I Was Offered a Recording Contract. Now What?

Special Interview with Miami entertainment law attorney Barry Chase.

Miami has spawned a broad range of recording artists across many genres. From Gloria Estefan and Jon Secada to Pitbull and Flo Rida, Miami recording acts have attained international fame and fortune.

Despite the differences in their music styles, these artists all started their careers with a recording contract (also called a record deal contract). An artist recording contract is a legal agreement between a record label and artist.

Until several years ago recording contracts were straightforward. However, with the rise of new distribution channels such as iTunes and social media, recording contracts explained not only key rights, but have become more complex and sophisticated. That’s why a recording artist should always contact an attorney when they’re offered a record deal.

Whether it’s copyrights, payments or royalties, your attorney will review the terms of the recording contract to make sure you get the best possible deal. Doing so will pay big dividends in the future should anything go wrong.

Here to offer his insight on what to do if you’ve been offered a recording artist contract is Miami entertainment law attorney Barry Chase of the ChaseLawyers firm, with offices in New York City and Miami.

Q&A

Q: Hi Barry, thank you for taking the time to speak with the Miami Law Advisor today. What is the first thing a recording artist should do when they have been offered a record deal? Should they contact an entertainment lawyer?

A: First of all, thanks for this opportunity to answer questions which are often on the minds of clients who come to see us.
The short answer is that the artist certainly should not SIGN anything until the contract has been reviewed by a good music attorney. Most attorneys will review an agreement and provide general guidance for a reasonable fee (ours start at $350). There is a long and not very honorable tradition in the music industry of abusive agreements for new artists, and you don’t want to become the latest example of an artist who sold a lot of records, made a lot of money for other people, and ended up with nothing for him or herself and her family. In addition to seeking an attorney’s advice about the terms of the proposed record deal, the artist should expect a good attorney to look into the track record of the record company and whether it actually has the resources to invest in him. Just being “signed” is not worth very much if the company that signs you either doesn’t know what it is doing, doesn’t have the money to do it anyway, or both.

Q: What are some of the key provisions that every recording contract should contain?
A: The form of recording agreement that is being used most often today is actually much broader than the old-style “Exclusive Recording Agreement,” which typically dealt only with record sales and artist-branded merchandise. Today, all the major companies and most independents (of which we represent many) are using what are called “360” agreements. As the name suggests, these contracts deal with not only record sales, but also money made by the artist through live appearances, television series or films he or she may be cast in, clothing, jewelry or cologne endorsements – anything that the artist may make money from because she has become a household name. From the point of view of the record company, the artist’s brand has become a household name largely because of the investment which the company has made in his career; whereas from the artist’s point of view, success has come about because of the artist’s special talents. In fact, both of these factors have played a role.

To give you a specific answer about “key provisions,” realistically many of the provisions are going to be lawyer gobbledygook, but the artist, of course, wants to have her lawyer look carefully at the royalty split; the amount of time she is tied to this contract (shorter is better for the artist); whether the company is taking a share of the artist’s composer rights (called “music publishing” rights) and, if so, how big a share; how often royalties are paid to the artist and how easy (or not) it is for the artist to inspect the company’s books to make certain that the proper royalty has been fully paid; whether there is an advance, etc.

Q: Are there any contract provisions that a recording artist should pay special attention to?
A: You’re probably expecting me to say that the presence or absence of a fat advance payment is a key; but in reality the artist is going to have to “work off” the advance anyway – it is an “advance” against the artist’s future income. No, probably the most important single provision is the one that says how long the artist is tied to this particular company, because the artist is the company’s EXCLUSIVE artist, which means that she cannot make money by working for anyone else. So if the relationship is not working out for any reason, it is absolutely essential that the artist have an “out.” I can’t tell you the number of sad meetings we’ve had with artists who signed multi-year deals and sat “on the shelf” because the label had gone on to the next big thing and they were still tied to their deal.

Q: Who owns the copyright to my work—me or the record labels? Does this include the master copies to those records?
A: Okay. Here’s where things become a little complicated, because there are actually not one – but TWO – copyrights involved in every piece of recorded music: first, the composer copyright; and, second, the sound-recording copyright. Think Irving Berlin’s classic composition “White Christmas.” People on the street may tell you that song is “Bing Crosby’s song” because he was the first to record it. But Irving Berlin (who also wrote “God Bless America,” Easter Parade,” “Blue Skies” and dozens of others) was and IS the composer (and, along with his “music publisher”, the owner of the composer copyright). So every time anyone wants to put out a new record of “White Christmas” they need to get a license to use Irving Berlin’s composition. There have been literally hundreds of different sound recordings of White Christmas, but there is only one composer. So the composer copyright, the “publishing” (which existed even back in the 1800s, before there was any mass technology to record music at all), is completely separate from the sound-recording copyright, even if the same person (unlike Irving Berlin) is both the composer AND the recording artist.

So here’s the answer to your question – The record company will ALWAYS own the sound-recording copyright to the track that it has paid for (unless you are Mick Jagger, Ray Charles, or another genius with enough clout to demand an exception). In fact that is a good definition of a record company: a company that owns and exploits sound-recording copyrights. But the composer copyright can be partially or fully retained by the composer/artist, depending on his leverage in the negotiation of the deal. And, in many cases (like “White Christmas”), the composer copyright is much more valuable than the copyright in any one sound recording.

Q: Is it possible to negotiate a deal where I own the copyright (and masters), and license my work to the label for a set period of time?
A: Possible, but unlikely to the point of not worth bothering your head about, except for the composer copyright. Perhaps if you have already sold ten million records and are playing stadium dates with 100,000 fans at an average ticket price of $100 apiece. Otherwise, trying to negotiate for this will mark you (and your lawyer) as naïve.

Q: Who is responsible for promoting the record? Who absorbs the promotion expenses?

A: The record label is primarily responsible, which is why you want to be certain that they have the money to invest in this before you sign. But these days, with social media, the artist can have an important role here as well. In fact, we have recently emphasized to our clients that, often, their best route to success today is to AVOID being signed until they have established a fan-base (and an impressive moneymaking history) on their own by using the various DIY [“Do It Yourself”] tools now available. An artist who is negotiating with a record label out of strength, because she can document that she has already sold thousands of units on her own, is in a entirely different negotiating posture from an artist who shows up at the label’s door, hat in hand, begging to “be signed.”

Q: Do I have to pay back my advance?

A: Almost never. The tradition is that an advance is not refundable, though we put this in our artist-clients’ contracts explicitly just to be doubly certain.

Q: Can I demand an increase in royalty payments made to me? When?

A: Like a lot of questions in the music business, this one is more about business than about law. From a strict legal perspective, a contract is a contract; and if it says that you’re going to record five albums for ABC Records, that is your legal obligation. But, as a practical matter, if your first and second albums are big hits, a nice call is made by your lawyer to the company’s lawyer suggesting that you will be a whole lot happier with an X% increase in your royalty percentage. They may want to extend your music recording contract in return for doing that, but that is all part of the re-negotiation.

Q: Once I sign a record deal, is it possible to “walk away” from the deal at a later time?

A: You’ve actually put your finger on a key aspect of unfairness in most first-time recording deals: There are thousands of eager young artists “waiting in line” for a record company with the resources to do anything for them. Because of this imbalance in bargaining position, the “standard” label contract doesn’t really require the label to do anything – not even to release your first album, much less to put a stated amount of money into supporting it with promotion, touring, etc. So artists often want to “get out of the deal.” But if they have not had a good lawyer negotiate that first deal for them, there usually is NOT a way for them to do that. One of the things we always preach to our clients is that they need an “escape clause” in their recording and management deals. Usually they listen to us. Sometimes they do not, and one of the sad stories I spoke about earlier is repeated – stuck in a contract that is going nowhere, and no way to advance out of it.

Q: What are some other suggestions you may have for an artist who has just been offered a recording agreement contract?

A: First, recognize that the music business is a BUSINESS – labels want to make money more than they want to make beautiful music.
Second, find someone whom you can trust and who is a good businessperson – not necessarily in the music business – to advise you as you go along. Sometimes, this role can be played by your attorney; but no matter who it is, you need someone to handle the business aspects of your career while you do what you do best – create and perform music.

Third, DON’T sign anything that hasn’t been reviewed and explained to you — in a way you can understand — by an experienced music lawyer, not a real estate lawyer or a traffic accident lawyer or an insurance lawyer or someone in law school or a “friend”, none of whom (no fault of theirs) will be able to understand a record contract. We are talking about years of your career here. They may be the best years you’ll have as a musician. So don’t be casual about your record deal. Treat it as seriously as you would choosing someone to marry or a college to attend.

Finally, DON’T BE DISCOURAGED. A lot of great artists have had a number of bad experiences and setbacks before they succeed. The only time you can truly fail is the time you decide not to keep trying.
Good luck.

Thank you, Barry for speaking with us today. You have provided us with an excellent overview of what a recording artist should do when they have been offered a record deal.