All right, now it's time for us to talk about and
examine some key provisions in the exclusive recording artist agreement.
Now once again, I really want you to refer to your text,
be sure to read through the text exclusive recording artist agreement.
And be sure to at least read the right side, the annotated side,
of each page of that agreement so it gives you an understanding.
Of course, if you're an artist or if you're just starting your own record
company or have a desire to start their own record company, you always have to
have an experienced entertainment lawyer review the agreement for you.
But it is still important for
you to have an idea of what some of these provisions are saying.
There was a great retailer, his name was Sy Syms, that started
the Syms Department Store chains, which was very big here on the East Coast.
And Sy Syms coined a very interesting hook and a very interesting phrase.
You know I'm big on hooks.
Every time the music gets played, somebody gets paid.
Get paid, not played.
Well, Sy Syms came up with a great hook, and
that was, an educated consumer is my best customer.
The Syms department store sold off-price clothing and
great name brands at tremendously discounted price.
They were really styles that might have been a season out of fashion, and
they would buy them and sell them in their stores at reduced prices.
Kind of cornered the market in the northeast.
It was fantastic.
Well, I say that an educated musician is my best client.
And what do I mean by that?
That's one of the reasons why I wrote my book.
I wanted my clients to understand the kind of issues that I was dealing with
on their behalf.
Now there's been some significant changes that have occurred
in recording agreements even since the beginning of this century.
As you can imagine, artists, and it's no secret, songwriters,
producers and other creative talent, were tremendously ripped off
[LAUGH] in the early parts from the 20s through the 50s and 60s.
It wasn't until the 1970s that there was even an entertainment law profession
to some degree, for entertainment lawyers that represented artists to
help them gain greater rights in their recordings and in their copyrighted works.
But over that period of time, for the 50 years between 1950 and 2000,
the recording contracts were very confusing.
They were very confusing.
Possibly intentionally confusing.
Very non-transparent.
It was very hard for artists in reading contracts to be able to figure out
how they were gonna get paid and what their actual royalty rates are.
So we're gonna discuss a couple of the key provisions.
We're gonna speak about the term.
We're gonna exam the term, how long the contract lasts.
We're gonna talk about the various types of royalties
that artists are entitled to under exclusive recording artist agreements.
Advances we're gonna speak about, advances are very important.
Advances are amounts of royalties that are paid in advance.
Artists pay certain dollar amounts that are deemed advances against royalties,
which means that when the artist starts earning royalties, those royalties
are kept by the record company until the advances are recouped or recovered.
And we're also gonna talk about the new provisions in recording
agreements that really started to develop at the beginning of this century,
360 degree deal provisions, and we're gonna talk about that as time goes on.
The first thing you need to know is that in the current market today,
many artists who are discovered by record companies and
have had no recording experience whatsoever sometimes
are signed to development deals or even singles deals.
And those deals usually provide a very low amount of an advance and
a promise of a royalty rate.
And it gives the artist as well as
a commitment to pay certain recording costs for a certain number of demos or
a certain number of singles to see if the artist really sells.
If the artist's material does sell, then at that point the record company
has provisions that allow them to pick up options for various albums.
And we're gonna talk about that a little later.
Let's talk about the term, the term of the recording agreement.
How long does the recording agreement last?
In the 60s and 70s, artists signed recording agreements with terms
that were described in a term of years.
For example, the artist would sign a contract for
one year with four one-year options.
What does that mean?
That means that the artist is signed to record for one year.
If the record company likes what the artist is doing and
their product is selling in great numbers,
then the record company has the option to pick up the second year.
And if they like what they did in the second year,
they can pick up the third year, so on and so forth through the fifth year.
So when artists back in those days looked at those contracts, they could possibly
think that, wow, I have a five-year contract with a record company.
Well, that isn't necessarily the case.
The record company doesn't have to pick up the second year.
And here's something else that kind of confused the artist at that time.
Even though the contract said that it was one year, the term was
one year with four one-year options, what the artist might not have seen in
the following pages was a provision that stated that during that contract year,
the record company had the right to record one album on the artist.
But they also had an option within that first year to
ask the artist to record a second album.
And if the artist didn't deliver that second album within that one-year period,
that one-year period was extended until they did complete the second album.
That became pretty problematic as we got into the MTV years and videos were made.
Because when MTV came out and videos became very popular, record
companies didn't want an artist to release an album but every two or three years,
because they wanted to put out a video on each single, three or four singles.
And they tried to sell that album over the course of two years, and
many times the album sales would continue to develop over a two-year period.
So some of those artists that signed those kind of contracts
thought they were signed for five years.
As it turns out, the record company might have decided to record two albums during
each year, and the year was extended until the second album was delivered.
And the second album might not have been delivered for
two years after the start of that period.
Artists started becoming involved in contracts that lasted a number of years,
ten years or more.
As a matter of fact, Prince, the great artist Prince,
signed his first contract in 1977 or 1978, and
the contract didn't end until he negotiated a settlement of the contract in
1995 or 96 with Warner Bros Records, and at that time he still owed two albums.
Now of course, the contract had possibly been renegotiated
giving Warner Bros the rights to additional albums.
But that gives you some kind of an idea of the length of the contracts and
why artists, particularly at the end of the last century and
the beginning of this century, were really upset about provisions that
possibly required them to stay with one company for
an extended period of time, possibly their whole career.
So that was an example of the non-transparency of
recording artist agreements and the confusing nature, particularly of
their provision dealing with the term of the exclusive recording artist agreement.
Now I do wanna say that record companies, and as a result of certain
lawsuits that were brought and certain court decisions that were rendered,
the record companies in the 80s and 90s started to change that provision.
Instead of it being one year plus four one-year options,
they decided to change the period of time to what were called periods.
They would have multiple periods to the contract, which means the first period
would be the time that it took to record and release an album.
Plus maybe seven months after that for the record company to see how the album did in
the marketplace, at which time they could pick up the option for the second period.
And during each period the artist is required to record one album.
So that still created a situation where artists were still bound
to maybe eight to ten periods for
contracts that were entered into in the 80s and
in the 90s, which is still a very long period of time.
So things have evolved in exclusive recording agreements.
In the latter part of the 90s, artists really became very frustrated.
And Prince was one of the primary advocates.
Some of you might have seen him on The Today Show in the middle of the 90s,
when he stopped going by the name Prince and just went by a symbol.
And when he was on the Today Show, he had slave written on the side of his face.
And part of his point was that he felt that record companies that signed you
to such long agreements were treating you like a slave
because they had the exclusive rights to your recording services for
such an extended period of time.
To him it really didn't make sense.
That kind of ignited the artist community at the end of the 90s to really start
advocating for more fairness,
more transparency with exclusive recording artist agreements.
And at the beginning of this century, there were certain actions
taken by the California legislature which kind of questioned these agreements and
threatened the recording industry with legislation
that would make the contracts more transparent.
And as a result of that, record companies got the point.
And at the beginning of this century they really started to recognize that, well,
maybe their contracts were a little unreasonable, asking for
possibly ten albums from an artist.
And voluntarily, although it really wasn't voluntary,
they did it as a result of the pressure from the artist community,
record companies started to change the term provisions of their contracts.
Instead of asking for a potential ten albums from a new artist,
eight to ten albums from an artist, they reduced that to four to six albums a term,
which would give them a number of periods to record either four to six albums.
Now what do I mean by four to six albums?
Well, an artist that has a lot leverage, and what do I mean by leverage?
I mean clout.
And by that I'll give you an example.
Let's say an artist has a number of YouTube views,
millions of YouTube views, and they've built up a great audience on their own.
Well, that artist is gonna have a lot of leverage,
a lot of clout, if a major label comes in and wants to negotiate with them.
The major label might first offer to sign them to a six-album contract.
And of course, the artist's attorney in that situation would be wise to say no,
we don't want to record six.
We will record three albums for you.
And then, of course, the record company is going to counter maybe five, and
eventually they might agree to four.
So it depends on your leverage as to how many albums you're going
to end up recording under the exclusive recording artist agreement.
Of course, the record label will want you to record as many as possible.
And of course, as an artist, you want to record as few as possible, so
that if you're successful during that four album or five album period,
you'll have the opportunity to test out the market and to see if there's other
companies that are interested in recording you under a new recording agreement.
So the term, how long the agreement lasts,
is an evolving provision of the exclusive recording artist agreement.
You'll remember when I said earlier that the contracts of the 60s and
70s had one year plus four one-year options and during each
contract year the artist might have to record two albums, a potential ten albums.
Now who has the option, who has the option?
Who has the right to pick up the option?
Usually the record company will have the right to pick up the option.
Record companies say that they need to have the right to pick up
the options because they've invested a lot of money in the artist, in recording,
producing, marketing, distributing the record.
So they should have the right, if the record is successful, to pick up
the option so that they can try to realize some profit from that initial investment.
However, as you can see, this contract provision in particular is evolving,
and has evolved and continues to evolve.
Now your contract with your company should probably be for
the norm, four to six albums.
So that if you want to do a deal with a major label,
you're in a position to assign those rights, if that's what you have to do,
to the major label for the maximum amount of albums that you have.
But once again, when I say that that is the norm,
that doesn't mean that that is the only way the situation can occur.
Just like these contracts have evolved over the past years,
they're gonna evolve even further in the future.
And the digital landscape is really changing the way things are done.
And the key is that it comes down to leverage.
If you have sold a lot of product, if you become very popular and
become a very important asset to the record company,
you're in a position to negotiate better terms.
For instance, I'm gonna use Prince again,
a revolutionary artist not only as a musical talent but also as a businessman.
In 1994 he was a little perturbed with his record company in releasing singles,
and there was a song that he really wanted to release on his own.
And as a result of Prince being Prince, being a multi-million selling artist,
he was able to release one single, The Most Beautiful Girl in the World,
independently, through an independent distributor, Al Bell's Bellmark Records.
That record went on to become extremely successful, and it was one single.
It was a one-off, as they call it.
In other words, they allowed him to release one single independently and
it became tremendously successful.
After he ended his contract with Warner Bros Records, Price became known as being
the one artist who could have one-offs with various major record labels.
And by that I mean he could release an album with a different company each time.
Very few artists can do that, but he showed the possibility of that happening.
So keep in mind, you may not have to enter into a long-term agreement with any party.
It depends on your leverage.
And in today's music industry you can build your leverage in a number of
different ways that weren't around, even two or three years ago.
If you have a number, millions of YouTube views,
if you have a very strong presence with your Instagram account,
if you have a number of Facebook likes, you could have one of your recordings used
in a television commercial or in the background of a movie scene or a TV show.
It could become a viral video as a result
of the success of that particular scene or that particular commercial.
All of that helps you build up leverage and
puts you in position to be on the cutting edge of the evolving music industry.
You could really negotiate for
terms that have never been negotiated before, which moves this industry forward.