1. Artists’ Recording Contracts Chapter Twelve

2. 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

3. 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

4. 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

5. 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

6. 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

7. 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

8. 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

9. 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

10. 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

11. 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

12. 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

13. 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

14. 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

15. 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

16. 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

17. 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

18. 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

19. 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

20. 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