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Step By Step Instructions and Explanation

Artist Recording Agreement

(Traditional Royalty)

This recording agreement has been designed to be used by an

independent record label. It is not as extensive as a major label recording
agreement. Though it has been designed to be simpler than a major label
recording agreement, it addresses the main terms that are necessary for an
independent record label to own and exploit the artist's recordings that the label
pays to have produced. This agreement pays the artist a royalty that is calculated
in a traditional manner paying the artist a percentage of the retail price that the
labels suggests to its distributor that it wants it to be sold for by retail stores.

INTRODUCTORY PARAGRAPH

The effective date that the contract will begin will need to be filled in. The label
will type in the date just prior to the time the parties sign the agreement.

The legal name of the record company should be listed in this first paragraph. If
the company is a corporation or limited liability company then the full corporate
name should be listed with the term company, corporation or inc. for a
corporation and LLC for the limited liability company. If the company is not a
corporation, or limited liability company then the words company, incorporated,
inc. or LLC are not used since those designations may only be used if it is a legal
entity. If the company is owned by one person then the name of the person who
owns the label followed by "doing business as" or "d/b/a" with the name of the
label is used (e.g. Joe Smith d/b/a XYZ Records). The artist's legal name should
be set forth here. If the artist has a professional name then it is common to type
"p/k/a" after the artist's legal name and then type the artist's professional name.
"P/k/a" means "professionally known as".

1. ENGAGEMENT: The paragraph sets forth that the artist agrees that he or she
will record exclusively for the record company. This means that the artist cannot
record for anyone else during the term of the contract. This paragraph also sets
forth how long the contract will last.

2. TERM AND OPTIONS: Record companies will agree to record and release
one record in the Initial Period. If the record company wants to reserve the right
to record and release more records then it the artist and record company will
agree for the record company to have the right to exercise an option to record
and release another record in the future. The artist and record company can
agree for several options or the right of the company to record several records.
This is called the Option Period. When the record company exercises the option,
then it basically is renewing the agreement under the same terms and
agreements for one more period. The length of that period is the same as the
one for the Initial Period.

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For most independent record labels, because they do not pay the artist any
advances. Because of this, the label is in a weaker position to be able to ask an
artist to sign a long-term contract. The standard in the industry would be to have
one or two additional options for a total of three albums under the agreement
(Initial Period: 1 album; First Option Period: 1 album; Second Option Period: 1
album). For major labels that pay an artist large advances the labels will be in a
position to ask for 5 or 6 options. Some states limit how long a contract for
personal services can be. California and New York limit the length of personal
services contracts to seven (7) years. If the length of the Initial Period and the
Option Periods are longer than 1 year then you will have to have less than 7
albums to comply with the state law where the contract is being enforced.

The term or length of the Initial Period and any Option Period could be changed
to be longer. During either period, the label needs time to have the album
recorded, manufactured (if CDs are to be done) and to market and sell the album
before the next period. For a developing artist that has never recorded before, a
label might have a longer period such as 18 months. Then the next periods are a
year. Again, because some state laws restrict a company from the number of
years a personal service can last, if the length of the Initial Period or Option
Periods are more than one year, then the total number of Option Periods will
need to be reduced.

The terms for the option periods in a contract for 3 albums during a 3 year period
would be completed as follows " Artist hereby grants to company the option to
extend the Initial Period for two (2) consecutive renewal periods of one (1) year
each ("Option Periods")" giving the label 3 albums.

This paragraph allows for the Option Period to be renewed automatically unless
the record company notifies the artist in writing that it will not exercise the option.
Since record companies might work with many artists, it is difficult to keep up
with all the contract dates for the all the artist's is has contracted with. So the
contracts allow the Option Periods to be renewed automatically, unless the
record company decides beforehand that it does not want to make the
commitment to record and release another record by the artist.

This contract provides that the label is required to release an album comprised of
no less than 10 songs in any contract period that requires an album to be
recorded. This prevents the label from signing an artist and never recording the
album and claiming that it still has a contract for the artist for the entire length of
the contract. The next paragraph deals with releasing singles in the first term as
a development term but with albums to be released during the option periods.

3. RECORDING REQUIREMENTS: This paragraph sets forth the requirements

of the recording process. The artist agrees to record and the record company
agrees to pay for the artist to record enough master recordings to constitute a full
length record defined between 10 and 12 songs. The record company typically
does not want the artist to record more than 12 songs because of cost to record
and value of the album to be released. Because of what the consumer is used to

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paying an album with 24 songs on it cannot be sold for twice the amount of
money an album that has 12 songs. Also if the record company is going to
release future albums, it wants the artist to save those new songs for the next
record. However, the parties can agree for more songs to appear on the album.
However, it is suggested that you not make it a requirement in the contract and
just decide later if the artist has more songs and the record company agrees to
add pay to record them and put them on the albums. This contract also provides
that the label can require the artist to record up to 5 additional songs during the
period to be released as singles.

This paragraph sets forth that the studio time and songs to be recorded shall be
mutually agreeable between the parties. Since the record company is paying for
the studio, it wants to make sure the artist is recording in a facility that is qualified
to provide the quality of recording it expects within the budget for the recording.
The label could have the artist provide a demo tape of the songs it will record so
it has an idea of the style and songs to be recorded. It can be a time and money
saver to the label if the label knows the artist has written songs to record and not
begin paying for the artist to go into the studio unless the artist has actually
written songs and done some pre-production of songs. The label can address
some terms here to pay for any pre-production it may require the artist to do.

The record company ultimately controls the right of approval of the recordings as
being "technically and commercially" acceptable. This allows the record company
to reserve the right to have the artist re-record songs or not release a recording if
the label is not satisfied with the technical or commercial quality of the recording.

The Alternative Clause allows for the company to commit only to recording up to
three songs. The traditional marketing strategy for promoting and selling an artist
is with a full album of material. The old model was to release the album, give the
artist money to tour and support the album, push singles to radio and focus
publicity and promotion support of paying for advertising and scheduling
interviews in magazines, television and radio. Obviously both technology and
consumer demand for singles has risen. An artist will have concern over signing
a long-term recording agreement with a label if the label will not commit to paying
for and marketing a full album. However, an independent label does not
necessarily want to spend lots of money on an artist on recording them and
marketing a full album because one the artist may not end up working out for a
number of reasons and two, the label may want to test market if there is a
demand and interest from consumers. The fact is that there is not a lot of profit
margin in a single to do the same type of marketing and promotional efforts. One
solution is for the label to make the Initial Period requirement no more than 2 or 3
singles. And then provide for full albums in the first Option Period. This makes
the Initial Period a development period. And if the label thinks the artist will be
successful and there is a market demand then it can commit to a full album's
worth of material.

4. RECORD PRODUCTION, EXPENSES & ADVANCES:

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a. Some artists may want the label to commit in the Recording Agreement
to spending an amount of money before they sign a contract. Some company's
may do that and if so, the terms of the money the record label is willing to commit
can be addressed in this paragraph. Most artists wants to know prior to signing
the record contract what the record company is willing to spend on the recording,
whether its $200, $5,000, $50,000. Most artists do not understand what it costs
to record a full-length album. The record company should be prepared to discuss
the amount of money that it plans on spending or has spent on similar recordings
to give the artist and idea of the level of recording that will be produced. If the
record company has its own studio, then the artist's rights to use that studio, and
any charge to the artist for the studio time can be addressed here. Many times
the label may just tell the artist that they are willing to spend an amount on the
record and so the artist can put together a budget for that amount. This provides
the artist with the flexibility to record in a studio of its choosing, with a producer of
its choosing. It is ultimately up to the label if is wants to include in this paragraph
a commitment to the amount of money. This contract provides some flexibility.

b. This paragraph clarifies that the money the label spends on Recording
Costs (as defined in the definitions) is treated as an "Advance" under the
contract. Since an "Advance" is an advance of royalties, the practical implication
is that the label will deduct the amount it spends to record the master recordings
is deducted from the royalties the label pays the artist. This provision also
clarifies that any unapproved charge over the pre-approved budget incurred by
artist will either be repayable immediately to company by the artist or that the
company may treat the unapproved expenditure as an Advance and deduct it
from any royalty payable to the artist.

c. Company may agree to pay the artist an additional sum of money in

addition to the recording costs and royalties. The record company may agree to
pay additional sums under each option period as well. This is typically a "signing
bonus" to simply pay the artist a sum of money for signing the agreement and
upon the exercise of each option. This is not required and is left up to the
discretion of the record company to include in the agreement. If the company
chooses not to pay the artist an advance, this paragraph can be removed prior to
submitting to the artist for review. Therefore the amount to be paid will be filled in
along with when the company will pay. The contract provides for some payment
upon signing the agreement and the rest upon delivery of the Masters.
Withholding part of the Advance can provide an incentive for the artist to
complete the recordings. The reason the terms "Delivery" is capitalized is
because it is a defined term and provides for other things to be delivered (i.e
signed producer contracts, artwork, etc.) than just delivery of the recordings
before they get paid the remaining amount. This can help to be an incentive for
the artist to cooperate with obtaining all elements of the Album before getting the
rest of the money.

d. This paragraph is based on California law and is not applicable to most

states. This provision is written in such a manner that if either the state where the
record label is doing business adopts such a provision, then the label is covered.

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Or if the label assigns this contract to a distributor or larger label in California,

then the provision will comply with California law. In most states, if the artist
decides to breach the recording agreement by not performing and decides to
record with another label, the record company can not file an injunction
preventing the artist from recording with the new record company. The label can
only sue the artist for damages for breaching the contract. However, in California,
the law allows a label to pay the artist a minimum amount of compensation
during each contract period for the right to file an injunction and prevent the artist
from recording with another label. Therefore, this provision can stay in, even if
the label is not in California, or it can be removed even if the label is in California
if it does not wish to utilize this legal remedy.

5. ROYALTIES:

a. The artist is paid two types of royalties in a recording agreement, a

record royalty for the sale or exploitation of the recording and a mechanical
royalty for any songs that the artist wrote that are on the recordings that are sold.
This paragraph addresses how record royalties are calculated. The next
paragraph will address the mechanical royalties. This contract calculates the
artist's royalties based on the suggested retail list price, or SRLP, of an Audio
Product as set by the label. The label has the right to set the SRLP and does so
by communicating the price to its distributors. Although, many distributors may
retain the right to reduce it and will depend on the label's agreement with the
distributor. The retailer can sell it for anything it wishes, but usually will adhere to
the label's request. However, for many big box stores (i.e. Target, Walmart), the
price is determined. The same is true for iTunes. The SRLP that is set by the
label will determine the wholesale price that the retailers will pay. But again,
many times this might be negotiated by the retail stores and labels have less
influence today over the price than they did five to ten years ago. Also, it should
be noted that there are several deductions and reductions that are going to affect
the artist's royalty rate in this contract.

The average standard royalty rate under an agreement that calculates the royalty
on SRLP is between 13% and 17%. Initially calculated the 15% royalty rate in
this contract the label would mean the label pays an artist $1.94 for album
formatted Audio Product that sells for $12.99. However, the deductions set forth
in paragraphs 5. d, e and f will bring this royalty down to $1.24 for an Audio
Product sold at regular retail price. The royalty will be lower or eventually drop on
other types of sales, also set forth in the subparagraphs. The label also has to
pay mechanical royalties from the sale of an Audio Product that will cost the label
about an additional $1.00 for each album sold. Therefore, before deciding on the
artist's royalty rate, the record company should do some research and have
some idea of what it will receive from its distributor for sales of an Audio
Products.

Because Recording Costs are an Advance, if the label spent $10,000 to record
the artist's master recording, then the label would repay or "recoup" the $10,000
from the artist's royalties first before the artist received a royalty payment.

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Therefore, at the artist's rate of $1.24 for each Audio Product album sold, the
artist would have to sell 8,064 album Audio Products to break even ($10,000 ÷
$1.24 = 8,064). The artist would make its first royalty of $1.24 on the 8,065th
album Audio Product sold. However, note that Recording Costs or other
Advances are not recouped or repaid from any mechanical royalties that are paid
to the artist. The artist receives the mechanical royalty payment from the first
Audio Product sold.

b. When a label allows for the use of the master recording for use in a
movie, tv show or advertisement, then this is a license of the master recording
(also called a "master use") and not a sale of an Audio Product. The standard
amount that is paid to the artist for this type of exploitation is 50% of what the
label is paid. However, any money paid to the label for this type of license is used
to recoup any Advances before the artist is paid royalties.

c. This is an incentive or bonus clause for the artist. In the event the
artist's Audio Products sell over a certain amount of units, then the record label
agrees to pay an increased royalty rate on those additional sales. This additional
amount can range between 1 and 3 percent. This percentage would begin and
be added to any sales after the sales levels are reached. In this contract, the
artist's royalties are calculated at the higher rate from all income that is paid to
the label from the date the bonus level of 75,000 units achieved. This paragraph
also provides for counting single downloads towards those sales. This paragraph
counts album sales towards the bonus. And then it counts single sales based on
the equivalent number of songs on an album. For example if there are 10 songs
on an album then it takes 10 single downloads to equal 1 album sale for
purposes of counting towards 75,000 albums sold for this bonus.

d. As discussed above, the artist royalty rate is reduced for certain types
of sales. This is usually expressed by lower the rate by a percentage. The
various type of products for which company will reduce artist's royalties are set
forth in paragraphs d. i-vi. This includes reducing artist's royalty rate to 85% of its
rate on CD sales as set forth in subparagraph vi. Therefore the artist's royalty
rate on the sale of a CD is 85% of its regular royalty rate which would be
calculated as follows: 15% x 85% x SRLP (There may be additional deductions
for CDs or other configurations as set forth in subparagraphs e and f. . The other
reductions for other types of configurations set forth in these subparagraphs
would be calculated in a similar manner.

e. This paragraph sets forth some situations where no royalties, including

Mechanical Royalties will be paid to the artist in particular circumstances. For
example the label will not pay a royalty on Audio Products that are given away as
promotional items, sold as scrap, or as "free goods". Free goods are goods that
the labels distributor gives to the retail store as a bonus to sell. So the distributor
may give the retail store 10 extra to sell as "free goods" for which the retail store
sells and makes money, but does not pay the distributor for. Even if SoundScan
shows 110 units sold, the label only pays the artist on 100 since it was not
technically paid for the 10 free units.

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f. The subparagraphs set forth other deductions by the label that will affect
the artist's royalty rate.

i. Any taxes, that are added to the SRLP are not counted
towards the SRLP for purposes of calculating artist's royalty.

ii. For any physical configuration such as a compact disc,

the label will reduce the SRLP by 25%. Therefore, artist's royalty calculation
would be as follows: 15% (royalty rate) x SRLP x 75% (physical configuration
deduction per this paragraph) x 85% (per paragraph 5 d.) Therefore on a CD sale
of $12.99 the calculation is 15% x 12.99 x 75% ($9.74) x 85% =$1.24.

iii. If and of the masters recorded by artist in this agreement

are coupled with other recording artist's masters (e.g. a record label compilation
album), then the royalty paid to the artist is calculated based on how many of the
artist's recordings are on the compilation album. Therefore, if there are 10 songs
by 10 different artists then $1.24 gets divided by 10 so that the artist is paid
1/10th of the $1.24. Therefore, if each artist on the compilation were paid the
same, they would each be sharing in the $1.24 artist royalty. Each artist would
also get paid a mechanical royalty if they wrote the song on the compilation.

iv. If there are other artist's that appear on artist's recording

such as a featured artist, side artist or other artist that wants a royalty, then artist'
royalty for that particular recording is shared with the other artists.

v. Its possible the label might decide to calculate the artist's

royalty on the wholesale price it receives and not the SRLP. Since the wholesale
price is usually around one-half of the SRLP, then the artist's rate would double.
However, all other reductions and deductions would apply and the artist,
theoretically, would still receive $1.24. 30% x $6.49 (12.99 ÷ 2) x 75% x 85% =
$1.24.

6. MECHANICAL LICENSING AND ROYALTIES: The record label must obtain

permission from the writers of the songs to record their music. This permission is
called a mechanical license. The licenses granted are only in the U.S. and
sometimes Canada, depending on the label's distribution. The label's affiliated
foreign distributor or company must get a license from the artist or songwriter
directly and the artist or songwriter collects its money for foreign sales from a
company overseas. For each Audio Product sold the label must pay the
songwriter a royalty. If the recording artist writes the songs, then the label obtains
the license in the recording contract, as is the case here. If the artist is not the
songwriter, then the record company must contact and negotiate with the original
songwriter (or songwriter’s publisher) for the right to record the song and obtain
the mechanical license from the songwriter or publisher. This is done in a written
contract called a "Mechanical License." The U.S. Copyright Law as of 2012 sets
a rate of 9.1 cents for each song recorded and each audio product sold (for
recordings over 5 minutes it is 1.75 cents for each minute, rounded up. This rate

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will increase from time to time as the Copyright Royalty Tribunal sets the rates.
This law and rate only applies to anyone wishing to record the song and sell it in
Audio Products without obtaining a direct license from the songwriter. However,
record labels try to negotiate a lower rate with the artist who records their own
songs. The reductions are set forth in the following paragraphs.

a. The U.S. Copyright was changed to require labels to pay 100% of the
rate for digital sales. There are some exceptions to how a label can negotiate to
reduce this, but it can only be done after the song has been recorded. Therefore
any reduction in a contract for songs not recorded yet are invalid. An
entertainment attorney should be consulted to make changes to this language to
meet the requirements of the law.

b. The U.S. Copyright does not restrict a record label from negotiating the
payment of a lower rate than the statutory rate on physical sales. This paragraph
reduces the rate to 75% of the statutory rate. Therefore, in 2012 the label would
pay the artist for each song the artist wrote that is released 75% of 9.1 cents or
6.825 cents. Therefore, if the artist wrote 10 songs on the album it would pay the
artist 68.25 cents for each album sold instead of 91 cents.

c. As the record company negotiates with the artist to pay 75% of the
statutory rate, it is also is standard to negotiate that the record company will pay
no more than for a certain amount of songs on a certain configuration regardless
of the number of songs that are actually on that configuration. One example in
this paragraph is that the record company will pay a mechanical royalty for a
maximum of ten (10) songs. Therefore, the record company will multiply the
statutory mechanical rate of 9.1¢ by 75% equaling 6.825 cents. Then regardless
of the number of songs on the album, it only pays for a total of ten (10) songs. If
the artist wrote and recorded 12 songs all the songs on the album then the artist
is paid the maximum of 68.25 cents. If the artist records 12 songs and one of
those songs was written by another writer then the other writer is paid first. Then
the amount paid to the other writer is deducted from the $68.25 cents since the
record company has stated that the maximum it will pay out is on 10 songs,
regardless if the other 11 songs on the album were written by the artist--10 songs
total. Therefore, as other writers own a share of the songs on the album, any
payments to them will reduce what is paid to the artist for songs that he or she
wrote. Again, this reduction does not apply to digital recording sales.

d. The label only pays mechanical royalties to the artist on the songs the
artist wrote on audio products that are actually sold. The label does not pay
mechanical royalties on copies it gives away for promotion, or to radio, or as
bonus records. Sometimes a label may give 12 copies of a CD to a retail store for
the price of 10 as a bonus to the retailer to make extra money. The label only
gets paid for 10 and so it only pays the artist on 10 copies sold, not 12.

e. The label restricts the artist from re-recording a song for 5 years from
the release that is on any of the masters the label owns and releases. This way
the label protects its recording. If the artist writes and records a hit song the label

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only wants the public to be able to buy an audio product containing that song
from the label. If the artist recorded the song on the last album in the contract
and it was a hit, the artist could sign a record deal with a new label and just re-
record the song so that the new label gets money from sales of an audio product
containing the same song.

7. ROYALTY ACCOUNTING:

a. Record companies will prepare an accounting and pay royalties to the

artist and other third parties receiving royalties, twice a year on September 30
and December 31. A grace period of 90 days is given from which the statements
are due. Though the label may be paid monthly or quarterly, the label needs
prepare an income based on the payments it receives along with ongoing
expenses and prepare an accounting. Because this is can be a time consuming
process and because the income and expenses are paid sporadically, it is more
efficient if the label only has to do this every 6 months.

b. The label will calculate an artist's royalties and prepare an accounting

based on the money it has actually received at the time the accounting is
prepared. So even if Soundscan shows there are many sales, unless the record
company has been paid by its distributor or from the retail store direct, then the
record company is not liable to pay royalties to the artist.

c. This paragraph allows the record company to calculate royalties based

on the amount received for foreign sales when any deductions may take place as
a result of currency or taxing issues related to foreign sales.

d. The record company will maintain books and records and affords the
artist the opportunity to review those books and records after notice if it has a
dispute with the company over royalties or sales of audio products. This
paragraph places a limit on the artist that it can only do an accounting once a
year and must do the accounting within 2 years after it has been rendered. These
terms are fairly standard but can be changed by the label to benefit or the artist.

e. The artist has timelines and procedures in which to object to any

accounting statement and to request an accounting. This time lines for an
objection can be increased or decreased, but the timelines set forth in this
agreement are very pro-company and could be increased a little to give the artist
a longer time to object and examine the books and records. A 2 or 3 year limit to
object is standard. The record company may even limit the time when an artist
may bring a lawsuit over royalties. The limit is usually less than the legal statute
of limitations. Therefore if the law provides that an artist has 4 years after an
accounting to file a lawsuit for breach of contract, then the label usually will try to
limit this to less time such as 2 years. This contract does not place such a limit on
the artist and therefore, the law of the state will control this date.

8. ARTWORK: This paragraph addresses the creation and ownership of the

cover artwork, and other artwork, created for the artist's audio product. This

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paragraph provides for the label to consult with the artist. This is good practice
especially for a smaller label. If the artist is not happy with the artwork or is not
consulted it can cause problems between the label and the artist. The label can
ultimate decision making, but experience dictates that the artwork is not the
deriving force behind sales of an audio product and therefore a label should be
willing to compromise for the good of the relationship.

The record label will own the artwork. It needs to own the rights to the artwork
because it will need to use the cover in advertising and promotion. Therefore, the
terms of the agreement set forth the label to own it as a work-made-for hire,
where the label is considered the author. Also, since the artwork usually contains
the artist's name, the paragraph provides for the artist to give the label the right to
use it in the artwork especially if the label is going to incorporate the artwork into
merchandise that it will give away. Any costs associated with the artwork is an
Advance under the agreement for purposes of the label getting paid back before
it pays the artist a royalty.

9. NAME, LIKENESS & PROMOTION:

a. Because the artist owns the trademark to the professional name used
or the band or group name, the record company must license the right to place it
on audio products, in advertising, promotions, etc. Further, because this
agreement grants the record company the exclusive right to record the artist then
the company will restrict the artist from granting the rights to other person to use
the artist's professional name in association with the sale of audio products
during the term of the agreement. However, if the artist has previously recorded
albums that have been released, the label can not restrict anyone else's use of
the artist's name on those previous audio products.

b. The artist agrees to register its name for trademark to protect such
rights. If the artist fails to do this then the record company reserves the right to do
it on the artist's behalf. The record company does not own the names to the
rights of the trademark, it only pays to have the trademark application completed
and files to protect its investment. Because the record company is investing in
the production and manufacture and advertising of records created by the artist,
it wants to protect its rights to the name of the artist. The record company would
not want to manufacture 50,000 records only to find out that another artist has
the rights to the same name and the artist the record company has signed must
now change the professional name of the group. Therefore a artist or label might
do a trademark search before the audio products are released to make sure the
name is not used by another artist. Then upon release of the audio product one
of the parties would register the name for trademark in the name of the artist. A
trademark or entertainment attorney can assist either party with this process.

c. This paragraph grants the label the right to create and maintain a
website for the artist and provides the parameters for the artist to be able to
create its own website and social network sites. Even after the recording
agreement is ended the label is still selling the artist's audio products and may

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want to maintain a website devoted to the artist.

d. The label may ask the artist to travel to other cities to help promote the
sales of the album. The artist agrees he or she will cooperate in these efforts and
the label agrees to pay for any travel associated with the request. The label
agrees to reimburse the artist if the artist is requested to travel outside the county
where the artist lives or is based out of. Any costs associated with the travel are
considered Promotional Costs for which the label will be deduct one-half of such
costs from artist's royalty.

e. The label will deduct 50% of all Promotional Costs from artist's royalties.

10. MASTER RIGHTS: There are two types of copyrightable material associated
with a master recording: the copyright to the songs recorded and the copyright to
the actual recording. The record company will own the rights to the recording of
the songs and the artist, or songwriter, will retain the copyrights to the songs. (If
the record company has a publishing company and wants to own the rights to the
songs then a separate publishing agreement will be signed. These rights should
not be addressed in the Recording Agreement ). This paragraph sets forth that
the record company will own the rights as a work-made-for-hire. There is a
discrepancy in the copyright laws as to whether the record company can own the
masters as a work-made-for-hire, which means that the record company is
considered the "author" of the recordings, not the artist and the record company
will own the recordings for 135 years after which they go into the public domain.
If the recordings are not a work-made-for-hire then the only way the record
company can own the recordings is if the artist "transfers" the copyrights to the
record company. So this paragraph protects the record company in the event a
court ever determines that record companies do not own the recordings as a
work-made-for-hire under the copyright laws. It protects them by stating that if
such a determination is made then the artist agrees that this paragraph transfers
the copyrights to the record company. However, if this becomes the case the
record company should understand that the artist will have the right to request its
copyrights back within 35 years after the transfer of those copyrights. Even
though the copyrights are owned by the record company under this clause, it also
reserves the rights to use the master recordings as it sees fit. If the artist wants to
restrict that ownership, the record company's the right to make derivative works
such as dance re-mixes or release outtakes without the artist's permission, then
the artist will contract those restrictions in this paragraph.

11. VIDEO RIGHTS: This clause is a simplified version granting the record
companies the right to produce a video and pay royalties in the event the videos
are ever sold. Music videos are produced by the record company for promotional
purposes and have very little resale value. Music video stations or online
companies do not pay for the right to broadcast a video. However, websites like
YouTube may pay a small fee for allowing advertising on an artist's music video.
Mostly, a music video is purely promotional to help promote the artist and help
the sale of audio products. However, some companies license the right to use
the video, maybe to put on a compilation video to play in clubs; or the a

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successful artist might have their videos compiled onto one video and sell the a
DVD containing all the videos to the public. Because the production of videos is
expensive and the competition is fierce to obtain airplay, most independent labels
do not produce expensive videos. This clause also grants the record company
the right to produce the video and if the artist is the writer of the song, waives any
additional fee or mechanical royalty to be paid to artist for the distribution of
copies of the video. The royalties payable for any income received by the label
for a music video is addressed in the Royalties paragraph. Costs for Videos are
Expenses and wherein the record company is paid back the costs from Gross
Receipts before calculating Net Receipts and paying royalties.

12. WARRANTIES AND REPRESENTATIONS: Artist warrants and represents

the following:

a. The artist will represent certain facts to the record company that the
record company has the right to rely upon when entering into a contract with the
artist. The main representation the artist makes is that the artist is not under
another contract with anyone else that will hinder the artist's abilities to enter into
this agreement and that will not effect the record company's rights under this
agreement. Also the artist represents to the record company that there are no
other recordings being distributed of the artist's recorded performances.

b. The artist will represent that the songs and the artist's performances are
original and either owned by artist or that the artist has the rights to the songs or
performances. The artist is also representing that if there are any "samples" on
the record, then the artist has the rights to use these "samples". A "Sample" is
the use of a recording of a song that is recorded integrated in the recording. A
"replay" is when a musician replays a portion of a song that is recorded and
incorporated into the recording. An "interpolation" is a variation of an existing
song that is performed by a musician and incorporated into the artist's recording.
Any of these uses of someone else's song require the artist or the record
company to obtain a license from the owner of the song or the owner's publisher.

c. As explained in Paragraph 4, California allows the record company to

file an injunction to prevent an artist who breaches the contract from recording
with another company until the breach is resolved if the record company has paid
the minimum amount of advances to the artist that is required by the law. The
remedy of being able to file an injunction depends on the state law that the
contract is being interpreted under, which is addressed below in the paragraph
titled Jurisdiction. This paragraph provides by agreement that the record
company will have the right to seek an injunction in the event of a breach of
contract by the artist. However, even though this provision is in this agreement, a
whether a state law would allow the company to file an injunction to prevent the
artist from recording with a different label after it breaches this agreement. The
language included in this agreement is consistent with the language that some
stat's require to be in contract for this legal remedy to be exercised. This
paragraph is included as a general protection in the event a state's law provides
for such a provision. An attorney should be consulted in the state where the

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contract is being performed to determine any legal requirements that would need
to be included in the agreement if the label wants to take advantage of this type
of legal remedy.

d. This paragraph basically provides that if required by law or the record

company becomes a signatory to a union contract, the artist will become a
member of the union. The two types of unions in the music business are AFTRA
(singers) and AFM (musicians). An artist has the right to join a union but is not
necessarily required. Most artists on independent labels may not be in a union.
However, if an artist becomes a member of a union, then the record company
must become a signatory to the union contract, otherwise the artist is in violation
of its union agreement. And if the record company is a signatory to the union
contract, then the artist it signs must become members. Therefore, an
independent label may operate without becoming a signatory and be required to
meet all union requirements as long as none of its artists are or become
members of the union. Some state's like California, New York and Tennessee
have very strong union representation and so the business operates under the
watchful eye of the union and most artist's become members. In other states, like
Texas, the unions are not as strong and so not as many artists' or labels are
members.

e. If the artist is using a professional name or the band or group is

performing under a creative name, then the artist warrants that they own the
rights to this name. In order for an artist to prevent anyone else from using their
professional name is to register it for trademark. Paragraph 9 requires the artist
to register the artist's name for trademark. Even though this warranty is in the
agreement, the best way for a label to protect its rights is to verify the artist has
registered the name and if they have not, then to help them do it. However, if
such a name dispute arises and the company is required to pay a third party
because of the dispute, then the artist will be required to pay the record company
back for any damages it incurs because the artist does not own the name.

f. The artist acknowledges that the music industry is risky and that the
record company does not make any promises regarding the success of the sale
of artist's audio products. This prevents the artist from making a claim against the
label that they did not do enough to help the artist sell a lot of audio products.

g. The artist agrees that it will pay the label back for any money incurred
by the label if the artist breaches any of the warranties or contract. Therefore, if
the artist claims it wrote a song it records but the label is sued for copyright
infringement for releasing a song the artist did not own, then the label can sue
the artist for any of the damages or legal costs associated with paying the claim
by the person that actually owned the song. This is a simplified version of an
indemnity clause. Some indemnification clauses can be very detailed and
extensive.

13. SUSPENSION AND DEFAULT:

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a. This is often referred to as the "Force Majeure" or "Act Of God" clause.

It allows for the record company to suspend its performance under the contract
or put the contract on hold during an occurrence that is beyond the record
company's control. If the record company is required to have a recording
completed within a specific amount of time by the terms of the contract and the
studio the artist is recording burns down, the record company can suspend the
contract for the time it takes to put the artist in the studio to re-record without
being in breach of contract.

b. This paragraph allows the record company to suspend its performance

under the agreement or terminate the agreement if the artist breaches the
contract. If the artist and company are in a dispute and the artist will not record
the next record, instead of the artist allowing the time to expire under the
contract, the record company can protect itself by suspending the contract, in a
sense putting all performances on hold until the dispute is resolved. Once the
dispute is resolved, then the contract will begin with the time that the contract
was suspending being added onto the end of the contract.

c. This provision protects the record company from the artist declaring the
record company in breach and claiming it will not perform or file a lawsuit.
Because record companies may have many artists that it deals with, it may miss
a deadline for making an advance payment or releasing a record. Instead of it
being declared in breach, the artist must give the company an opportunity to
clear the matter up or "cure" the breach. This provision provides the artist must
give the company written notice of the "breach" or problem and the record
company has sixty (60) days to correct the problem.

14. APPROVAL: Approval when it relates to artistic control can be an important

issue for an artist. However, for most independent labels it less of an issue. The
label's main concern is that the artist produces a quality recording under limited
direction. This contract allows for most decisions to be by mutual decision with
the record company being able to exert a final decision in the event of a dispute.
This allows for the artist to participate in all aspects involving artistic decisions.
The label should make the sure that when exerting a final decision that it is over
a matter that is not as important to the artist as some other artistic aspects. This
type of clause can help the independent label develop a working relationship with
the artist rather than choosing just to make decisions without the artist's
involvement. It is protected in the event a final decision absolutely must be made,
but it should always try to work it out with the artist first.

15. ASSIGNMENT: The independent record company needs to have the right to
assign or transfer this contract to a bigger label that it may enter into an
agreement with for the distribution of the artist's records. This contract does not
limit the right to a major, though it refers to this right as an example. The
company does not necessarily want to restrict this right only to a "major" label,
however, it would be reasonable to limit it to at least a label of "equal or greater
stature distributed through a national distributor."

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16. SUCCESSOR IN INTEREST: In the event anyone acquires rights to this

contract, such as an heir to the artist or a company that purchases the record
label, will receive all the rights under the agreement as if they were the original
party. Wile an heir could not perform under the agreement, he or she would be
entitled to receive royalties and enforce payment under the terms.

17. INVALIDITY OF TERMS: If a term or paragraph in the agreement is deemed

to be legally invalid, then it will not affect the validity of the agreement as a whole.

18. NOTICES: This paragraph provides how any required written notices in the
contract should be sent. The artist's and company's address should both be
listed in this agreement for this provision to be effective. Sometimes the lawyer
for either party will request a copy of such notice also be sent to him or her. This
is a reasonable provision to add to the contract if requested.

19. APPLICABLE LAW: The contract should be interpreted by the law of the
State where the company is located and any lawsuits should be filed in the
county where the label is located. Most of the services provided under this
contract are performed in the state where the company is located. The company
needs to be able to run its daily business relying on the laws of one state.
Further, because the record company contracts with many artists, it should not
expect to defend legal disputes in all the different states that its artists may be
located. However, if the label is signing an artist that resides in another state,
Federal law may require the label to sue the artist in the state where the artist
lives though the contract may be interpreted under the law that the parties
agreed to in the contract.

20. AMENDMENT: Any changes, modifications or amendments to the contract

are required to be in writing and signed by both parties to be valid. However, in
the event the record company and artist agree to something to the contrary and
do not document it, the contract provides that the failure to do this does not
constitute a waiver to require a writing in the future. Just because the parties did
not put the new agreement in writing does not mean that the company has
waived its right to require the next modification to be in writing.

21. DEFINITIONS: In general it is necessary to define terms. It is not realistic to

rely upon each parties understanding of what a specific term might mean. For
example, without a definition, of recording costs the parties may have a different
idea of what recording costs will mean. The recording industry may have certain
things that it considers recording costs but every single record label will add
things to the definition. This is most important because the record label will
recoup "Recording Costs" from the artist's royalties. And therefore, the specific
things that the record label will recoup as recording costs will be specifically set
forth. The record label might recoup artwork or special packaging or promotional
material. These items would not be considered a cost associated with recording
the record, but is a "Recording Cost" based on the label definition. Therefore not
only is it important to define terms in a contract., but it is important that both
parties read the definitions, since important terms of the agreement may be

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affected by that definition.

"Advance" is the money paid on the artist's behalf for "Recording Costs"
is considered an Advance. This contract sets forth that all Advances are
recoupable, meaning that the record company pays itself back any money
considered to be an Advance from the artist's royalties. Recordings Costs are
described below and may include things that are more than traditional recording
costs. If the label does not want to include the additional items in "Recording
Costs" then it needs to be sure to make clear that other items that it may wish to
call an Advance be set forth clearly as Advances and recoupable such as
payment for advertising and promotions.

"Audio Products" define the term used to describe the products the
record company is selling. The products could be physical configurations (e.g.
CDs) or physical and digital downloads. In the past the term used was "records"
or "phonorecords". And while these terms could still be used, many people think
of "records" as only physical configurations. Any term can be use in the contract
to define and refer to the configurations. This Agreement is updated to adapt to
new configurations.

"Audiovisual Products" defines the term used to described the products

created from audiovisual material like video or film. This could be a physical
configuration like a DVD or a video that is in a digital format that may be
downloaded.

"Budget Audio Products" are Audio Products that the label sets the
SRLP at 50% or less of the SRLP that it would normally set for the same type of
Audio Product. This may occur at the onset of a release or the label may change
the SRLP from $12.99 to $6.49 a year later in order to try to encourage sales and
get rid of overstocked physical product. When this occurs the label will receive
about 50% of the Budget price from its distributor for each Audio Product sold.

"Compositions" defines the term used to refer to any of the songs the
artist will record whether the artist has written them or not. .

"Contract Period" defines the term used to describe any contract period
whether it’s the Initial Term or any Option Period.

"Controlled Compositions" defines the term used to describe only the

songs the artist writes and records. The artist is paid a mechanical royalty for the
songs the artist writes and records that are released by the record company.

"Delivery" defines the term used to described what constitutes a delivery

of the recordings under the agreement. This is important since a payment or a
release guaranty may be tied to delivery. Since there are other elements other
than just the masters the record company needs before releasing a recording
(i.e. side artist or producer agreements). If the record company withholds its
performance under the contract such as payment of advances or releasing the

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masters till it gets all the elements it needs in order to have some leverage to get
these elements. Otherwise the artist would have not incentive to obtain the
elements if the company pays the money or releases the recording, which could
cause a problem later.

"Digital Format" defines the term used to described products that created
and sold in a digital format.

"Digital Transmissions" defines the term used to describe the way Audio
Products in a Digital Format are sold and delivered.

"Long Playing Album" defines the term used to described a product that
is configured in a traditional album format

"Master Recording" defines the term used to describe the recordings

embodying the artist's recorded performance that are subject to the recording
agreement.

"Mid-line Audio Products" are Audio Products that the label sets the
SRLP between 51% or 75% of the SRLP that it would normally set for the same
type of Audio Product. This may occur at the onset of a release or the label may
change the SRLP from $12.99 to $8.99 a year later in order to try to encourage
sales and get rid of overstocked physical product. When this occurs the label will
receive about 50% of the Mid-level price from its distributor for each Audio
Product sold.

"Net Sales" defines the term used to describe what constitutes a sale of
the Audio Products. Sometimes with physical products, though CDs may be
shipped to a retail store, if the store does not sell the CDs, they can return them
to the label or the label's distributor for a credit. Therefore, the label's distributor
usually holds back an amount of money to cover returns and does not pay the
label even though a retailer may have purchased 10,000 units from the label. The
label wants to understand that the artist's royalties are calculated on those units
sold that do not get returned and also based on those units the distributor pays
the label for which will not include the money the distributor is holding on to until
it is satisfied that the CDs will not be returned to the label. This will become less
of an issue with Digital Downloads.

"Promotion Costs" defines the term used to describe promotional costs

that are spent by the label for advertising and promoting the Audio Products.

"Recording Costs" defines the term used to describe the those things
that a label considers a cost related to recording a master Because this
agreement categorizes Recording Costs as an Expense the record company will
deduct any cost for recording the masters from the gross receipts received by the
label before calculating the Net Profits.

"Release" defines what constitutes a release of an audio product. The

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contract provides that there are certain guarantees by the record label to
"Release" an audio product. A label also might agree that certain things occur
after a "release" such as the payment of an advance or when an option period
begins.

"Suggested Retail List Price" ("SRLP") defines what the suggested list
price is for purposes of calculating royalties. Basically, it is the price the label tells
its distributors that it wants retail to sell the product for. However, retail can sell it
for more or for less. The SRLP is usually documented in the label's "one sheet"
which is a physical document or digital document sent to retail stores that
provides information about the Audio Product for the retail stores to order the
product from the distributor which will include the wholesale price the store will
buy the product for and the price the label suggests the label sell the Audio
Product for.

"Term" defines the term used to describe the duration of the contract.

" Territory" defines the term used to describe the part of the world this
contract will apply to. This record label has the rights granted in the agreement
throughout the entire world. Some companies may use the "Universe" for the
Territory. Basically, the label wants the rights to sell the products worldwide.
Before the internet, artists might be able to limit the territory to the U.S. or
specific territories if the independent label did not have a way of distributing CDs.
in other parts of the world. However, because of digital downloads and the ease
of these audio products being available through online retailers (i.e. iTunes),
labels are able to ask for the "world" and not be limited.

22. DISTRIBUTION AGREEMENT: The label may or may not have distribution
at the time it enters into an agreement with the artist or it may change to a
different distributor during the term of the Artist's Recording Agreement. This
provision allows for any controlling provisions of a distribution agreement to
control if it interferes with the terms of this agreement. This clause may or may
not be enforceable since the law may dictate that any material change to the
terms of a contract may need to be agreed upon by both parties. Therefore, to be
safe if the record company enters into a distribution agreement that has terms
that are inconsistent with the agreement with the artist, the record company
should just draft an amendment for the artist's review and signature.

23. SIDE ARTIST: A side artist is a vocalist or musician that is featured or

appears on another artist's recording. Because the recording agreement is an
"exclusive" agreement, the artist is not allowed to record for any other record
label, even as a side artist. However, this provision allows the artist to record as
a side artist on another artist's record that is on a different record label under
certain restrictions without having to obtain permission from the label first.

24. GROUP ARTIST & LEAVING MEMBER:

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a. This paragraph sets forth that each member is responsible under the contract
"jointly and severally". This means that if there is a breach by one member of the
artist, then all of the other members are liable for the breach. If the artist is a solo
artist, then this paragraph can be removed. This paragraph also sets forth that no
changed to a group make up can be made without both the artist and company's
approval and that any new member is required to sign an agreement just like this
one obligating the new member to the label too. The old member may or may not
be released from the contract. The company typically will still need to pay the
leaving member his or her share of royalties. The old contract stays in effect and
any formal document releasing a member from its obligation under this
agreement would address the provisions of the contract that are still valid.

b. This provision does not apply to a single artist and may be removed from the
contract. However, for a group that consists of two or more persons it is
applicable. This provision protects the label in the event the group decides to
break up or if one of its members wants to go "solo". This provision allows the
record label to sign the leaving member or members to a recording agreement
under the same terms and conditions as this agreement. It specifically sets forth
the conditions the artist and the label must meet in order to effectuate the terms.
This protects the label when a group is unhappy with the label and believes that
by "breaking up" they can terminate the agreement. They may break up and
choose not record anymore. Under that circumstance, the label will have
recourse under this Agreement.

c. This paragraph makes it clear that the exclusive rights of the label apply to
each member even if the group disbands. It sets forth the agreement will
continue under the terms set forth in subparagraphs 24 c. i., ii, and iii.

i. Company may terminate the Artist Recording Agreement as to all

members by providing a written notice.

ii. If company does not terminate the Artist Recording Agreement, then
the Agreement continues with the remaining members of the artist being
obligated to continue to record under the Agreement.

iii. The Leaving Member becomes obligated to continue to record for

company under the terms of the Artist Recording Agreement as a solo artist or an
artist with a new group or band unless the company sends the artist notice it is
terminating the Agreement as to the Leaving Member. The contract makes this
occurrence automatic so the label does not lose the Leaving Member because it
failed to send the Leaving Member a written notice.

iv. The Leaving Member agrees not to use the artist's name to form a new
band or group under the old name. This provision helps protect the band or
group too.

25. MEDIATION: When a breach of contract or major dispute arises between the
parties that would normally lead to a lawsuit, this paragraph provides for the

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parties to mediate the case first prior to submitting the case to arbitration or filing
a lawsuit Mediation affords the opportunity to settle a dispute with anyone making
a binding or non-binding agreement. If the parties are unable to reach an
agreement on their own then either party may file a lawsuit or arbitration.

26. INDEPENDENT CONTRACTOR: The company makes it clear in the

agreement that the legal relationship between the artist and the label does not
create a legal entity of a partnership or joint venture between the parties which
can have legal consequences if it was. It also makes clear that the relationship is
that of an independent contractor and that the artist is not an employee of the
company. This designation has legal consequences for both liability and tax
purposes upon the label. The company is trying to make it clear that it is not
responsible for the actions of the artist like an employer might be for an
employee and that it is not responsible for paying or matching any tax payments
when the artist is paid advances or royalties under the agreement.

27. RIGHT TO LEGAL REPRESENTATION: The artist should be provided the

opportunity to seek out legal counsel for representation. All labels should
encourage the artist to obtain an "entertainment attorney" to look over the
agreement. No major label will ever sign an agreement with an artist unless that
artist has an entertainment attorney. While it is not a legal defense that the artist
was not represented by counsel, it can certainly be brought up as fact and work
against a label if a dispute arises. Further, it will cause less problems in the future
if the artist had the opportunity to have an attorney make suggested changes to
the agreement or negotiate new terms.

Signatures, Addresses and Social Security Numbers: The actual legal name
of the record company should be typed in and replace the word "Record
Company" here. The addresses of the artist and record company should be
added. The addresses are necessary because of the notice provision in the
agreement. If the record company is a corporation, then it should list its corporate
name both in the beginning paragraph and in the signature line. If the person
signing is an officer of the corporation, or partner, or owner, then this designation
should be listed to identify the person's capacity for having authority to sign the
agreement. If there is more than one person in the group, then each of their legal
names should be printed under a signature line with their professional name next
to it after the designation of p/k/a professionally known as). Each artist signing
the agreement should include his or her social security number. If the group has
a federal employer identification number (EIN) it can be listed. Since the label is
paying royalties, it will need to issue a 1099 if the artist is paid over a certain
amount of money.

At least two originals should be printed and signed by the artist and the
label. Each party will receive one original for its records. However, some
record labels may require more than two executed originals depending on
its business policies.

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DISCLAIMER:

The contracts sold on MusicContracts.com are form agreements.

MusicContracts.com and J S Rudsenske, PLLC make no warranties, specific or
implied, about the use or fitness of the agreements sold on MusicContracts.com
or any of the terms contained in the agreements. The use of the explanations is
not a substitute for legal advice from an attorney. Because of the legal issues
associated with the subject matter of this contract, a qualified attorney with
knowledge of entertainment industry contracts should be employed to make any
substantive changes to this agreement. The contracts on this site have been
drafted and included terms based on the standards in the music industry and
copyright and trademark laws of the United States. While the contracts are
drafted in such a manner, they can be used a template for the way to structure a
particular deal, with changes being made to adhere to your state's laws. Each
state has their own particular laws regarding contracts. Each contract should be
reviewed by an attorney in the your state to make sure the contracts adhere to
those laws. Therefore, these contracts would only be used as a guide or a
template for particular terms you might want to include with your contract that is
consistent with your state’s or country’s laws or industry practices. As a customer
purchasing and using these agreements and explanations you agree you are
assuming any risk of the use of the agreements or explanations you purchased
and agree the burden is on you the customer to seek out legal assistance.

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