Basic considerations before signing a recording deal – a must read by recording artists!
You are a music artist in Cameroon and a record label wants so sign you in a recording deal. It is understandable that that is definitely a huge step for you in your career. However, before signing with any label make sure you’ve read the terms very carefully and are happy, they can’t offer you more. Here are a few things you should look out for before actually penning your signature.
· The type of recording deal
· The legality of the recording company (record label)
· The duration of the contract
· The rights an obligation of the parties
· Royalty partitioning
· Ownership of Intellectual Property (copyrights, trademark, stage names)
· Dispute resolution mechanism
· The methods of termination
1. What is the type of recording contract they are offering?
There are generally four (04) types of recording contracts.
A first type is the Major Label Deal. It is one in which the record label absolutely provides the artist with a huge amount of funding to cover the cost of everything from recording to distribution, promo, etc. and even pay the artist a hefty advance in order to pimp him/her up so he/she may look fly. In return the label would recover all the cost and most times own the master copies and copyrights to the songs while the artist is only paid a small amount of royalties usually between 10-15%.
A second type is a Distribution Deal. In such a deal, the artist is considered to have already had a reasonable level of success and significant buzz for themselves. He/she needs the label to boost this success to another level. The artist generally comes up with the financing for the production, recording and the marketing of the album. The artist literally takes control of promotional costs, videos, radio, posters, wardrobe…everything; crazy yeah? As in, “so what is the label bringing to the table?” Well, the Label will take charge of manufacturing, distributing and promoting the album. Of course, this is not so much but it is worth it. This is why the Label only gets about 25% of the sales profit and the artist gets about 75% and above. Some people refer to this as a P&D Deal.
There is also the Independent Label Deal. The Indie label is very similar to the Major Label Deal. The difference is that the indie labels are generally smaller and so give a smaller amount as advance to the artist. Also, the artist has a greater control of his/her album and work as they work very closely with the label. It is easier getting in touch with indie labels than major labels.
Finally, we shall look at the 360 deal. This is gaining grounds amongst most record deals nowadays and could be described as the most commonly used today. Its uniqueness is in that it characterizes of the artist and the record label coming into a deal in which the label is involved in a 360o engagement in the artists work. This ranges from production to distribution to recording, tours, merches, brands, endorsements, TV appearances, etc. They are also known as equity deals; multiple rights deals or participation deals. The label makes money not just form music sales but form almost everything that the artist does. In as much as this seems to be a bad deal for the artist, but it could be a major incentive to the label who would have reason to be more engaged in promoting and sponsoring the artist.
2. The legality of the record label (company)
Generally, a record label is considered a business. Like any business, the label is regulated and expected to operate in one of the various business structures. There are sole proprietorships, partnerships, private limited companies, public limited companies or joint stock companies. However, the most commonly used form is the Private Limited Company.
Whichever structure the label choses, it will be important that the artist verifies to it that the label is properly incorporated and registered, and thus recognized by law as a moral person having a legal personality and capacity to contract, to own property and to sue and be sued in its name. Where a label does not have this status, it is generally not having the capacity to sue – a major element needed for a contract to be valid.
3. The duration of the contract
Basically, as the word stipulates, duration means time frame or how long. Every contract must have a duration. The parties are at liberty to decide on the duration of their contracts. An artist should be keen to see that the contract is not a “for life” contract or for a very long duration such that it becomes rather detrimental, preventing him/her from freely moving on from the contract.
Generally, a recording deal should at best be for a period of one (01) year. This should be enough time for the record label to work on the artists project and produce results. Where the relationship is good and both parties feel like continuing work together, then it can be renewed for another one year and so on.
4. The Rights and Obligations of the parties
In every recording agreement, there is usually a portion for the rights and the obligations of the parties. In fact, this portion of the agreement is one of the most important and should be read keenly between the lines to perfectly understand what they represent and mean. It is the portions that explains what each party can and cannot do. If you do not understand anything in this portion, do not sign until you are sure that you have finally understood and accepted them.
5. Royalty and sales Partitioning
Royalties are payments made to artists for the use of their copyrighted works. They could include a mechanical royalty, synchronization royalty or public performance royalty. It is a major stream of income for the artist; therefore, it must be looked into very keenly.
Generally, whenever a song is sold or played on radio or played online, the record label gets a percentage of it and so too does the artist. Note that this however is subject to the type of deal that is agreed upon.
As an artist, you should be sure that the percentage given to you by the label is worth the work put in, vis-à-vis the investments the label is willing to put in as well.
6. Ownership of Intellectual Property (copyrights, trademarks, stage name)
Some recording deals are designed such that the artist signs off his/her rights, autonomy, creative control and stage name to the label. This is crazy! How do you even accept a thing like that? That is all you have got – that is the value of you! So accepting a deal like that literally means selling away your value to the label.
Every artist should lookout to see that this is not the case in his/her contract. You should own your copyrights and master pieces and be able to own and control your social media handles and YouTube channels. The moment you give it out to the label and your relationship with the label goes sour, then you crash!
7. Dispute Resolution
When a disagreement occurs as to the application or interpretation of the terms of the agreement, then there is bound to be a dispute which has to be resolved. There exist various dispute resolutions methods with the most commonly used being litigation.
However, given that the relationship is one of a business nature, it is of importance that the dispute resolutions mechanism put in place should by all means avoid a court action. Court actions should be the very last options. Do all to see to it that in the contract it is inserted that other amicable form of settlement must be used before ever engaging in a court action. Court actions are lengthy and costly and you don’t want to use your resources and time to fight your label and in the and kill your business relationship.
Other mechanisms exist such as negotiation, mediation, conciliation and arbitration. Arbitration is most appropriate; however, it could be relatively costly. If I will recommend a dispute settlement mechanism, then I will go for a mediation.\
Make sure this is clearly spelt out in your agreement.
8. Methods of termination
This may look trivial but it is rather a key point in every contract agreement. You should discuss before hand on how your contract can be terminated – what can lead to termination and how the termination should be done.
It is advisable to not be too quick in issuing a termination notice to your record label, even when there is a breach on the part of the label. It is important to follow a structured procedure. You may write a notice to respect contractual terms and a pre-action notice to respect contractual terms. It should be only after notice has been issued and the label does not repair the damage caused that you can go ahead to issue a termination notice.
In any case, the artist must be sure that the termination of the agreement shall not be disadvantageous to him or her at that point.
See to it that clear procedures are put in place as concerns the issue of termination of the agreement.
In a summary therefore, it is important to understand that every recording deal is a whole lot put together, it could be in a single page document just like it can be in a five pages document. However in any case, an artist should NEVER, no matter the pressure or desperation, pen his or her signature on any recording deal without first reading thoroughly and keenly the contract document and perfectly understanding the meaning and implications of every single provision. Of course, a contract is a legal document and it is only but normal to say that it is best understood by a person with a legal background and understanding in law. Given its specificity – of the music (entertainment) world, it would be best that an entertainment lawyer is sought to guide the artist at every step in the signing of the deal.