You’ve worked hard to make your music known, perhaps using Groover to promote it and finally your dreams have come true: a record label offers you a contract!
First of all, congratulations! With this article, I would like to guide you through some of the most common aspects of a contract from a record label; what to expect and what to avoid, so that you are protected and prepared for unwanted situations.
In today’s world, there are a lot of options when it comes to record labels. The are an infinite amount of possible combinations, in fact, labels are available for artists of all sizes and styles. However, it all boils down to one decision: an independent or a major label. While the majors usually remain much more “traditional” in their contracts, independent labels often have the opportunity to offer tailor-made creative input for a specific artist but, with the disadvantage of often having a smaller budget and a more limited network of contacts.
So what should you expect to see in a contract? Let’s analyze some of the main sections together!
1. Establish the context
First of all, each respectable contract will start by establishing who the parties stipulating the agreement are (this usually involves the artist, their possible representative and the label with their representative). A date should also appear at the top to establish a history chronology and any other information relating to you as an artist and the label as a company.
In this section it is also important that all the specific terminology relevant to the contract is defined because they will be used repeatedly throughout the agreement. Some examples: terms such as “master”, “artist” … etc must be defined. This section serves as the introduction to the contract!
2. Duration, terms and expectations
After the introduction, the first section of the contract you will most likely encounter will be that of the “term”, also known as a temporal clause. Here, the artist and the label will agree on the duration of the commitment and the report. In this clause, it is very important to also determine what the expectations concerning the quantity of music that must be produced are and in what time frame. Note that the latter point is applicable only if the label is signing the artist. The license and distribution agreements usually do not require the artist to produce a specific amount of music under the “protection” of the label, however, one will still need to define the duration of these license rights.
In this section, the artist will decide how long the rights of their music are available to the label, and the nature of the relationship between the two entities will also be defined: whether it is exclusive or not. If it is an exclusive contract with the label, usually the label will take care of all aspects of the artists career. If it is a non-exclusive contract, then this usually means that the artist is authorized to enter partnerships with third parties regarding merchandising, tour, production etc. (make sure to read under the “terms” section and understand what the “exclusivity” of your contract really means and what it entails).
Finally, in this first section, you can also expect to see a clause that grants permission to the label to use the artist’s name and image in order to distribute and promote the artist’s music. Make sure that you read the details within the clause because while allowing a different entity to use your name and image freely can be beneficial for your career, it can also be quite detrimental. (Maybe you want to add a statement saying that there must be artist approval before any name or image is used … this could save you a lot of future troubles).
3. The financial aspects of a record contract
The following part of the agreement will involve everything that has to do with money and expenses. This is usually divided into two parts:
1.Advances and financial support:
When we refer to advances, we’re talking about the money that the label will give to the artist as a “deposit” that pays for the creation of an album or EP (whatever the agreed quantity of music was) and essentially finances all life expenses (salaries) involved and the production process from start to finish. The amount of the advance will depend on the type of contract, the size and budget of the label, and the popularity of the artist. However, it is very important to know that this money can be considered recoupable or non-recoupable: this means that the label retains royalty payments (or a percentage of, depending on the contract) from the artist until their initial investment has been repaid in full or in an agreed percentage. However, the difference is, is that a non–recoupable advance means that if your sales do not reach the break even point with the label, you do not owe money to the label but, you do still have to pay back the advance in your royalties.
In this section, it is often possible to find an agreement concerning the properties of the recordings (also known as the “master”). The general rule is that those who pay for the record, has the masters. In the past, this meant that the labels had full possession of the masters of most of their artists. Nowadays, the artists struggle to maintain the ownership of their recordings and for this reason, they look more and more to independent labels and license / distribution agreements rather than complete contracts for artists offered by major labels.
2.Division of royalties
The second part of this section is where the percentage of the division of royalties is agreed upon. This term varies depending on any individual case and also changes based on the exchange: usually, the more money is received by the artist as advance, the higher the quota that the label will ask in royalty payments. Royalties may include mechanical rights, publishing, streaming and extend to any other form of income perceived by the artist.
| Check out: All you need to know about music royalties
4. The last section: details, more details and termination clauses
We are almost there! As I said before, the contracts are different and may vary but, in the most standard of cases, they will have two other very important sections at the end.
The penultimate part of the contract will contain some various points, including, but not limited to: any flat-rate compensation that the label could pay the artist (note that it is always the label to pay the artist and not vice versa, as we will see in the last paragraph of this article!), any specific agreement concerning all songs that could be part of a compilation or that have already been published as singles, and the album artwork, video clips or even ideas for promotion. Here you can also find a deadline for the publication of new music (which is a temporal clause, but that does not necessarily belong to the section of the “term” so, keep an eye for it in this section!).
Finally, the contract will end with points that are of bureaucratic or legal nature. Usually there are many points listed and may differ for various reasons. The most common are:
- The artist guarantees that they have the right to stipulate the contract and do not need third-party permission.
- The repercussions in the event of early termination of the contract (the notice requested and the liquidation necessary to compensate for the invested capital).
- Finally, the agreement usually terminates by declaring the national jurisdiction of the contract (in case of problems, there is a need to establish in which country you will go to court).
5. Alarm bells in contracts and what to avoid
We talked about what the most common features of a contract with a label are, but now I would also like to highlight some points that should make alarm bells go off. Remember that it is always within your rights to question any point that is not clear to you and, if necessary, seek legal advice from a specialized lawyer in the music industry.
Here are some things you should be aware and try to avoid:
- The label asks you for money! As I said before, it is always the label that should be paying and not the other way around! If your “label” asks you for payments, it’s probably best to politely decline and find a new partner.
- Beware of contracts that lock you into a long-term and absolute exclusive deal.
- Don’t give up the rights to your music for the “duration of the copyright”: in Europe this is 70 years after your death!
- Stay away from any agreement that asks you for the same percentage of royalties as those required by a major label but without either the financial advance or other benefits (promotion, networking, access to high-level facilities, producers, songwriters and sound engineers)
- Beware of contracts stating that your masters are wholly owned by the label. Instead, try to keep ownership of your masters or at least share ownership with your own label.
- Pay particular attention to the termination clauses or any clauses that may suggest that the label owns the recordings forever even after the contract is terminated and that may grant them the right to use them for any purpose. (See Image)
– Translated by Betty Gonzalez Gray –