out ahead for they did not have to pay the artists any of the interest the money earned after sitting, in some cases, for nearly 15 years in a bank!

For this reason, artists need to be ever vigilant over the accounting practices of their labels and demand to see the books in a timely fashion.

Default: What constitutes a breach or default in the agreement by either party should be spelled out, as well as what remedies are available to correct them.

Assignment: How, why, and when may the record company assign the contract to another entity? In recent years, mergers in the music industry have become commonplace. Although many new artists may not have the clout to contest the proposed merger of their company, it is still worth a shot to negotiate a provision which would allow the artist some input into the deal.

Since every situation listed here will not apply to every artist in every way, please seek professional consultation as to the specifics of your contract.

© 2004 Cornbread Productions, Alexander Magazine. All Rights Reserved