Artists’ Recording Contracts Chapter Twelve

What role do unions play in record company contracts? Start Thinking . . . What role do unions play in record company contracts? What are the important issues that should be negotiated in a recording contract? Music Business Handbook and Career Guide, 11th Ed. © 2013 Sherwood Publishing Partners

Chapter Goals Learn the basic elements in a recording contract. Be able to distinguish between royalty artist issues and nonroyalty artist issues. Understand union involvement in the process and the standing agreements that the AFM and SAG-AFTRA have with record companies. Music Business Handbook and Career Guide, 11th Ed. © 2013 Sherwood Publishing Partners

Covers singers (not instrumentalists) SAG-AFTRA Agreements Covers singers (not instrumentalists) SAG-AFTRA National Code of Fair Practice for Sound Recordings Covers all singers on a recording (including the stars) Contract addresses wage scales, overdubbing, working conditions, reuse payments, and labels’ contributions to Health & Retirement Funds Music Business Handbook and Career Guide, 11th Ed. © 2013 Sherwood Publishing Partners

SAG-AFTRA Agreements Vocal Contractors Union contractor Singing member of the group Supervises adherence to SAG-AFTRA code Required if 3+ singers in a session Keeps track of overdubbing and tracking Files SAG-AFTRA’s Sound Recording Sessions Report Music Business Handbook and Career Guide, 11th Ed. © 2013 Sherwood Publishing Partners

SAG-AFTRA Agreements Scale Classifications: soloists, groups, classical, and so on Recording funds/advance Contingent scale payments Sound recording copyright shares Health & Retirement Funds Music Business Handbook and Career Guide, 11th Ed. © 2013 Sherwood Publishing Partners

SAG-AFTRA Agreements Acquired Masters Recordings by small companies and indie labels Signatory third party acquiring master must ensure nonsignatory producer complied with SAG-AFTRA code must comply with all obligations H&R and contingent payments New use of masters Music Business Handbook and Career Guide, 11th Ed. © 2013 Sherwood Publishing Partners

SAG-AFTRA Agreements Nonunion Recording Typically a disparity of bargaining power between any one artist and an entertainment conglomerate Changing technology opening the door for DIY artists But SAG-AFTRA obligations must be met when distributing conventionally Music Business Handbook and Career Guide, 11th Ed. © 2013 Sherwood Publishing Partners

AFM Agreements Sound Recording Labor Agreement Instrumentalists, conductors, arrangers, orchestrators, and copyists Covers provisions for production of music videos and concert DVDs Employer pays wages + AFM Health & Welfare Fund + AFM Employers Pension Fund Requires that all music “prepared” for recording must be handled exclusively by arrangers, orchestrators, and copyists who are AFM members Music Business Handbook and Career Guide, 11th Ed. © 2013 Sherwood Publishing Partners

AFM Agreements Sound Recording Labor Agreement Contract provides 200% of sidemusicians’ pay for the leader AFM contractor for 12+ musicians doubling, cartage, and so on backup artists Royalty artists = 3% or more royalty to qualify “Outside” masters Music Business Handbook and Career Guide, 11th Ed. © 2013 Sherwood Publishing Partners

AFM Agreements Sound Recording Special Payments Fund Phonograph records Record companies make payments to fund twice a year Paid to musicians who performed in preceding 5 years Same-scale payments for all musicians If ownership changes over a 10-year period, new owner must honor payment obligations Motion pictures Film Musicians Secondary Markets Fund Payments reflect relative success of project Music Business Handbook and Career Guide, 11th Ed. © 2013 Sherwood Publishing Partners

AFM Agreements Music Performance Trust Fund Nonprofit organization to keep live music available to public Returns a fraction of lost performance income back to union musicians Trustees schedule live music performances by AFM members If no admission charged, live performances may be broadcast Music Business Handbook and Career Guide, 11th Ed. © 2013 Sherwood Publishing Partners

AFM Agreements Nonunion Recording Taft-Hartley Act and right-to-work laws AFM control Professional symphony and popular music recording Less control in gospel, Christian, jazz, and country fields Young Sounds of the AFM Spec sessions Music Business Handbook and Career Guide, 11th Ed. © 2013 Sherwood Publishing Partners

Royalty Artist Contracts Types of Deals The label signs an artist; a producer handles project in-house; the artist gets royalties The label already has an artist under contract; retains independent producer Independent producer and artist produce master, then try to induce record company to acquire it Artist or production company pays all recording costs and leases the master to the label in exchange for a royalty, called a master lease deal Artist forms a production company to deliver a master tape to a label Music Business Handbook and Career Guide, 11th Ed. © 2013 Sherwood Publishing Partners

Royalty Artist Contracts Negotiations Conservative signing policies Labels more risk averse than in earlier era Terms of contract discussed by lawyers Formal drafting follows Goal: Maximizing self-interest Each party needs its own lawyer Music Business Handbook and Career Guide, 11th Ed. © 2013 Sherwood Publishing Partners

Royalty Artist Contracts The Issues Term Exclusivity Royalties, advances Production budget minimums Creative control Commitment to promote Chargebacks Ownership of masters Music Business Handbook and Career Guide, 11th Ed. © 2013 Sherwood Publishing Partners

Royalty Artist Contracts The Issues Publishing rights, controlled compositions Video rights Foreign releases Assignment Right to audit Default, cure Royalty discounts Music Business Handbook and Career Guide, 11th Ed. © 2013 Sherwood Publishing Partners

Royalty Artist Contracts 360 Deals Also known as artist brand agreements Power shift between artists and record companies Two types of 360 deals: Record company gets traditional revenues + percentage of the artist’s other income streams True partnership Today’s environment = double-edged sword Does the label bring enough value to justify the revenue share? Music Business Handbook and Career Guide, 11th Ed. © 2013 Sherwood Publishing Partners

Royalty Artist Contracts New Use and Legacy Royalty Rates Dramatic changes in technology lead to anomalies in royalty rates Standard agreement provides for payment to the artist at different rates depending on how the record is used Sale ≠ License Challenges of streaming, downloads, and freemium distribution Music Business Handbook and Career Guide, 11th Ed. © 2013 Sherwood Publishing Partners

For Further Thought . . . What is the difference between a royalty artist and a nonroyalty artist? Is a 360 deal better for the label or the artist? Why? Why is it possible for an artist to have fulfilled all recording obligations under a contract, have some recordings that sold well, but still not receive any royalties? Music Business Handbook and Career Guide, 11th Ed. © 2013 Sherwood Publishing Partners