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Being a Musician is a Business (Music Agreement Red Flags)

When an artist receives their first music agreement, there’s a sense of accomplishment.

Someone likes me! Where do I sign?

Before signing, it’s important to understand what you’re signing.

In record label agreements, music publishing contracts, digital distribution deals, and other music agreements, it’s not uncommon for there to be a number of “red flags” – warnings to watch out for in the agreement and/or the relationship with the company making the offer.

The following list (in no particular order) provides some common red flags to keep in mind.

 

  1. Inconsistencies between what you are told and what’s in the agreement

It may be on purpose, or not, but just because the A&R gal told you one thing, doesn’t mean the agreement you’re asked to sign is completely consistent. An obvious example is if you’re told you’re getting an advance of $5,000, but the agreement doesn’t provide for an advance. Also, if the title of the agreement includes “non-exclusive”, that doesn’t mean the agreement is actually non-exclusive.

 

  1. Being asked to give more rights than are needed

The role of synch licensing, which is one element of music publishing, includes the role of placing music in films, TV series, and advertising. Getting placed can be very lucrative for whoever owns and controls (1) the master recordings (by providing a master use license for the sound recording) and (2) the publishing rights in the compositions (music and lyrics) (by providing a synchronization license for the composition).

Other music publisher roles include administering licenses and the collection of publishing royalties.

A record label doesn’t need publishing rights to distribute your music. As such, if you are being asked to provide publishing rights to the label, then you’re being asked to provide more rights than are needed to accomplish the label’s main function – distributing your music digitally and physically.

Unless you’re being appropriately compensated for the publishing rights, and the label is the right fit to be both your distributor and your publisher, then the requirement to grant publishing rights to your label is likely excessive.

If you read that the label wants publishing rights, ask what they intend to do with these rights and how you’re being compensated.

Also, is the label asking to own your masters? This isn’t needed to distribute your music if you give the label a sufficient license to distribute your masters. If the label owns your masters, they get a piece of the broad publishing-related revenue, specifically being fees paid for the master use license, which is typically 50% of the up front fees to place music (into a film, series, ad, game, etc.), with the other half being paid for the synchronization license to the publisher(s). Also, whoever owns the masters, controls the use of those masters, including for synch licensing opportunities.

 

  1. Lack of clarity

A key reason for an agreement is to clearly define the rights and obligations of you and the company, and get on the same page about the general way you and the company will work together. Without clarity, there can be confusion. When there isn’t clarity about when the company’s rights start, there isn’t clarity about when the rights end. When there isn’t clarity about what you need to deliver, how can you prove you delivered everything you needed to deliver? Unclear terms should be clarified.

 

  1. Future sales advances

Sometimes the company has the option to extend their rights. For example, a company that has the rights to distribute your first album, may have the option to distribute the second and third albums once they’re produced. The company may refer to an upfront cash advance (against future sales) if they decide to extend their rights (“exercising their option(s)”). While it looks lie a guarantee, if the formula is based on prior sales, the company may be able to access those additional rights by paying you a lower advance than the number in the agreement, or no advance at all.

 

  1. Uncapped expenses

The formula used to determine how much money you make from sales might be gross revenue less company’s expenses multiplied by a percentage. However, without any limitation on the company’s expenses, you may never get paid anything.

If you’re told an agreement is take it or leave it, and the company won’t answer your questions about the agreement, they may not be the most trusted partner.

  1. Controlled compositions

If you’re both a writer and performer, a label will usually try to force you to receive fewer mechanical royalties as compared to the statutory royalty rate. For example, you may be required to accept 75% of the mechanical royalties for up to 10 songs, even if you need to deliver 13 songs. While this is not an uncommon (yet generally unreasonable) request, consider how much you’re paying in mechanical licenses to your co-writers and the people who wrote songs you covered. Are you paying more mechanical royalties than you’re receiving?

 

  1. Zero commitment to market and promote

What do you want the company to do? Spend some money on marketing and promotion? If they aren’t willing to put their verbal commitment in writing, maybe they aren’t going to actually market or promote you and your music.

 

  1. No provision to get details

If the company is responsible to pay you, they should also have an obligation to give you details about how they calculated your royalties. Also, you should have the ability to make sure the numbers are accurate by having the right to take a look at their records.

 

  1. Lack of balanced rights

There are a variety of “general” agreement terms, from representations to indemnity, which are found in all types of agreements. Just because they’re commonplace, doesn’t mean the terms you’re reading were drafted reasonably.

 

  1. Lack of clear termination provisions

If there isn’t a clear way for you to get out of the agreement, you will wish you had a way out, if the company isn’t paying you what you are entitled to receive, but are still selling your music.

 

On a brighter note, if you read an agreement before signing, get some assistance from fellow musicians and/or a music lawyer, and the company is willing to discuss and reasonably negotiate the agreement, it may be the start of a beautiful relationship…

Edwards PC, Creative Law is a boutique law firm provides legal services to Music, Film, Animation, TV, Digital Media, Game, Software and Publishing industry clients. For more information and blogs, please visit www.edwardslaw.ca

Regarding music law, Byron Pascoe works with musicians and music companies to assist with record label agreements, publishing contracts, distribution deals, producer agreements, band agreements, etc.

© 2017 Edwards PC

* This blog is for general informational purposes only and is not to be construed as legal advice. Please contact Edwards PC, Creative Law or another lawyer, if you wish to apply these concepts to your specific circumstances.

 

 

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