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t~ be a union member or become one within 30 days, and the artist paid no less than union scale. Most artists receive advances in excess of
A lot of kids dream of becoming recording stars, of being the next Park, Alicia Keys, 50 Cent, Gwen Stefani, or Kenny Chesney. But it's often
10nO" touzh road between the dream and the recording contract. .
b' 0 .
that would-be stars do not wish to launch their careers through their
Website, or one hosted by others, they must first make contact with a producer or an A&R (artists and repertoire) executive, usually through ~ < ommendation from a friend, a manager, an attorney, an agent, another artISt, . a music publisher. Or they may put a demonstration record into a hands or get a break simply by haunting the offices of the record compames-r one of the big four record companies (Sony BMG, Warner, Universal, one of the many smaller labels owned by the big four (e.g., Epic, Interscope); or one of the independents (e.g., Concord, Curb, Koch, TVT, V2, Victory). Assuming that their talent is recognized and they offered a recording contract, artists must then try to negotiate a fair and sonable agreement. For this, they need an understanding of the basic of a standard recording contract and, preferably, the aid and advice of a edgeable representative, such as a manager or an attorney.
company agrees to pay all recording costs, including artists to the producers and arrangers, copyists, engineers, and musistudio and equipment rental charges and mixing and editing costs so paid by the record company are deemed to be (that is, recoupable out of) royalties payable to the artist.
agreement runs for a term based on the delivery of a minimum . jtr,ecordings plus a period of time following acceptance of the recordmonths) -, The minimum number of recordinzs has tradi!eri·fr~Lm(~d in terms of albums (defined as not less than 10 individual not less than 50 to 55 minutes duration). In the Internet era, consumers often prefer to buy a selection of individual tracks eno:e album, this may have to be modified. The record company
options to extend the agreement for additional albums. Even ~eriod is stated in years, a contract year is invariably condelivery of a product, since the passage of time without the is of no interest. to a record company.
contracts are either signed in or made subject to the laws of ,-""WVUll:". Under California law a personal service contract which years cannot be specifically enforced, though there is an T"·,..<.,.",,,liT'~ artists that allows a label to seek money damages if the all of the recordings specified in the contract. Some lobbied the California legislature to repeal this exception. have a maximum term for personal service contracts, so it is to decide whether the length of an exceptionally long-term 11:V]OJj~tI"S public policy. Contracts with minors are special situations shorter contract terms (see the discussion in Chapter 3).
fails to fulfill his or her obligations, most recording contracts company to suspend the running of the term. In other words, until such time as the artist cures his or her failure to perform. the artist continues to fail to perform, he or she could be However, courts have generally tended to !?:Tant relief to the
ill Vanguard Recording Society, Inc. v. Ksueskin, 276 R Supp.
'~ .. 't"r~' a New York federal court refused to enjoin the artist for a different record company where enforcement of a susan indefinite period would make the contract "harsh and
THE STANDARD AGREEMENT
Under the standard agreement, the artist is engaged to render his or her sonal services as a recording artist on an exclusive basis for the purpose of ing recordings from which records can be derived. The term encompasses not only traditional compact discs, cassettes, and other devices, including videos that contain the artist's recorded performances, also interactive media (e.g., Enhanced CDs) and electronic transmissions .< online digital audio, wheth~ or not downloadable).
The artist is required to appear at times and places designated record company to perform for the purpose of making recordings to be ered to the record company. These recordings must be acceptable to the company as being "technically and commercially satisfactory." Ellt.HVU"".L·· standard agreement states that the musical selections to be recorded selected by the record company, in practice the company may give the right to select compositions to be recorded, subject to the record
In the case of record companies which are signatory to agreements
American Federation of Television and Radio Artists (AFTRA) or the Federation of Musicians (AFM) (which includes all the "majors"), the
case, MCA Records sought to prevent the recording artist from recording for another label after an allezed breach delivery of recordings. The California Court ~f Appeals could not be prevented from recording for another com-
pany for a period longer than the one in which her commitments to MCA could have been fully performed. This was considered to be five years (an initial period of two years plus three one-year options). MCA unsuccessfully contended that the term could be extended for up to seven years by reason of contractua1language permitting suspension until the delivery of recordings was completed. As a consequence, record companies usually define the duration of a recording contract in tenus of satisfactory delivery of a stipulated UUlllU'<:;L' of albums, not in terms of a stated number of years. (See MeA Records, Inc. Newton-John, 90 Cal. App. 3d 18 .)
Under section 3423 of the California Civil Code, record companies pay a guaranteed minimum amount per year in order to obtain an mmncnon against an artist seeking to leave a label while still under exclusive contract. It important to note that this California statute relates to obtaining a court barring recording for another company, but does not affect the contir lUUlg right to sue for monetary damages should any recording so forbiddenbe The minimum guaranteed payments (subject to further conditions based actual payments) are as follows:
Year 1: $9,000 Year 2: $12,000 Years 3-7: $15,000 In a 1984 dispute between Motown Records and R&B singer Teena
a California appeals court held that these payments must be truly zuaranreeonot dependent on an option exercised at the label's discretion. Further, ing budgets and tour support payments are not part of the minimum amount.
These guaranteed payments must be fixed and not merely VV'.~'5V' amounts to be paid under a royalty deal. However, the contingent earned royalties can be used to pay the additional sums required in years 4
5 ($15,000) and in years 6 and 7 ($30,000) as long as such sums are actually Any amounts earned in excess of statutory minimums in any particular year
be carried forward as a credit for the next or subsequent years' minimums.
A fail-safe clause in the California law provides that an artist can still be vented from terminating an agreement, even if it is not in conformity . requirements of the law, if the record company makes a lump-sum navment
the artist that is 10 times the required minimums. For example, if the guarantee of $9.000 were missing from the agreement, a record company
still make a $90,000 late payment to prevent an artist from terminating by of the omission. This is appropriately called the "superstar insurance prC.VISlIOJ
"'-.~---'~ during the term of the ~OTeement. If the group has recorded previously label, the contract may include a provision recognizing the right of r~cord company to continue using the group name on its recordings. tune may come when, for various reasons, the group members' paths When a group member drops out, a satisfactory replacement must be
may cause problems between the record company and the remainmembers. The record company may wish to select or approve the
. .•. ,.. so as to ensure the continuation of the group's special sound or
'. the group may fight for the right to select its own replacement.
. company may also contend that it is entitled to continue to
• dropout artist as a solo artist, especially if the departing member is performer in the group. The terms of an agreement coverinz a artist entail separate negotiations when the group is first signed, ordinarily run the gamut of those commonly contained in a solo
,~~~,.~,.~..., including the initial period of the recording contract, renewal
advances, and recording and release commitments. .
instances, an A&R person may propose that two artists under sep.v""ll~.ULO perform together On one or more records. A combined by well-mown artists, for example, The Three Tenors, may sales than records featuring each artist separately. Record conthe division of royalties in such cases by providing for the of the royalties and the recording costs.
. . Epic Records and Universal's Interscope forged an In relation to the "supergroup" Audioslave, made up of members (si~ed to Interscope) and Rage Against the Machine (signed
'. two major labels, each unwilling to cede its exclusive rights to the
.' .. , .. band members, agreed to split all costs and profits from Audioslave '.' -. ' . They also agreed on a rotating schedule of marketing and dis~;.""'''''.H:;'''' Epic promoted the band's 2002 debut, while Interscope han-
album Out of Exile.
A recording contract may cover two or more artists who perform togetner« group. In addition to acquiring the exclusive right to the group's recording
ices, the record company acquires the exclusive right to use the group's
""'~~J:'<",.u,,,,,, customarily acquire the exclusive right to record an artist of the recording agreement, although there are exceptions in
. and jazz. Without exclusivity, different companies could issue
versions of an artist's recordings, with resultant confusion. a record company would be unwilling to spend the time and to develop and promote an artist if the artist were also recordat the same time.
pertormers make a livelihood performing as sidemen, They are not .perrormers on recordings, and they are not prominently highalbum cover, packaging, or advertising. Most exclusive recording cover any and all recording services except where specifically :~V''''''''''fi"Y, it is desirable to specify the terms and conditions under services can be performed for other record companies. Typical
nezotiated terms require credit to the artist's regular record company, such as "c~urtesy of ... "; limitation of name credit to sideman only and not ?n the front of the album packaging; a maximum of twO or three songs on which the sideman services can be used in anyone album; and sometimes a requirement
that the artist-sideman not receive royalties. • ..
Artists may wish to be part of a movie soundtrack album distributed b! •... another record company. The artist's own record company may feel that this •
exception to its exclusivity is worthwhile, since it promotes th~ exposure of .
artist. Much depends on the bargaining position of the parIles as well as concessions made by the distributor of the soundtrack album. These conces-: sions may include proper credit to the artist's label and royal.ty payments to artist's record label. Generally, the artist's record company will reserve the to distribute its artist's recording as a "single" or to include it in the own albums, possibly with the right to refer to the movie itself for added
Recording contracts usually forbid recording the same selection
another company for a minimum period of time. This is known as the cording restriction. In most contracts the restrictive period is five years from
date of delivery of the recording to the record label or two years from the ration of the term of the recording contract, whichever is later. During period the record company will not be faced with competition by the artist performing the same material.
on the artist's future releases. But where the record company is unwillartist faces the prospect of sitting out the balance of the current con-
period. To avoid this situation, some artists have been able to negotiate which provides that they are free from further recording obligations .eOomparlY allows 6 months (or an alternative negotiated period) to elapse U.S. release date and the next authorized recording session. are meaningless unless they are released commercially.
record company will not want to absorb the expense of releasing a which it has no confidence. Its position is that it has already made
.;;",,~~ .. ~ in the recording, and that if the recording has no commer-
its release would amount to throwing good money after bad. So as the mercy of an arbitrary judgment on the part of the company, try to have a release commitment in the contract. If the company :·"",~~·I.?~.";~1- that commitment, the artist may end the agreement.
'~'·~"<';U.LU companies have several labels, including a top-line label, a midlabel, and possibly other specialty labels. In addition to price labels within the same price category at a major record company . different marketing and promotion teams. An artist with sufficient may request that his or her recordings be initially released only label, The record company may grant such a request for the United it has sole control, but may refuse it for other countries where it has and where flexibility in pricing is necessary. Even where top-line . .. is part of the agreement, the record company may reserve the right . . . records on midprice or budget labels after a period of time, in order
. sales through lower prices.
RECORDiNG AND RIElEASE REQUIREMENTS A recording agreement sets forth the minimum number of sides to be durinz each contract year (though in some cases the required album expressed in terms of total running time). Aside customarily c~~ists of a composition with a minimum duration of2~ minutes. The mmimum of sides for an album is usually 10 to 12. The agreement may also state that artist will make additional recordings at the company's request. Sometimes . parties agree that an excess over a certain maximum n~ber of re.e :.0: rd.ul~ must be mutually approved. The agreement may also contain a proVlslon if the artist exceeds the minimum recording requirement in any one ~<;;l.lVI.,J"., the company's discretion the excess will be credited against the Lll.U..LJ-I.L'LU,
recording requirements in the succeeding period. .'
Although a recording agreement signifies the company's mtention to duce recordings by that artist, this intention is rarely expressed as a contractr commitment After the initial recordings are made, the record company become disillusioned and try to avoid further recording obligations to the Thus, recording agreements sometimes state that the artist shall be paid scale, or another amount reflecting the cost of prior albums, for the upon minimum number of sides that remain unrecorded. .' Artists quicldy sense when companies have cooled toward them, and
may request a release from their contract, which the companies may be to grant, particularly if they are repaid their recording costs and! or grante,d'~
L<":<:Ll'"In." contract provides that the artist is to be paid a royalty that . either as a percentage of the suggested retail list price of records . of the wholesale price of records sold (usually at least rate applied to the suggested retail list price). New artists 9% to 12% of the suggested retail list price for domestic sales for sales outside the United States, although established a higher royalty rate.
~Ul~aUJ.lg· royalty rates for foreign sales, artists should try to get not of the U.S. royalty rate for sales in Canada; 75% for Europe, t .. .o.I~u'dil·a;· and 50% for the "rest of the world." Where the U.S. owns and operates foreign subsidiaries, the rates may be U.S. company 0>VnS its Canadian distributor or ships records 1/C'llSt()merS in Canada, the artist royalty rate for Canadian sales as those for U.S. sales.
royalty rates frequently escalate in increments known as bumps leicluaJtltity of sales. For example, there may be a 1 % increment for over 500,000 and a further 1 % increment for sales over 1 are limited to sales after the albums have attained the req-
uisite plateaus. Also, royalty rates are often, though not always, increased when a company decides to exercise its option to extend the term of a recording agreement. Such increases apply only to recordings made 10 the option period, not to recordings made 10 earlier contract periods. These two forms of escalation are not mutually exclusive; both may be applicable in an appropriate instance.
Record companies pay a lower royalty rate for singles than for ..... 1J'uu..L.:>, .• because singles are usually less profitable than albums. For example, an may receive a 13 % album royalty but only 10% on singles.
The suzzested retail list price in the United States has for some time
$6.98 for singles and $16.98 to $18.98 for CDs, though some record companies
have begun offering releases at a manufacturer's suggested retail price of $12.98 to compete with cheap and/or pirated digital downloads, The gested retail list prices are either published by the manufacturer or extrapolate from the wholesale prices charged to dealers. Retailers are constantly records for sale at a discount from the suggested retail list price. If these counts are subsidized by the manufacturer through a reduction 10 w u'v."'" ..... prices, the artist whose royalties are calculated on the basis ofwholesale will suffer a reduction 10 royalties. However, even artists on a retail price
alty basis usually have a clause allowing pro rata reduction when normal sale prices are discounted
The cost of packaging is also deducted from the base amount for ing royalties. Traditionally these deductions have been 15% to 20% for settes and 25% for CDs, even though the actual cost to the UJ.<I'ULlJ.<tl..'"Ll<'''' generally much less. The packaging deduction is predicated on the theory the artist should receive a royalty based solely on the recording itself, not on artwork, wrapping, or sales appeal added on by the packaging. In this should be noted that the record company generally absorbs the entire creating the artwork and other elements of packaging. Unlike recording these costs are generally not charged back to the artist.
Record companies do not pay artist royalties on records that are away to distributors for promotional purposes as "free goods" (which .. despite the name, intended to be sold to consumers). The amount of these goods (not to be confused with bona fide promotional copies distributed charge to reviewers, radio stations, etc.) is generally 15% of records sold,
more in the case of special promotions. The artist should try to maximum on the amount of free goods that is consistent with actual
Under generally accepted industry practice, retailers have the return any unsold records to the distributor, who then returns them
record company. Since artists are not paid royalties on returned (i.e., records, record companies hold back a portion of an artist's royalties as a against these returns. The artist should endeavor to negotiate a limit amount of reserves, such as 35% of album sales during a particular period, and a reasonable rime limit for liquidation of the reserve, such
equal installments over four semiannual accounting periods, rather than lump sum liquidated at the very last moment.
upon a rime CDs were considered "new tecbnOlogy," and record reduced the artist royalty rate on CDs by 15% to 20%, claiming ,,",,·<-u.<,u to be reimbursed for their research and development COSts as """~. 'UEjU". COSts of manufactUre. Although this is now rarely done in the companies will continue to take a new-technology reduc. media" as soon as they come into existence. For their own pro-
endeavor to limit the new media royalty rate reductions to :o/cfen. .00. such as two years, or to a stipulated sales level, Alternatively, to get a so-called "favored nation" clause stating that if 10 the company changes to a more favorable royalty computation
. . in question, this formula will also be applied to the cal-
have an all-in royalty agreement, which means that the artist .orccucers royalty, typically 3%, out of his or her royalties. For
'. royalty is 12 % of the suggested retail list price, the pro-
. leaving a 9% net artist royalty.
";:~VUIC:al ail-in royalty calculation On a $14.98 CD where the arrist's
12%-3% (producer's royalty) '" 9%
3.731 % of $14.98 = $0.5589
. royalty account will therefore only be credited initially with less each $14.98 CD distributed by the record company (subject the reserve turns out to be greater than the units actually is a far cry from $1.79 (12% of $14.98) per CD.
. the calculation of royalties does not take into account items an artist's royalty account, such as a portion (or all) of video or a portion (or all) of 10dependent promotion costs. The
)prlomi;>o'( m of records by independent parties hired by the record radio airplay of records can be substantial, up to $100,000 or l:n:le~lSe. This should be an importanr issue during negotiations. have to pay such costs out of their royalties; at most, half of
be a charge against artist royalties.
importance of the Internet, including audio streaminz and thrown traditional methods of calculating royalties into astate income from Internet-related sources, major record companies take a substantial reduction in the otherwise applicable royalty as well as to permit the record company to deduct a distribubetween 15% and 25%. Alternatively; net income might be divided, distribution fee has been deducted. The assumption is that
the entity providing the online service will be able to specifically identify the recordings that are used, either by direct tracking or sampling, which is not always the case where blanket licensing is done. The economic models in this area are very much in flux at the time of this writing, due to the record compa-
nies' high start-up costs for going online, as well as the effect of .
In response to this uncertainty, new models are sometimes proposed alternatives to the "standard" royalty agreement. Rather than agree to a plicated web of packaging and technology deductions, some artists have tiated royalty rates based on wholesale price, with virtually no Ut;:IJ,U,;UU'U whatever. Others, particularly those involved with independent labels, negotiated "net profits" contracts. In such an agreement, the artist and share equally in the profit from a given release. "While this arrangement equitable on its face, such deals often allow the label to deduct manuractunn; shipping, advertising, and other costs off the top before calculat!ng whereas these costs are generally nonrecoupable in a conventional royalty Artist representatives should do the math to determine whether the proposed by any given record company is actually advantageous to the
Lest it be assumed that the low royalties payable to artists generally
eate high profits to record companies, bear in mind that, according to Recording Industry Association of America (RIM), most albums fail to their recording and marketing costs. On the other hand, the Status of ment of an artist's royalty account bears no mathematical relationship record company's actual profits on any given release.
In addition to royalties based on records sold, artists should nezouate: receive a share of the record company's income from ancillary uses of recordings, for example, motion pictures and new media licenses. If they do so, they run the risk of suffering the fate of The Ronertes.In 2002 the
York Court of Appeals ruled against The Ronettes, who were seeking a millions of dollars received from synchronization usages of their recordings. The court based its decision on the fact that there was no in The Ronettes' contract to receiving royalties from synchronization .
and the grant of rights in the contract was sufficiently broad to vest, . record company all rights in their recordings and income derived from
shows may cost as much as $100,000 or more, depending on the size On the other hand, greatest hits albums entail little or no additional costs, since they are assembled from existing recordings-although
W';,,:UJ.l'UJ or more new recordings is not unusual and can run up costs.
company will recover its COSts for all recordings made by the royalties. Thus, if three of an arcist's albums are released and is successful, no royalties will be payable to the artist until the
for all three albums have been recouped from the royalties record. Obviously, it will take longer to recoup record .. royalty rate than at a higher one.
.ompanies may liken the system of recoupment of recording costs a joint venture in which the production costs and overhead before the partners divide any profits. Record companies conjustified in recouping all their costs first because they are the rne-iarze financial risk while the artists invest only their time. They that many artists derive major income from songwriting and LPp.,earan(:es--u· acome in which the record company does not share, company's recordings may have been essential in buildino- the
and generating such income. <:>
. recording artists are their own producers; more frequently an mdependent producer. It is increasingly common for record artists with a recording fund. The artist is then responsithird parties Out of the fund, which is customarily disbursed in '. ' ~e first upon commencement of recording, the second upon
. basic tracks, and the balance Upon delivery of finished master to '"U<UIJ'·HY. The artist can retain the difference (if any) between the and the actual recording costs; this gives the artist an incentive
the budget. Recording funds, like recording COSts paid directly are always treated as advances against artist royalties. may contain a formula for computing recording funds. This set forth the fund for the first recording and contain parameters
subsequent recordings, generally based on two-thirds of the averv::e~uni·ngs on U.S. sales through normal retail channels for the artist's albums, with stipulated minimum and maximum amounts.
An artist generally does not receive any royalties until the record compan recovered all of the recording costs incurred for that artists records. The making a record depends on many factors, including the size of the COst of bringing in an outside producer, the complexity of the ~"",." .. n;"
the level of perfection desired. Recording costs for relatively new range from $80,000 to $150,000 or more for one album. Established
have been known to run up costs in excess of $500,000 for an album.
extreme example, former Guns 'N' Roses singer Axl Rose reportedly million making a solo album that has yet to be.released.) Original-cast
are also successful composers and many record companies are music publishing firms. A publishing interest in a composition of the recording company in investing in and exploiting a composition. For this reason, a record company may arzue language giving the company the right to acquire thro~O'h publishing interest in compositions written by the artist and the recording agreement.
Record companies may claim that, except for a publisher's distrib~ti.on ~f printed copies and attempts to secure cover records of the same COm?o:lnon, It is difficult to differentiate between what a record company and a publishing fum will do to exploit a musical composition. A record company sends promotional: copies of records to radio and television stations and has its promotional staff .': hires independent promoters to call on programmers to 'encourage th~ p~ying records. It may also advertise its records on the radio and in trade ?ublicanons. of these activities will result in publishing income, since there will be U:LI .. ,aUI,;a:;L
ing performances for which the performing righ:s or~tion ~ p~y sales of records for which the record company will remit mechamcallicense
and sales of sheet music if the composition becomes popular.
In some cases, the artist may agree, believing that the additional the record company, through its affiliated publishing fum, may ~ead the company to make greater efforts on the artist's ~eha1f. ~teman:el!, ~e
may be willing to compromise by granting an interest in publishin~ only from the particular record issued by that company, ~r ~y enter:ng coptiblishing arrangement with the record company's.publishing affiliate
than assizninz all of the publishing. rights to the affiliate.
~ts who own their own publishing firms are most likely to resist ins their interest in the copyright or publishing income. Some artists argue
the record company's publishing enterprise is a mere shell and does not any publishing services over and above the activities of the record company, recognized publisher has the staff and budget:o supplement tha: of the company, and thus effectively promote the artistswork- The aro.s: may be
ing in a self-defeating manner, however, if the independent publi~er and promotes a cover version of the same compositio~ by a .compe~g ing artist. This is less likely to happen when the publisher 15 an affiliate
artist's record company.
If the record company's affiliate does become the artist's publisher or ..
publisher, it may attempt to recoup the artist's recording costs, from I..IULJ='J.U royalties that would otherwise be payable. Artists should negonare -disallow this practice, mown as cross-collm:eralization.
the contracts 'With the artists may provide that to the extent mechanifees for controlled and non controlled compositions exceed the maxthe company has agreed to pay, the excess is deductible from monies tse.pavable on controlled compositions and (if not sufficient) from artist advances. In effect, this places the responsibility on the artist to
Q·T"'V(}lr;IIl'" mechanical license rates 'With outside publishers for comthe artist proposes to record.
company does not usually pay artist royalties on free goods and
not to pay mechanical royalties for controlled compositions on artist will contend that such royalties should be paid because merely a form of discount that the record company should compromise is reached, 'With the record company agreeing to royalties on 50% of the albums distributed as free goods.
ri',a. controlled composition clause, the record company will fix: the .",-",,,-,-,,,,<u license fee as of a particular date; the applicable rate on that effect forever and does not change regardless of increases in the rate. The artist will attempt to-provide for the latest possi• .... as the date of record release, in order to take advantage of any . compulsory license rate. For the same reason, the company will date, such as the recording or delivery date of the master.
an.exceuent means of promoting an artist's album, as sales consisareas in which the artist performs. However, for most newer
of touring exceed the income derived from the engagements.
NJ.J,.LI..I"-'..u.= sometimes subsidize tours on the theory that the tour of the record, which in the long run will provide more disbursed for the tour. But some recording agreements may support is recoupable against future artist royalties. The artist to make tour support nonrecoupable or only partially development of video as a promotional tool has reduced the or-conventional tour support.
The term controlled composition refers to any composition written, controlled, in whole or in pan, by the artist. The record company may reduced royalty rate for a mechanical license for conn-olled I;VIHI..I'J"".J." commonly 75% of the minimum compulsory rate (also m0v.:n.as the
cite) under the Copyright Act. Since January 1, 2006, the mmunum rate (for compositions of 5 minute or less duration) has been 9.1 cents,
the 75% "bargain rate" on controlled compositions only 6.825 cents. vious rate (from 2004 to 2005) was 8.5 cents.
In addition, although CDs today often contain more than 10 tions .record companies usually stipulate that they will pay only 10 or 11
the minimum rate for the CD, no matter how many composmons are
the definition of "records" includes audiovisual devices as well Record companies will negotiate for the right to control ~COJrQJJ1Q'S in audiovisual form and to restrict the artist from permedia, such as in feature films, for other companies.
•..•. in contract negotiations between artists and record companies •.....• videos. Videos are usually visualizations of songs performed by . are a significant promotional tool, and recording artists will try companies to produce at least one video for each of their videos can be expensive and difficult to place on the various such as MTv, record companies resist making any firm com-
------------------- ------- - --------- ----
.:;..'U ., •• J _ __ ...
Most recording con tracts provide that artist royalties are not payable on videos that are distributed to promote record sales. Royalties should be payable on videos that are distributed commercially. Although the commercial market .. for videos is still limited, this may change in the future 'With the increased use of .... alternative distribution modes, such as DVDs, the Internet, and 'Wireless oper- ." ators. In 2006, Universal Music Group licensed more than 1,000 music . to mobile video provider MobiTV; which offers a monthly subscription
Generally, 100% of the video production costs are recoupable out royalties from the sale or use of videos, and 50% of any balance due recoupable out of artist royalties on sale of records.
Under copyright law, a video producer must obtain from a copyright prietor or its agent a synchronization license to record protected music in chronization with or timed relation to the pictures in a video. Permission is necessary to publicly perform, make copies of, and distribute the music as a of the music videos. 'With controlled compositions, record companies demand that the artist provide free video licenses. While artists may agree
this if the video is for promotional purposes, they may balk if the video is . exploited commercially.
OWNERSHIP AND USE OF MASTERS
agreement is usually written as an employment contract, and thereerecoro company 'Will claim that the results and proceeds of the artist's <v .. "_"~'" to the record company as a work for hire. This means that the no interest in the physical tapes or masters or the copyright in the
corOl·ngs and is restricted to a claim for contractual compensation and the U.S. Copyright Act, exclusive rights in sound recordings reproduction, the preparation of derivative works, and distribuof public performance is not included for traditional (that is, and FM broadcasts. Digital broadcasts, including streaming, to compulsory licensing under the Digital Millennium
. ..•• of 1998. (See Chapter 7, Sound Recordings: Rights,
. and Royalties, pages 63-76.)
"*J.I.<.IJ..W.<':'; whether the artist is an employee producing a work for hire ,(:;p~:nQeD1: contractor is a complicated subject that has been the subject ' .... "'''w'''''.u..., between the RlAA and artist groups such as the Recording 'y",..,.w,v,u (http://>V\1IlW.recordingartistscoalition.com). The answer ownership, the duration of copyright, and copyright terminasubject is treated in depth in Chapter 17, Works for Hire.
:,Or<1.c()mlPar:lYwill jealously guard its ownership rights in masters and ,tS·.',no,wever. in rare cases with certain highly successful artists, record agreed that the ownership of the masters and copyrights will ".u.J,\O. "'. u.",_" after a period of years. Artists who desire to transfer to company :6nd that the reversion of their recordings is a valuable
ennances their worth to a new company.
. can usually use a recording as it sees fit. It may issue the
any label it desires, and it may couple the recording 'With the artists. Established artists 'Will try to restrict a record comdiscretion, especially seeking to limit the time prior to which ,",""""J<U,v may (without artist's consent) release the artist's records at '~'f'''''-~' the use of artist's recordings in advertising, or the number of ~.)"~'~'~~ that can be used in any compilation 'With other artists.
In certain circumstances, for example, in the event of a sale or merger, a company may wish to assign its rights to a recording agreement to entity. In most contracts there is no prohibition against the assignment agreement. This unfettered freedom of assignment can be injurious to an particularly when the new owner lacks the same interest in the artist as original record company.
New artists may not be in a position to' quibble about the asslgDtaOILllt)l.1 their contract, although successful performers will seek to limit such bility, Sometimes a contract includes a key man clause, referring to an who has been important in getting an artist to sign on with a particular pany. Such a clause may give the artist the right to terminate the azreement the key man (or woman) leaves the company for any reason. Given the nature of employment in the industry, record companies are uncerstanoat reluctant to include key man clauses in their contracts.
Some record companies 'Will agree to limit the possibility ofassignment "successors in interest, " that is, to successors who acquire all or ~U'"~~~'"A-r of the assigning record company's stock or assets. This is a way of """'''''''''''-5 artist of the continuing financial viability of the successor, which would least as big as the original company. A small company may be LLU.,"""""~ unsound and unable to invest the same amount in marketing and IJrlJlllUUI An artist may be willing to consent to assignment if the original record pany continues to be liable for the fulfillment of all obligations, or assignee is an entity owned or controlled by the original company or any . pany distributed by one of the major labels.
sometimes issue or authorize others to issue recordings that nertormances of various artists into a compilation album. Thanks to "'~~Y'~~'V~: se~ces such as iTunes and the licit version ofNapster to listen to and even download custom compilations of
Fearing that they may be cheapened and damaged by assoof lesser stature, artists will try to negotiate the rizht to
availability for couplings of their recordings. If the artis~ is of to merit the granting of this type of request, the record comcontractual protection that the artist's approval will not be 'Withheld.
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ACCOUNTINGS AND DEFAULTS
Artist recording agreements usually provide that the recording company will account to the artist semiannually and that if the artist fails to complain a certain period, such as within two to three years from the date the statement is rendered, the artist will be deemed to have waived any objections to royalty accountings. This is known as the "account stated clause." The should not overlook this clause, which is designed to insulate the compam from claims arising long after the facts become known to the artist. Note
the courts will generally uphold account stated clauses that reduce the wise applicable statute of limitations, so long as the reduction does not an unreasonably short period after which the artist cannot object or the absence of a contractual right to audit the record company's books, an
may have to sue in court in order to obtain the right to audit.
If a company fails to account for or pay royalties when due, artists commence legal proceedings against the company. Artists may wish to breach as an excuse for terminating the agreement, freeing them from
ther obligations to record for the company. However, unless the original
ment specifically authorizes such termination, a court will have to whether the breach is serious' enough to justify a cancellation. A slight rendering accounts and payments would not be regarded as material, long delays after many demands might be.
Other defaults may occur. For example, the company may refuse to inspection of books and records, even though the artist has a contractual
do so. The company may fail to release recordings that they have committe; release or fail to record the artist at given periods as provided by the
The record company will strongly oppose a default clause that
require a written notice of default and a sufficient opportunity to alleged default. No record company will accept a unilateral right _L.~~_'_.
by the artist, although some may be willing to agree to an arbitration
instead of forcing the artist to bear the expense of going to court.lVIany ing contracts specifically state that the artist's only remedy for any monetary damages and that the artist does not have the right to "~'M ... i",,~ contract no matter what the circumstances.
U,,""''''UUUJ. • creditors. Delinquent artist royalties are ordinarily general debts with .. . m bankruptcy. Future artist royalties constitute a continuing obligation ' ..'.'.'. assumed by the party that acquires the master recordings. That patty also over any unrecouped balance in the artist's royalty account.
record contracts there is an attempt to treat bankruptcy as cause for record masters to the artist. Such a reversion of valuable ri cr hts " •. "'JUU.<U V to the principles of bankruptcy, as it would give an unlawful .tialtreatmenr to the artist at the expense of other legitimate creditors, recording artists have resorted to the bankruptcy courts to free
exclusive recording contracts. Robert Noonan (profes .... as Willie Nile), an Arista Records recording artist, had accu- . royalty recoupment account that required the sale of a lar .... e
'r·xl~cor<1S before it would become positive. He also had significant
for prebankruptcy legal expenses and his manager's award. He had a limited cash flow and insubstantial assets. des~ite lo~ sales,. exercised its options to extend the agreement dunng which Nile would have been obligated to record two
<L'_'UU.U\.IJ.J.. to two already made. Arista refused to give Nile any further
him pay his financial obligations, Nile commenced a Chapter
and sought to terminate all future contractual oblizations to financial reorganization plan. Nile subsequently ex:rcised his the case to a .cha~ter 7 ("straight") bankruptcy proceeding, ,r~:ist~~d strongly, since It would have deprived the court of the pos.J.J."J.J..U..'~ Niles recording contract. In the matter of Noonan (17 .. D.N.¥. 1982]), the U.S. district court ruled against Arista, the fresh start which he sought. Since then, Toni Braxton, and other artists have declared bankruptcy and either dis-
iegotiated their recording contracts.
t·.companIes often argue that artists who file for bankruptcy do so "in sole purpose of breaking their recording contract or pressing companv to alter the agreement. The RlAA succeeded in havin o a in a 1998 bankruptcy reform bill that would have outla:ed Congress removed the provision under pressure from musi-
BANKRUPTCY A normal recording contract, consisting of an initial contract period
sequent option periods, will potentially continue for an extended time. Recordings made during the exclusive term of the agreement owned by the record company and will potentially continue to be sold
nitely, thereby giving rise to an ongoing royalty payment obligation .. , relationships between the artist and the record company roay, . interrupted or revised by a bankruptcy proceeding involving either
Several independent record labels-Stax, General Recorded Tapes
All Platinum, Springboard-s-filed for bankruptcy in the 1980s_ In each debtor's master recordings were sold and the net proceeds were till;UllJu.U;U·~
', contention is of dubious merit when a performing artist is in distress and is evidencing a need for the protection of the In a case involving the artist George Jones, then under con~ ~~Ptcy co~ held that the trustee in bankruptcy the artist s nght to recerve record royalties on prebankruptcy
court also decided that CBS could continue to recoup its of such recordings from royalties on sales generated by the that Ioness discharge in bankruptcy was ultimately to produce data proving his financial statuS and business year preceding the filing of his petition.
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