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What are the Particulars of a Record Deal ?

Discussion in 'Band Management [BG]' started by SMASH, May 4, 2005.

  1. SMASH

    SMASH Guest

    Jan 18, 2000
    Anyone run a label? Anyone on a label or a music industry attorney?

    If so, pls share whatever details and clauses you'd care to share about the particulars of your deal, or deals you know of?

    Alternately, does anyone know of any good resources for template deals or deal details?

    I'm going in on a label with some investors - one of whom is a lawyer so that end is covered - but we're at a bit of a loss as to what the standard clauses and wording of same is in typical contracts between artists and labels. We want to make things as fair and beneficial as possible for the artists, but also wish to be protected in case they strike it big or don't hold up their end of the deal.

    I realize almost each deal is different, but there must be some rules-of-thumb or at least common legalese in the wording of most deals?

    If so, pls let me know. I also think it'll prove a good resource for anyone looking to sign deals in the future.

  2. ABout.com has some really good stuff on this.

    You're correct in assuming each deal is going to be different but it's going to come down to what you can offer the bands (i.e. distribution, booking, press, etc), what you expect to be paid and how. You need to take a hard look at your resouces (press contacts, studio owners and recording engineers, club owners and booking agents). Can you get them a discounted rate at a decent studio? Can you get them rack space in a series of stores? Can you hook them up with shows for a tour?

    I think the greatest thing you could do for them is get the business end of it started and provide them with an icon to affiliate themselves with. After all, the labels further up the food chain arent intrested in art, they wanna get paid. If you go to them with a proven business thats making money hand over fist, you have a lot more lattititude in contract negotiation than the average joe who hasnt done this.

    Of course somewhere in the contract should be the stipulation that the contract can be bought out for a nice check. :cool:
  3. Music Attorney

    Music Attorney

    Feb 22, 2004
    I’ve posted a bit on this general subject before in this forum so, if you haven’t already, you may want to do a search and see if you find any of the posts useful. However, the bottom line is that there is, IMO, no such thing as a “template” or “standard” agreement. A company may send you THEIR standard agreement, but that does not make it a “standard” agreement.

    You say you want to be “fair’ but fairness is one of the most subjective words in the English language and usually requires some context. For example, one deal I did was where the artist took no advances and had considerable name recognition before signing the deal. Therefore, the label had much less risk and was willing to scrap the recording agreement altogether in favor of creating a joint venture with the artist which basically was a 50/50 split of net receipts, co-ownership of masters, etc. While these deals are tough to come by, they are possible.

    Another example is when the artist you want to sign is part of bidding war. That situation creates stupid money being thrown at the artist and either you get into the ring and outbid the competition or you stay out. Conversely, you may find a quirky artist in some coffee shop that you think, with time, money, and effort, you can turn into something big but you will be investing heavily and, I assume, be expecting a higher return commensurate with your risk.

    What services is your label providing? What contacts does it have? Does it have distribution or are you merely passing the job through to someone else? Are you paying for recordings? If so, how much? Are you making a video? If so, are you paying for it and what types of budgets are you talking about?

    Also, I’m a little perplexed when you say: “I'm going in on a label with some investors - one of whom is a lawyer so that end is covered - but we're at a bit of a loss as to what the standard clauses and wording of same is in typical contracts between artists and labels.” What do you mean you are “covered”?

    Finally, I’d be very careful about using the info you find on the web (e.g., like at the URL provided by Sonic Seamus). Some of the info is correct and some is not, but I doubt most people will know the difference. For example, the guy who wrote the article “How Recording Contracts Work” at the URL was Marshall Brain. His bio said this: “Marshall Brain is the founder of HowStuffWorks. He holds a bachelor's degree in Electrical Engineering from Rensselaer Polytechnic Institute and a master's degree in Computer Science from North Carolina State University. Before founding HowStuffWorks, Marshall taught in the computer science department at NCSU and ran a software training and consulting company.”

    I’m not trying to take anything away from the guy, but I’d read the info with more than a grain of salt. There are many pitfalls not addressed and the ones that are addressed are not done in a way that would really provide you the substantive knowledge on how to truly deal with them in a contract. Would you feel comfortable knowing your doctor had read a “how to” on surgery by someone that wasn't even a surgeon and then operated on you?

    Let’s start with the above and then talk after you’ve had a chance to respond.

  4. SMASH

    SMASH Guest

    Jan 18, 2000
    Great, thanks. I was hoping you'd chime in.

    "Yes" is the answer to those questions.

    Exactly the plan. Thanks.

    Fair enough. More so what I was hoping for was any agreements to work off of so that we have examples of the wording, typical cuts for artists or the label, don't forget to consider and any eventuatlities, revenue streams, etc., or leave loopholes for same.

    Agreed that "fair" is subjective, just saying that per our model we'd be happy to break even rather than trying to make a lot of money at the artists' expense, or being put in a position of releasing subbish albums for the sake of keeping cash flow up as many (most? .. all?) labels do. By "fair" I meant the label gets something commensurate with what it puts in.

    It'd be nice to leave some clauses open-ended as, like the artists we'd like to work with, we're learning as we go, but they're also artists that could sell well with the right push so we'd not like to be left shut out if a bigger label swoops in to take an act from us.

    Similarly, "fair" by providing a good contract that spells things out clearly and protects the act should the contract be bought out.

    Yes to all these, but it depends on the act - what work the band will do. No point putting an album in national stores if the act doesn't tour. Why have an act that doesn't tour? Many small labels in metal and techno (probably in all niche genres) make profits on acts that are only recording projects - so long as you can market them well in the genere-specific media.

    "Covered" in the sense of understanding and working with legalese and contracts, and not having to pay for that expertise. Also, lawyers can be good negotiators and one with his own firm can open more doors than some yob cold calling out of the blue.

    Great points. Any input is very much appreciated !
  5. Music Attorney

    Music Attorney

    Feb 22, 2004
    I’m still trying to understand a few things based on your responses.

    You say you want “agreements to work off of” and they need to cover what is paid to the artist, cover any “eventualities, revenue streams, etc.” and they can’t leave any “loopholes.” You’d like them to “spell things out clearly,” to have some clauses be “open-ended” and you want to be protected “if a bigger label swoops in to take an act from us.”

    All of the above are understandable goals. However, those goals can manifest themselves differently in the contract depending on the particular act you are signing. For example, there are provisions in a recording agreement with a band that would not be part of a recording agreement for an artist. Maybe you intend to give the band a recording fund or perhaps you prefer to give the band an advance plus a recording budget. Again, this would create the need for different language for each scenario. Another example would be where an artist uses a loan out company to furnish their services. The language in the recording agreement is different than if the artist is signing directly.

    You also said you want the agreements to be “fair.” However, when I asked you about paying money and making other obligations to the artist you said yes “but it depends on the act.” In addition, you felt the contract should be structured so that the “label gets something commensurate with what it puts in.” This is my point exactly! That is, it depends. Major labels use a number of templates developed over years and years and these agreements can run 90 pages. And while they do a good job of covering the label for any “eventuality” I wonder whether they would be good “templates” for a small label. Reviewing recording agreements used by small labels may cause you to leave out important clauses or language that may not have been important to that label but might be important to you. You really need someone who knows what they are doing and can create documents that make sense for your label.

    I’m still concerned about your feeling that you are “covered” regarding legalese and contracts and not paying for that expertise. The legal profession, like the medical profession, tends to be highly specialized. Even though I’m a lawyer, I would not draft my own estate planning document, I would not create a partnership agreement for a group of investors, nor would I litigate on behalf of a client. Reading contracts is one thing. Reading contracts with the familiarity and expertise that comes with working in a certain field is altogether different. Would you have the doctor that delivers your child perform brain surgery on you? They are both doctors, but I’d certainly want the one with the particular expertise doing what they do best. The firm I’m with also does film, tv, books, etc. and I’d no more review contracts for a film production than a lawyer in the film division would review a recording agreement notwithstanding the fact that we are both lawyers and the subject matter involves the entertainment industry.

    Rant over.
  6. Music Attorney

    Music Attorney

    Feb 22, 2004
    Let me start this next section by saying that the best way to make a small fortune is to start with a large one and go into the music business ;-)

    Because of time constraints, and the amount of material needed to be covered, I’m going to have to do this in stages. Also, my experience is mostly with U.S. major labels and while many of their concerns naturally apply to smaller labels, there are certainly significant differences between them as well.


    What services are exclusive under the agreement?

    The answer to this question will go a long way towards “protecting” you from other labels. If your artist is signed to an exclusive agreement, then the other label can’t touch your artist without going through you. Typically, labels require that the services of their recording artists are exclusive in connection with “records.” However, the definition of “records” is usually extraordinarily broad and encompasses a large number of ways that an artist might record their voice. For example, if read literally, an artist signing a major label recording agreement would not be able to record their voice for a books-on-tape style product even if it was completely unrelated to music. A label could prevent an artist from doing a voice over for an animated character even if the artist was being used simply because they had the right voice for the character as opposed to a “distinctive” speaking voice where everyone knew who was doing the voice over. The label could also prevent an artist from acting in films and television because the film/tv show would include their voice on a “sound recording” which would be considered a “record” under their agreement and the label has the exclusive rights to those services by the artist.

    Usually, there are a number of exclusivity waivers that a label will “give” during the course of negotiations if asked to do so but the artist’s rep needs to ask and needs to know what to ask for. The most contentious “exclusivity waiver” right now has to do with ringtones. I was recently told by a major label that if my artist wanted to sign an agreement with Verzion to promote Verizon’s wireless services saying nothing more than “Hi, this is Artist and I think Verizon has the best network”, they would consider it their option to prevent it or require the artist to cut them in for a piece. Their “logic” (and I use the word loosely) goes like this: A ringtone is a sound recording. A sound recording = “record”. Verizon sells ringtones. Therefore, your services are being provided in connection with records and those services are exclusive to us notwithstanding the fact that what was said was nothing more than an endorsement about Verizon’s network.

    As I said above, what services are you going to require be exclusive to your label? Traditional records only? Songwriting? Can your artist produce records for other people? If so, can they use the artist’s name and likeness in connection with the advertising, promotion, and stickering of the album for the other artist? Obviously, the issues regarding exclusivity can go on and on.


    How long is the agreement for? Typically, recording agreements call for an initial period of 1 or 2 albums firm and then the label has a certain number of agreed upon option periods (usually for 1 album during each of those option periods) that it can exercise in its sole discretion. You’ll have to determine when an artist can commence recording each album, when it will have to be completed by, etc. These start and stop dates are usually a little easier to determine in connection with the first album, but harder with subsequent ones. For example, if the first album does well, then the label will want to ride that success as long as possible before starting another album. If the first album flops, then labels typically want as long as possible before they have to make a choice on whether to drop the artist or try another album. Some “average” time periods for the major labels are that the initial period commences with the signing of the agreement and ends (assuming they don’t exercise an option to extend the term) 12 months after delivery of the last master recording in connection with the album or 7-9 months after the initial U.S. release of the album. Timing on the start and end of option periods must be thought through based on the label’s requirements regarding when each album can commence recording and the applicable delivery dates.


    Are you going to have control over the artist’s website? Will it be the “official” artist website? If so, can the artist have an alternate website? If so, are there any restrictions to them doing so? Does the artist have any say in creating the label’s website (e.g., content, “look and feel”, etc.)? Are the costs recoupable? What happens post term?

    I’ll be back at some point in the near future.

  7. Tash


    Feb 13, 2005
    Bel Air Maryland
    Does this mean Smash is "The Man" now?
  8. Music Attorney

    Music Attorney

    Feb 22, 2004
    As you can probably surmise from the discussion above, short of posting a boatload of different documents, it’s going to be hard for me to provide language or “agreements to work off of” without a better understanding of the workings and business model of your label. That said, here are some other things to consider:


    Is your label going to own the copyrights in the records, videos, etc. under your recording agreement? Co-ownership? Will you license the masters from the band/artist?


    Are “creative” decisions mutual or will you consult with the artist, but retain ultimate control of the process? For example, does the label pick the single to radio? Who has the ultimate say about album artwork, how much it costs, who owns it, and can the label use it for it’s own merchandising purposes? Perhaps your label will control the merchandising and license the artwork to the artist for their non-exclusive use.

    Who controls the publicity, marketing, and promotional decisions? Are all of these costs recoupable and from what sources?

    Are you providing money for the band to tour (i.e., so-called “deficit tour support”)? If so, what sources can be used to recoup it?

    Here’s another example that might help illustrate why it’s not so easy to draft language that’s “fair” yet cover any eventuality. Let’s say your label felt there was a great opportunity to place a master recording it owned in a movie that would give your band great exposure and/or generate significant income for the label, but it was a controversial movie like “Passion of the Christ,” “Fahrenheit 911,” or something similar. Would you want the band to have blocking rights (i.e., mutual approval)? You might be saying you wouldn’t use the master in the movie if the band objected so let’s make it mutual approval. However, any artist attorney that has a clue what they are doing would, when the label came to discuss the situation, tell the label: “we will agree to approve the use IF you [insert condition that band is insisting on like giving them half the license fee instead of the label using the money to recoup its investment]. Now the label is in a position it doesn’t want to be in. What started out as “fair” language on the label’s part becomes a weapon in the hands of the band. In my world, contrary to what a lot of people might think, the label will keep control (or give the band limited options) to prevent that very scenario from happening and then actually consult with the band and usually follow their decision (assuming it’s not just financially based). Therefore, when you are considering the language for your template (or templates), is your language going to give away some of the label’s power and control or will it retain the power and control with the label saying to the artist: “trust us”?

    More to come.
  9. Steve Clark

    Steve Clark

    Jan 9, 2004
    London ON
    Subscribe. Thanks everyone, Music Attorney in particular.
  10. SMASH

    SMASH Guest

    Jan 18, 2000
    Music Attorney, much thanks.

    You're right that just any lawyer won't do, just saying the one we do have has a vested interest ergo will be careful, is familiar with contracts/clauses, and at least can get the gist of things - better than nothing is all.

    Please continue your postings. They're extremely helpful in re: what types of things to consider and cover.

    I expect our agreements will be pretty small-time for now, and with bands that haven't any contractual experience themselves and likely no representation. In that regard it's up to us to make sure the deals are fair for all sides, with our side's primary concerns being that the artist holds up their end and that the label gets a fair cut if any of the acts hit big or get big label offers.

    Holy ironies Batman !


    I hope not though. Trying to out-man The Man, if anything.
  11. Tash


    Feb 13, 2005
    Bel Air Maryland
    You know what they say "If you can't beat em, join em, buy them out and make them work for you!"
  12. SMASH

    SMASH Guest

    Jan 18, 2000
    Bump - anyone have anything to add?

    Music Attorney, the info you're providing is excellent. Can't thank you enough. Please continue if you've ever the time and inclination.
  13. Music Attorney

    Music Attorney

    Feb 22, 2004
    I haven't forgotten. More to come when I can get some time. Maybe this coming weekend.


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