Often times a new artist who has obtained a record deal may neglect to look over the fine print of his contract due to his enthusiasm towards starting his new career as a signed artist, here are a few things you as an artist should negotiate with the recording company before you sign that contract.
As stated in a previous article https://everythingaudio.wordpress.com/2011/04/08/how-recording-contracts-work/ a recording company is making an investment anytime they negotiate and sign a record deal to incorporate an artist into their label. In your contract, the record label should clearly state their production budget for your album, this would cover such expenses as music videos, studio recording and CD production. Most recording contracts for a new artist are negotiated to stand for a period of one year,which is the length of time it usually takes an artist to complete an album, after album sales have been calculated and the artist is deemed valuable to the label, the contract may be re-negotiated for a period of 1-2 years, or in the case of an established artist up to 6 years.
Also stated in the article noted above, a record company always recoups expenses made on the artist before the artist is paid, these expenses are usually recouped from album sales. A new artist usually gets 10% retail price of the album, meaning for every album sold at $10USD the artist gets $1, with that being said, in order for a label which has spent $50,000 in expenses on an artist to recoup , the artist would have to sell 50,000 album copies before he/she sees any money from album sales coming in.
Here’s the tricky part, record companies usually account to the artists every 6 months, within those 6 months however, sales are being made on the album and the record company is in the process of determining whether or not an artist is valuable to them. A hit album would cause the label to invest in another album for the artist, they often try to do this before they have to make royalty payments to the artist, meaning the production costs of the second album is being covered by the royalties the artist was supposed to receive on the first. If this continues, and the artist continues to make one hit album after the next, he/she may see very little royalties, or none at all for all their hard work. However, this can be avoided by clearly stating in your contract, that there shall be no “publishing cross-collateralization” or you can ask for cash in advance on each album or on a yearly basis.
Royalty rates should also be negotiated within a contract for a new artist. New artists should always negotiate for a rate no less than 10% of sales based on 100%. As explained earlier, a record company recoups all expenses made on an artist before he/she is paid, therefore the higher your percentage of sales the quicker the label can recoup expenses and the faster you can get paid album sales royalties.
Your contract should have a recapture clause, this means that when you are released from your contractual duties to the label or when your contract with the label ceases, ownership of the master recordings of your music reverts back to you. A recording company normally has ownership of the master recordings throughout the duration of the artist’s contract, unless they are an established artist or an independent producer, in which case they would have ownership of the masters and lease said master recordings to the label for the duration of the contract. If a record company owns the master recordings to your music, it basically means they own the rights to use your music for economic gain through leasing its rights of usage to commercials, television shows, radio etc. If you own the master recordings, however, even though your contract may end with your label, you can still lease usage rights to your music for your own economic gain.
If you are signed to a label as both a singer and a songwriter, you should enter a co-publishing deal, in which you will receive money as both a publisher and songwriter. It is also very important to enter a co-terminus agreement as well, which ensures when the record deal ends the publishing deal previously negotiated with the recording company ends as well.
The artist should always negotiate within his/her contract a right to audit, which is a review of the recording company’s accounting statements. This should take place preferably twice a year. It is done to ensure the record label is conducting good business practices and that all royalties due to you, the artist, are being paid and that all charged costs are legitimate.
Written by Tamika Simon