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The Skinny on a Big Fat Piece of the Music Business – The CONTRACT

DISCLAIMER – THE FOLLOWING DOES NOT CREATE AN ATTORNEY/CLIENT RELATIONSHIP WITH ANY READER. YEAH, YOU…I AM NOT YOUR LAWYER. THE FOLLOWING INFORMATION MAY NOT BE RELIED ON AS LEGAL ADVICE. READ THIS AGAIN. THEN READ IT AGAIN. WHEREFORE, THE PARTIES TO THIS ARTICLE ACKNOWLEDGE AND AGREE THAT THE WRITER OF THIS ARTICLE, HIS AGENTS, EMPLOYEES, DIRECTORS, PRINCIPALS, OWNERS, PARTNERS, SUBSIDIARIES, ANY AND ALL WHOLLY OR PARTLY OWNED CORPORATE ENTITIES, HIS LACKIES, JANITORS, WINDOW WASHERS, IN HOUSE RODENTS OR OTHER RESIDENTS OF ORIGINATION AND ALL OTHER CREATURES, THROUGHOUT THE WORLD AND THE KNOWN UNIVERSE ARE HEREBY RELEASED FROM ANY AND ALL CLAIMS, DEMANDS, SUITS AT LAW OR EQUITY, AND EVERY OTHER DAMN THING.

Did that seem a bit ridiculous? Of course. That said, it is a caricature of something very real, something very complicated (often more complicated than it should be), and something very important to musicians everywhere. The law affects us all, from the silver-lined glass of the high-power corporate boardroom to the guy in the 8 x 10 complimentary suite at the graybar hotel. But lots of folks, many musicians included, have very little understanding of how much of a role the law plays in the life of musicians and the world of music. My preamble, though idiotic, is actually not terribly inconsistent with the kind of detail, written and unwritten, that goes into the matters that govern the music industry and the relationships within it. That said, I am an attorney and have been practicing entertainment law for a number of years, and I thought a light-hearted primer of sorts might be of some use. The most famous book on the music business is 480 pages long in its current edition, so keep in mind that I merely wish to “issue spot” as they say in law school, and hopefully provide a little insight, and perhaps some help, to musician-readers or anyone else that finds this “stuff” remotely interesting.

BEWARE OF….labels, agents, managers, publicists, promoters, publishers, lawyers, venues, endorsees, roadies, groupies, fans…. Again, a bit ridiculous. But the point here is critical. It’s about contracts in part – it’s about being a target in whole. First, let’s go with being a target. In some form or fashion, you are a target of everyone I just mentioned. This is not to say that is a bad thing. A musician wants to be wanted by all of the above. Without one or all of them in a musician’s day, a musician is like me….a hobbyist that may or may not make a buck on the side doing what he/she loves. The professional musician not only wants, but needs these characters in their life for various goal-oriented reasons. And back to being a target, WE (I include myself as both a lawyer and a manger), need the musicians. I’m “stealing” this analogy, but it’s the best one I’ve heard. Consider the music business a bicycle wheel. The musician is the hub, because the musician IS the source of the MONEY. And let’s not kid ourselves, it’s called the music BUSINESS for a reason. The rest of us are spokes surrounding that hub, providing the stability and structure to build a wheel. And when very very fortunate, that can be a wheel that rolls smooth and steady for a long time (well, you’re bound to have a flat every now and then), and that steady roll is otherwise known as a CAREER. So, recognizing those spokes as necessities as a music career begins and grows, I mention “beware” only because not all spokes are built the same, not all are as solid on the hub, not all have the integrity to keep the wheel “in the round,” and it’s just plain important that you do the best you can to build the best wheel. And the law comes into play allllll the time.

That brings us to contracts. A contract is a weird creature. It can be your best friend or your worst, depending on what it says. And believe it or not, the all-caps preamble to this article is a goofy illustration of somewhat actual language in a lot of contracts. And believe me, in lots of music contracts, particularly with labels and publishers, don’t pretend to understand their implications unless you’ve been studying and reading lots of them for a long time. They get funky! And here, I would be remiss if I didn’t state the obvious. With contracts in the music business, please have a knowledgeable lawyer review them, if not negotiate them. Once signed, contracts affect your future in one way or another, some parts insignificantly, some parts more significantly than you can imagine. A contract can obligate you to things you absolutely do not want or need. But they can also provide a wonderful black and white mapping of a relationship that helps prevent in-fighting and eliminate misunderstandings, or simply provide mechanisms by which disputes are resolved. They spell out “this is how this is going to work.” And that is actually a good thing. Just make sure the “this is how this is going to work” is the way you want it to work, or at least that you can live with it (and without leverage, see baby bands, being able to live with contract terms is often a necessary evil). So that’s that. Contracts can be good, they can be bad, they can be negotiated, and they must be taken seriously.

So, specific contracts. Well, here’s the good news with lawyers. You can’t be forced into a contract with a lawyer. Not really, anyway. You can agree to pay an hourly fee to a lawyer or agree to a percentage of a deal, etc., but a lawyer can’t hold you hostage to a “term,” which is to say they can’t keep you working with them for a period of time – if you ever don’t want to work with a lawyer, you can get rid of him/her and get another. That’s because of rules governing lawyers. As for booking agencies, you’ll find a mix of contracts. Typically, they are going to take 10-15% of every performance fee you receive. Some agencies are non-exclusive (allowing you to work with other agencies). Some agencies do not make you sign a contract for a specific period of time. And others require a set period of time and exclusivity. There are a zillion variations of these generalities, but that’s the gist. Publishers or licensing agencies, well, pretty much the same thing, except their income off of you derives from public performance royalties for the most part, or sometimes flat fees paid for synchronization (when your music is put into a commercial or a tv show or a movie – that kind of thing). Again, there are a zillion variations, but a good rule of thumb is that these groups will do a 50/50 split (there are a couple tricks to this in good negotiation…again, talk to someone that knows what they are doing).

Managers. These folks are incredibly important and can be wonderful assets or liabilities. They can contract you for a period of time, and lord knows that on the negative side, one need only watch VH1 documentaries to hear a number of multi-platinum artists tell horror stories about getting “screwed” by their managers due to contractual shenanigans. But there are lots of good ones, honest business people who love the business and love their musicians and know what they are talking about. And these same people tend to offer fair contracts. They can be complicated as well, so it’s always good to have some educated help knowing what you are possibly getting yourself into. Percentages here range from 10%-20%, typically, with the lower percentages usually given to the artists that are making a ton of money (as the saying goes, would you rather have 10% of a million bucks or 20% of zero).

And then of course…the labels. Labels are not the 800 pound gorillas they once were thanks to the internet and social media outlets and general technology allowing recordings and videos at exceptional quality, but they are still critical to the industry and always will be (at least I think they always will be). Labels can be a saving grace for some. They can be a death knell for others. And you can’t necessarily know from the outset. But you can know the contracts. These days, the standard has become what’s known as the 360 deal. You see, historically, labels made money ONLY off of record sales. They essentially loaned you money to make an album, advised on the making of the album (often helping pick the studio, the producer, negotiate the price, etc.), released the album (if you were lucky), promoted the album to radio stations, fronted tour funding (see “loaned” above), and basically did everything they could to maximize record sales. But oops…that darn internet, from Napster on, changed the world. Sales of records just didn’t work anymore, because the reign of the traditional album ended, at least in as much as labels couldn’t make near enough money off of JUST sales of albums, not even singles, to justify their expenses. Enter the 360. These days, the labels still do the same thing, but instead of just taking revenues from record sales (and they still try to take rights to the masters, or snatch away your copyrights, so be careful!!!), they now take a percentage of gross income. That percentage is always negotiable, again based on leverage, but it ain’t never less than 10% and can be 20%. Contractually, the percentages are important, but not nearly as important as how many album cycles they reserve for themselves, called “options,” whether they guarantee album release, whether they own your masters or swipe your copyrights…hell, whether they guarantee ANYTHING for that matter. These are very complicated documents and should be addressed with utmost care and business acumen – get help with these, please! You need it. I’m not dogging the labels, because as I said, they remain very important. But shame on you if you salivate and sign just because one wants you. Your best result comes only when more than one label wants you – it’s lovely to have a couple of folks fighting over you. The pot gets sweeter, I guarantee that.

Boy, once you get writing on the music business, no wonder a 480 page book on the subject is out there. This tidbit of information doesn’t even form the meniscus in the test tube of the volume of legalities and details of the music business. It doesn’t even scratch the surface of the “contract” discussion. But, for musicians everywhere, never forget YOUR ART is exactly that – YOURS. So be smart, be careful, but don’t be greedy. You need the guys offering the contracts, and the guys offering the contracts on the other side of the table need you. It’s simply about working a deal the best you can so that a confident handshake and signature can be made by everyone involved, the proverbial “win-win,” and you can leave the ink to dry with a smile and a bright outlook on the forward movement of your music career.

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