What Should be Included in an Indie Record Label’s Contract?

Whatever genre of music an indie record label specialises in there are legal contracts to be put in place. From ska and reggae to dub step and trance, a sound legal basis for record label owners, producers, musicians and writers cannot be ignored. Far too often small scale musical projects come to grief before they reach their potential because of the lack of awareness surrounding legal contracts. Nevertheless, help is at hand and there’s no excuse to step into the business side of music without proper advice. And once you have the contracts sorted out, it is time to get back to the fun – making and promoting the music.


So what is a recording contract?
In simple terms, it is a legal agreement between the recording artist and recording label whereby the label is given the right to promote and sell the contracted record or records. What an artist needs to be aware of is the number of different, additional conditions attached to this arrangement:

Rights & Exclusivity: The term ‘sole and exclusive’ will pop up throughout the contract regarding the many rights to do with the music. The areas covered will include:

(a) The artist will be bound to the label for a specified period to produce an album (or single or EP.) as well as be forbidden from working with other labels.
(b) The label will exclusively own the copyright to those songs for the duration of copyright (or an agreed shorter period –often called ‘Rights Period’). Label will also prevent artist from rerecording those songs for a certain time.
(c) The label will also have the ‘sole and exclusive’ right to exploit that product in any media, to grant licenses for compilations, synchronisation and other profit making ventures.

Moral Rights: the music exploitation section of the contract will often make reference to moral rights which protect the musician(s) reputation by guaranteeing them:
(a) identification as the author of that music and
(b) the right to object to the derogatory treatment of that work, to preserves it’s integrity against alteration and distortion,.

There are parts of recording contracts which will say that you waive these rights. Artist can ask them to change this in the contract, so they have a say in regards to what they may do to the music in the future, thereby maintaining some control.

The Term: Time periods and deadlines are crucial when addressing the commitments from both the artist and label. It is a two-way street and some key points are as follows:

(a) The Release Commitment: This outlines how the label has to exploit and make public the recording commitment produced by the musician(s) within a certain time periods. This is laid out to prevent the label from simply shelving the recordings. The territory specifications are important here, the label may only be required to promote in a particular territory (UK, USA, Australia, etc) in which case you should be able to have another label releasing your music in other territories not covered by the agreement.
(b) The Recording commitment: This will specify how and when the songs need to be presented to the label, e.g. 6 months from the date of the agreement. It will usually also state how many songs, the quality of the recording expected and the total playing time required to fulfil the commitment. An example being an EP of 3 to 8 songs equating to 23- 25 minutes playing time.

The artist needs to be VERY aware of the full length of time they will be bound to a label, especially at the prospect of it all not working out. The contract will usually specify an initial period of say around 12 months that artist is committed to the label which may include the time needed to deliver the recording commitment plus a certain period of time from the release for promotion what-have-you.

It all seems straight forward up until now, but what about this ‘Option to Extend’ thing?

An Option is a legal term that gives the label the irrevocable right but not the obligation to extend the recording contract for successive periods usually with a new recording commitment imposed on artist. For example, the Initial Period may have required an EP to be produced of a certain length with a certain amount of songs. If the option to extend the contract is exercised then a new requirement of say an album of 14 songs with a playing time of a minimum of 45 minutes to be made within this a certain period, for example 6 month period after the exercise of the option.

It is important to note then that if the record company decides to exercise them under the contract, artist is bound to abide by the new terms. If label doesn’t think a subsequent album artist make will have enough success to guarantee the investment, guest what, artist is dropped. It may seem harsh, but the label needs to be able to better guarantee their return from their commitment the artist. There is usually more than one option period outlined in the contract, such as ‘First Option Period’ then ‘Second Option Period’ usually up until 4-5 Option periods; each with an additional recording commitment.

Royalties come from either Net Receipts from the exploitation of the recordings or a percentage of the price the records are sold to dealers (i.e. distributors). Now, the amounts the label and the artist will receive will vary according to the way in which the recordings have been exploited to make a profit and the percentages agreed between parties. On a Net receipts type of deal, the label and artist will usually get a fairly even split regarding the actual sale of the albums or EP, usually 50/50. For other ventures, such as synchronisation licenses and printed sheets of music, the proportion of profits will usually be higher for bands, around 70% of the Net Receipts.

The basis of this split is that the label has invested their time and effort into making the recording itself, its production, distribution etc. The synchronisation deals rely more heavily on the talent of the artist themselves and final product, which impresses the third party licensee.

If a band receives an Advance before the recording is made, you may be able to afford Tesco finest sausages but it ain’t free money. It’s an advance on future earnings! Additionally, and this is when reading the document is very important, Budgetary Expenses provided by the record company for promotion and other things may be due back to the label. In both instances, this money is effectively owed to the label and will need to be earned back through net receipts until paid in full at which time the artist will start to receive the royalties.

Image Credit: pixbox77