Advice on record contracts - read this before you sign!
Blog by Musicians' Union under Finance, Law & Music Business, Record Labels
Offered a recording contract by a label? It’s important you understand what your contract says before you sign. Let’s take a look at some of the headline issues.
Make sure you know how and when you will be paid. Ideally you will be given a cash advance. They should always be non-returnable, and only recoupable from any future record royalties. If a long-term contract is offered, the advance should be large enough to provide the members of the band with a reasonable living wage until any initial costs have been met and royalties are being received.
You should aim for royalties to be payable on 100% of all sales and pay particular attention to royalty rates that will apply to digital download sales and streaming. Try to secure higher royalties as the contract goes on, for instance after a certain level of sales have been achieved and/or with each new year of the contract. Watch out for reduced royalty rates for compilations, ‘TV advertised product’ etc. It’s also important to ensure you have a right of audit if you’re concerned that you aren’t receiving everything you’re due. If you’re not sure whether or not a recording agreement works for you, get in touch with your Musicians’ Union Regional Office and get advice.
We believe that only the cost of recording and personal advances should be offset against royalty income. You should try to get references to ‘other costs’ deleted from an agreement, or at least make them subject to joint agreement. Try to limit the number of remixes the company can commission without your approval or it’s possible that recording costs can spiral. Also, never agree to cross-collateralisation of advances against non-royalty income, such as PPL, or income from other contracts. It can get complicated, but if you’re a member, we can help make sense of it for you.
How long will the agreement be for?
A typical deal with a major record company might be for one year plus four options, calling for five albums. But you should aim for as short a deal as possible. This is particularly important if the guaranteed annual advance isn’t enough for you and your bandmates to live on - in which case you should only commit yourself to one album. There should be a time limit of one year within which it should be recorded and released. And, if your recordings have not been released in the major markets of the world within a certain time, you should be able to terminate the agreement.
Who owns the recordings?
It’s important to remember that if the record company initially commissioned and paid for the recordings, then in the eyes of the law they are the owners and not you. Your recording agreement will make this clear and assign all copyrights in the recording to them.
But if you have made and paid for recordings yourself then you probably own copyright in them. So if a label expresses interest in releasing them, you should be able to decide whether to assign your copyright to the label or simply grant them a licence to exploit the recordings. We usually advise that you license your recordings and retain copyright in them yourself, unless there is a very good reason to assign them over.
Get in touch with your MU Regional Office for advice, or if you’re offered a contract that assigns copyrights you own, discuss it with the MU’s Contract Advisory Service.
There’s more to it than the music
A label may want to include other sources of income in your recording agreement so you need to make sure you fully understand what is proposed before agreeing. For example, does the label want a stake in any merchandising or brand endorsements? If the label makes a promo video usually they’ll want at least 50% of the costs to be recoupable against your royalties. It is important that your contract allows you to share in any income the label receives from exploitation of the video.
Don’t sign your rights away.
Protect your rights now, and they’ll protect you for years to come. If you’re an MU member and are offered a recording contract, run it by our Contract Advisory Service. It will help make sure you understand exactly what you’re signing up to, and where a contract falls short, we can tell you how to make it better. Read our full advice about recording contracts. And if you have any questions about this or any other aspect of your career as a musician, get in touch.
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