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Recording+K

Recording+K

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Published by socratic_mudd
A template that can be used by up-and-coming music producers, agents, etc.
A template that can be used by up-and-coming music producers, agents, etc.

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Published by: socratic_mudd on Apr 07, 2008
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05/08/2014

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Recording AgreementRecording AgreementagreementIf an exclusive recording agreement is being proposed, there are certain key issues thatshould be addressed and negotiated, if possible. As in all music-related agreements, all provisions are negotiable, but largely dependent on your clout. The following are the mostimportant:(1) Term: "Term" is the length the recording artist is required to provide personal servicecontract. The artist should watch out for the "open-ended" term provisions, which allows recordcompanies to define a "year" as "8 months after delivery of the minimum recording obligation,whichever is later" or similar language. The artists should attempt to limit the initial fixed term to12 (not 18) months.(2) Artist's Recording Commitment: This is the provision specifying how long an artist mustexclusively record for a certain record label. It obligates the artist to record and deliver a certainnumber of masters to the record company. If a long term and substantial albums are sought bythe record company, the artist with sufficient clout should ask for "promotional" provisions, suchas guaranteed release, promotional budget, advertising, support, publicity, and/or video. Theartist should also try to limit the delivery commitment to one or two albums per five-year term. If the artist cannot limit the recording commitment to a comfortable number, ask the recordcompany for broad and favorable "suspension" terms.(3) Record Companies Commitments: The artists should ask for a "guaranteed" release clause,defining "recording" to include "releasing." The artists should also avoid "minimumcommitment" language.(4) Delivery: "Delivery" of a master recording at certain times is required of the recording artist by every recording contract. Failure to deliver product on time may prevent the record companyfrom timely manufacturing and selling records. This may affect the artist in a number of ways,including extending options dates, expirations dates, and payments of advances.(5) Suspension and Extension: These clauses are usually triggered by some failure of the artist torecord or the artist committing an immoral act. Generally, care should taken by the artist to avoidautomatic "suspension" clauses for non-delivery or late product. Instead, request that thesuspension applies only if the non-delivery was the failure of the artist and/or that it is excused if the record company bars the artist from recording.(6) Injunction and Equitable Relief: Record companies try to prevent the artist’s breach of arecording contract by restraining the artist from recording elsewhere. They do this by inserting aclause stating the artist's personal services are "unique" and "special" and exclusive to the recordcompany. Recording agreements with this language entitles the record company to injunctive andother equitable relief. The artist should limit this to provide that the record company is onlyentitled to "seek" injunctive or other equitable relief.(7) Royalties: The "base royalty rate" is the gross or starting royalty for "regular full-price sales".It is negotiable, and varies from artist to artist. Generally, it may range from 5% to 10% for a
 
new unknown artist, to 15% for a hot new artist in a bidding war, or up to 18% for a seasonedrecording artist. The base royalty rate is usually severely reduced by various other royalty provisions and definitions.The packaging deduction is another common provision. Record companies usually deduct whatis known as a "container charge", "packaging deduction" or "jacket charge." This is the singlelargest reduction of the base royalty percentage and is usually non-negotiable.An artist may also rarely avoid a "free goods" clause; this allows the record company to giveaway free CDs and tapes to radio and retailers for promotional purposes that can result in asmuch as a 15% reduction on the base royalty rate.Royalties from the sale of CD’s are often computed by many record companies on the basis of less than 100% of the sales. For example, royalties for CD’s are commonly calculated on the basis of only 85%, or even as low as 75% of sales. Try to avoid this historical practice. There isreally no justification today for this reduction since the price of making CD’s is negligiblecompared to other formats.Record club royalties are usually reduced by 50%, and are further calculated on the basis only85% of sales. The right artist with sufficient clout may be able to ask for 100% sales on recordclub royalties, and should also place limits of freebies.There are reductions for foreign royalties. For example, because of extra costs involved withover seas distribution, the royalty on foreign sales of records is usually reduced to one half (½) of the normal domestic rate.And, if possible, try to insert a provision that accounts for countries with blocked currency or funds. Some countries require royalties remain in their countries or at least be spent in their country. To be protected against these blocked royalties, the artist should negotiate a clause thatrequires the deposit of these blocked royalties in the name of the artist.(8) Controlled Compostition Clause: Mechanical royalties are paid by the record company to theartist based on US sales of records. Under copyright law, there is a statutory minimum. However,under the so-called "controlled composition clause", or "reduced rate, " a record companyusually gets the artist to take a negotiated or reduced mechanical license rate. There are severaltypes of reductions in your statutory rate.A. The rate is reduced by percentage; instead of 100% of the statutory US rate. The mechanicalrate is commonly 75% of the minimum statutory rate, as of one of the following dates:(1) commencement of recording;(2) date of delivery;(3) date of initial release; or 
 
(4) date of sale.Obviously, the latter date is more advantageous to an artist, as the statutory rate may go up fromthe date of recording to the date of sale.B. The rate is reduced further to a certain number of songs. Thus, the "rate" is usually limited to10 to 11 songs per record, even though you may have 15 songs on the album.C. The reduced "x 10 min stat" rate is also further reduced depending on the configuration(format). Thus, a typical reduced mechanical license rate would be: 10 songs x 75% rate on LP’s,5 songs x 75% on EP’s, and 2 songs x 75% rate on singles.D. Mechanicals are payable only on records for which record royalties are payable, whichusually means no payment on "free goods" and promotional copies.E. There is usually a further reduced rate for secondary markets, such as for record clubs sales, budget lines, and sometimes mid-priced records. And, there may also be special treatment for multi-record packages. There is also a special rule regarding "Greatest Hits" or other re-releases.(9) Advances: Royalty "advances" are basically pre-payments of estimated royalties. They arenon-refundable but recoupable, meaning they can be paid back to the record company fromartist’s earnings only. They come in different forms, the obvious being an advance payable uponexecution of an exclusive recording agreement.(10) Reserves: Currently, most record companies limit returns to 20% to 22% of records shipped.Because record companies do not know how many records will be returned by retailers, theycompute mechanical royalties based on net sales "less returns" so as to avoid any overpayment of royalties. They maintain what is known as a "reserve" against future returns. The reserves is a percentage of gross sales of a record. These reserves may range from 30% to 75%. Since mostrecord companies are not going to accept more than a 22% return privilege from retailers, theartist should try to limit these to "reasonable" reserves, not to exceed a certain percentage (e.g.,20% to 25%), and include a specific liquidation clause ensuring full payment after a certain period of time (e.g., within three or four accounting periods.).(11) Cross-collateralization: This clause should definitely be avoided. A cross-collateralizationclause compromises the song writer's otherwise independent royalty income. Under this clause,the record company is allowed to recoup mechanical royalty advances from sources other thanfrom the actual sales of the record in question. For example, if an artist owes the record companyfor unrecouped mechanical royalties from LP1, the record company can use sales from LP2 or even publishing income to get paid. This obviously substantially reduces and sometimeseliminates the likelihood that the artist will receive any royalties. This clause is never called byits name. It is usually recognizable by the term, "all agreements between artist and recordcompany heretofore or hereafter entered into shall be deemed to be one accounting unit." Alwaystry to get these clauses removed from the recording contract.

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