When I first started practicing law over 30 years ago, recording
agreements were pretty simple documents, maybe 10 or 12 pages, which
basically talked about the advance that the artist would receive, the
royalties that they received.
The predominant configuration of the sale of recordings at that time
consisted of vinyl records and cassettes.
10 or 12 pages, well, it's changed a lot.
The recording agreements have evolved over the years.
And I'm going to show you a copy of the last agreement that I negotiated
earlier this year.
And as you can see it's much different from the agreements from years ago.
Here's a copy of the agreement, 70 pages.
I always bring this into class and I drop it on the podium for emphasis,
just to let students know this is a pretty thick, very serious document.
Now why do you say, why 70 pages?
Why 70 pages?
Well what happened is for each technological advancement in the music
industry, these contracts have gotten longer and longer and longer.
Why?
Because there's more pages added, more provisions added to cover the rights
and obligations that result from these new technological advancements.
For instance, when I first started practicing in 1980, CDs hadn't even
entered the marketplace.
But within a couple of years, they did.
You have four or five pages added to deal with CDs and the rights and
obligations related to the CD becoming a new configuration
in the music industry.
Also, in the early '80s, you had another technological advancement,
cable TV, and a new cable channel, Music Television, MTV.
So record companies had to start producing music videos.
Another five or six pages were added to account for that.
And on and on it went.
As we got into the '90s, you had the development in the latter part of the
'90s of the digital age.
And paragraph by paragraph, technological advancement by
advancement, you had additional pages added to these contracts.
Very, very important, why?
Because the purpose of an exclusive recording agreement is to establish
and document the asset value of the company.
What do I mean by that?
What are assets?
Assets are things of value.
And what do exclusive recording artist contracts do?
Well, they convey rights and obligations on both of the parties.
So we're going to talk about two of the things that I think create value
for a record company and for an artist in an exclusive
recording artist agreement.
First is what I call the most valuable asset in the music industry, which is
the copyright.
Now we're going to deal with copyright in the next lesson to a great degree,
so I'm not going to dwell on it too seriously this time.
But in speaking about the exclusive recording artist agreement, it's
important to note that record companies want the rights to the
copyrights in the sound recordings.
There's various types of copyrights under the law, and we're going to deal
with two or three in this course that really relate to the music industry as
it currently stands today.
Record companies are concerned about the sound recording copyright.
What is the sound recording copyright?
What is a sound recording?
That is a recording of a composition, and the composition is another
copyright that we're going to deal with in the next lesson.
But the sound recording is the fixation of sounds that make up the
recording of a composition.
What do I mean by that?
Well, you'll have a basic song that an artist will record.
An arranger will get involved.
A producer will get involved.
Other musicians might come in.
You might have a rhythm section come in.
You might have strings come in, or you might use synthesized strings.
You're going to have an arrangement.
You're going to have someone coach the vocalist on the
interpretation of the song.
That's basically what the producer does.
All of these people are involved in producing this sound recording, the
fixation of sounds that make up the version of the composition.
Record companies want to own the rights to the copyrights
in the sound recording.
Now what is a copyright?
Well, a copyright is a piece of intellectual property.
It's just like owning real estate.
Of course, it isn't real at all, because it's in the air.
You can't put your finger on it.
It's called intellectual property.
It's the creation of the mind and talent as well.
So an artist that performs on a recording--
for instance, I recorded with the group Cameo.
And the inflections of my voice and my creative work in the studio is
something that the record company wants the rights to.
And under the exclusive recording artist agreement, that's
exactly what happens.
The artist and everyone involved in the process of creating the sounds
that are fixed on that sound recording need to be transferred to the record
company, because the record company wants to own those rights
in the sound recording.
Why do they want to own the rights in the sound recording?
What's the value of owning that sound recording copyright?
Well, the copyright can last for life plus 70 years.
There's some other rights that we'll talk about in the next lesson
regarding copyright.
So if I record and produce my own song in my home studio, and I'm ready to
release it, and I want to release it through my company, John Kellogg
Music, then I'm going to transfer my copyright interest to my company, John
Kellogg Music.
And they will own that copyright for my life plus 70 years, subject to some
limitations, which we'll talk about next week.
But after that 70 year period, after the life plus 70 year period, then
that copyright falls into what is called public domain, which means that
anybody can use that copyright, and they don't have to get
permission from anyone.
With a copyright.
that gives you a monopoly on that intellectual property.
Nobody else can use that property.
Nobody else can use that sound recording without getting your
permission during the life of copyright.
So why do companies want to own sound recordings?
Why do they want to have that right?
And you need to know this as well.
Record companies don't require you to assign your interest in copyright over
to them for nothing.
No, this is the reason why you have an agreement.
The record company is saying, assign that copyright interest over to us,
and in exchange for you assigning the copyright interest over to us, we are
going to pay you royalties for you assigning that interest.
Record companies want to own those sound recordings because over the life
of copyright, those sound recordings can be used in a number of ways.
And I'm just going to give you a couple of ways.
One, they can be sold.
Those sound recordings can be sold in different types of configurations,
digital downloads.
They can be sold in CDs.
They can also be used in other ways.
They can be used for streaming purposes.
So the record company is in position by owning that copyright to negotiate
with the people that want to use those recordings.
For instance, streaming services, Spotify, iRadio, and others, they have
to get the permission from the owners of the sound recordings to stream
those sound recordings.
And here's another use that's becoming even more and more important in the
music industry today.
And that is the right to synchronize those sound
recordings to a video image.
That's called the synchronization right.
And what do I mean by synchronize?
That means, in time sequence, taking a recording and putting it in maybe a
commercial, a movie, the background in a movie, or a TV show, or a video on
the internet.
Very, very important right, why?
Because the people that want to use and sign these synchronization
licenses so that they can use the sound recordings in these various
mediums usually have to pay a fee.
And it's a very important revenue source for record companies.
So the transfer of copyright interest is one of the things of value in
having a recording agreement.
It establishes the right in the record company, and that could be your own
record company as an artist.
Why, as an artist, should you have your own record company?
Because at some point, you might want to do a deal with a major label, an
internet distributor.
You might want to license your recordings to other people.
And at that point, you want to establish those ownership interests in
an entity that's working for you.
Why?
Because in the American system of capitalism, businesses like to build
value in their assets.
And the copyrights are assets that usually grow in value.
The more you exploit those copyrights in various mediums, it builds the
value more and more.
One of the most remarkable companies in the history of the current music
industry is Motown Records.
Motown's master recordings are very, very valuable because you'll hear them
in commercials all the time.
You'll hear them in movies.
So the exclusive recording artist agreement, one, transfers the sound
recording copyright interest to the company, which is very important.
And two, it provides for the artist to render their exclusive recording
services for a period of time or a certain product commitment.
That could be four to six albums.
Why is that important?
Well, I release my record on my own through digital distribution.
It starts getting a lot of social media, and it turns
into a viral sensation.
And let's say a major label approaches me and said, we really like what you
do, John, and we'd like to sign you to an agreement.
Well, it's important for me to say, well, I have my own company, John
Kellogg Music, and I have a contract with my company where I am going to
record five albums.
Now I've recorded the first one and released it, and that's the one that
generated all the heat and the reason for you wanting to sign me.
But I have four more albums under my contract, so let's deal.
My company can deal with you on that basis.
And it puts you in a much better negotiating position to have that.
Now what do I mean by exclusive recording services?
Well, that means that I can't record for anyone else, any other company,
during that period of time.
It's very important, very important.
And we talk about the evolving nature of recording agreements.
I think it's important to talk about the fact that record companies back in
the early '80s enforced that provision, the exclusivity provision,
in contracts pretty severely.
I remember back in the early '80s when I first started practicing, and I
represented the O'Jays.
And they had the opportunity to record with Stevie Wonder, and in fact did
record with Stevie Wonder.
And at that time, Stevie Wonder was at the top of his game.
The O'Jays were at the top of their game.
And they went into the studio, and Stevie recorded a song called "All I
Do." "All I Do," great record, by the way, great, great record.
Stevie plays all of the instruments on it.
And of course, you know, he's a fabulous musician as well as a great,
great vocalist and songwriter.
And the O'Jays not only provided background vocals for him, but during
some point in the recording, the O'Jays did what is called in the
industry, they stepped out.
And by that we mean that they started riffing, and they started improvising
over certain tracks to the point that you can recognize that, hey, that's
Eddie Levert on that track.
Wow, the O'Jays are recording with Stevie Wonder.
Two superstars, this is fantastic.
Walter Williams, the other lead singer of the O'Jays, did his trademark
signature licks throughout the song.
It was fantastic.
I remember the O'Jays brought the, at that time, cassette
tape back with them.
And we were listening to it.
And all of the people in their camp were really excited.
This had never been done before, superstars coming
together to record tracks.
Well, as it turns out, at that time, record companies were really concerned
about allowing their artists to record on other artists' tracks because they
thought that it would cannibalize the sale of their own artist's recordings,
to the point that the O'Jays' record company did not agree to allow the
step-out vocals of the O'Jays to be used.
And so they had to pull it.
They couldn't mix those tracks into it, which, to me, was the thing that
really made the recording special.
But the O'Jays were allowed to do the background vocals.
And the other background vocalist on that track was Michael Jackson, but he
was signed to Motown, or at least Motown had given him the permission to
record with Stevie Wonder.
So I think that that shows that there was one time that the exclusivity
provisions in contracts were very strictly adhered to.
And it's important for you to know that if you sign with a record
company, you just can't go record with anyone and everyone without getting
the permission of the record company that you're signed with.
You are their exclusive recording artist.
Now that situation has changed.
Once again, these contracts evolve.
As you got into the rap genre really gaining significant prominence in the
'90s and the first part of the century and currently, you started to have
artists provide guest vocals, step-out vocals, on a number of recordings.
And now, if you look on the current Billboard charts, you're going to
possibly find, in the top 10, maybe 5 or 6 of the top 10
feature guest artists.
And record companies started to loosen their restrictiveness on the
exclusivity provisions.
And they really started to allow their artists to appear on other artists'
recordings.
Of course, they demanded a certain royalty, a percentage of a royalty
when their guest artist appeared.
But also I think it's important to note that record companies found value
in their artists being promoted as a result of being guest artists on the
other recordings.
So once again, the transfer of the sound recording copyrights, two, the
providing of the exclusive recording services of the artist to the record
company are very important things that build the asset value
of the record company.