Recording Agreements
What is a good record deal?
What is good for one artist is not necessarily so for another.
- Some artists will be happy to give away all their rights in their recordings subject to payment of a substantial advance by a record label. Other artists however may be willing to grant rights to a label to exploit their recordings for as little as one pound, provided they also retain rights to receive a substantial share of the profits made by the record label.
- Record labels also vary in size and their ability to promote recordings. Some labels might be happy to agree to spend thousands on a worldwide media campaign, whereas others might be happy only to pay for the recording costs – and some may not even be willing to agree any release commitment whatsoever.
Why have a recording contract anyway?
Generally, the party making the arrangements for the recording session (ie the person who pays) will own the copyright in the sound recording. That entity then has the exclusive right to exploit the recording, and allow others to do so – this is because they own it and can do what they like with it, subject to obtaining the approval from whoever composed the song and any necessary performance rights. The approval right of the composer (or his publisher) to allow the owner of the sound recording the ability to actually manufacture and distribute records and MP3’s of the recording itself is also known as a mechanical licence.
Bear in mind this legal right relating to ownership of the sound recording itself does not give any publishing rights. The sound recording owner therefore will not have any rights in relation to the words and music in the underlying composition.
So – where an artist is approached by a producer who offers free studio time to record some music, the artist needs to be careful not to accidentally give away all rights in the sound recording and his performance to that producer or the studio owner, as he may end up with no legal right to share in any income relating to the sales of the recording. To avoid any disputes over who owns the recording and who has the right to sell it - it is best to have a proper written recording contract specifying such rights and how income from such exploitation will be split between the parties.
Key provisions in a recording contract include:-
- Minimum commitment – usually 1 album, possibly with options in favour of the record label to extend the term for further albums.
- Advances – payable by the record label to the artist to sign the agreement, with further advances payable when options to extend are exercised.
- Royalties – further payments to the artist when advances are ‘recouped’. There are generally two types of royalties:-
(a) A ‘receipts deal’ is a percentage of the record label’s net profit, usually 50%. This type of deal is favoured by smaller independent record labels.
(b) The bigger labels however prefer a ‘points’ based system being a fixed percentage of the dealer price of a recording. For example, a good royalty for an artist might be 25% of dealer price.
- Release obligation – often recording artists want some assurance that their album is ‘commercially’ released to as many people as possible, ie throughout the world both physically and digitally. This can be expensive to arrange, so some smaller record labels might only be prepared to agree to release digitally in the UK. Where the record label completely fails to release an album, the artist should have the right written into the recording contract allowing him to acquire the copyright in the album to release it himself or licence it to another 3rd party record label to do so. Some record labels will agree to this provided that they are reimbursed a proportion of the recording costs spent by them on the particular album.
- Group provisions – where a band signs their exclusive recording rights to a record label, it is usual to ensure that each member is bound by the terms of the agreement in the event that the band splits up. Even when this happens some record labels will not release a leaving band member to record for another label. It is also usual to include wording in the recording agreement regarding how new band members are to be admitted and how they will be accounted to for recordings going forward from their date of admission.
- Controlled compositions clause - this is a clause that deals with songs composed by the artist as opposed to ‘Covers’ composed and controlled by someone else. Most record labels will require rights to control part of the artist’s own compositions. The record label may then also limit the amount of the mechanical royalty which it has to pay for Covers in North America. In that territory the law provides a statutory royalty rate - which is payable for the mechanical licence to record and distribute a song, unless the parties contract out of the statute. Some record labels however will only agree in the recording contract with an artist to pay 75% of the statutory rate for Covers recorded by the artist, meaning that any excess mechanical royalties are deducted from the recording artist’s royalty account. In extreme circumstances where the recording artist does not write any of his own material, he can end up owing the record company for mechanical royalties payable to other composers.
- Accounting – the recording artist will want to make sure that royalty payments are paid as often as possible each year. Some record labels however are only prepared to account twice a year. The artist should ensure he has audit rights to inspect the books of account of the record label, and the record label will seek to limit this right to only being exercisable once a year and that royalty statements are binding after a shorter period than the usual statutory limitation period of 6 years.
Contact us
Chris Phillips and Mike Shepherd who head up the Media and Entertainment department here at Bolt Burdon are experienced lawyers used to negotiating and advising on all types of music industry agreements.
To find out more about recording agreements, and how we can represent you either as a new artist or band or a record label, please contact us for a free initial consultation on 0207 288 4700.