Balancing label–artist contracts in today’s music industry
6 February 2014
Virtually, all major labels have had a public spat with an artist, leading many times to the artist attempting to leave without being released from his contract. What’s making artists so upset?
In the parallel universe where things work and there is a just reward for artistic creativity, getting a record deal is usually cause for celebration. The artist knows he/she will be paid a lump sum advance by the label, usually in installments, which the label will try to recoup over the life of the contract, through record sales, touring, etc.
A record deal seldom means more than the artist finding someone willing to pay for styling, studio time and video shoots in exchange for 60-70% of the artist’s net takings. Advances are rare for artists who aren’t yet established; who haven’t, as we say, “blown”, so many new/up-and-coming acts depend entirely on the label for their day-today maintenance.
This arrangement is usually fine until the artist’s first hit. The artist gets a glimpse of his/her potential earning power and, like Adam and Eve after partaking of the forbidden fruit, their eyes open. A restlessness develops that, if not managed properly, will lead to the sort of confrontations and frustrations.
This is not to say that the labels are without blame, however. Most of the contracts in circulation, in addition to there being no advance, have no minimum commitment (financial or otherwise) for the labels. This effectively means there is no legal means of exit for the artist in the event that the label does nothing to promote the artist or unduly delays the release of recorded material.
Some contracts have a term of X years, with the option to renew for Y additional 1-year periods. For example, a 4-year contract, after which the label is entitled to exercise the option to renew the contract for 2 additional terms of one year. Chances are that you’re renewing because the artiste has “blown” by year 3 or 4. The artist’s expectations are likely to have changed with his stature.
But the labels aren’t in it for charity either. At the end of the day, they invest in the artist to reap a profit, like any other businessman. With the dependency on reformed(?) pirates for physical “sales”, digital suffering from the abundance of free music and quality videos costing what they do today, a long contract is probably the best way to hedge against un-recouped investment. And if the vast income spent in years 1 and 2 of a 4-year contract is rewarded with dismal revenues, what’s the incentive to keep spending for years 3 and 4? And why let the artist go after year 4 if your net profit is still a negative sum?
Additional Info: TexTheLaw
In the parallel universe where things work and there is a just reward for artistic creativity, getting a record deal is usually cause for celebration. The artist knows he/she will be paid a lump sum advance by the label, usually in installments, which the label will try to recoup over the life of the contract, through record sales, touring, etc.
A record deal seldom means more than the artist finding someone willing to pay for styling, studio time and video shoots in exchange for 60-70% of the artist’s net takings. Advances are rare for artists who aren’t yet established; who haven’t, as we say, “blown”, so many new/up-and-coming acts depend entirely on the label for their day-today maintenance.
This arrangement is usually fine until the artist’s first hit. The artist gets a glimpse of his/her potential earning power and, like Adam and Eve after partaking of the forbidden fruit, their eyes open. A restlessness develops that, if not managed properly, will lead to the sort of confrontations and frustrations.
This is not to say that the labels are without blame, however. Most of the contracts in circulation, in addition to there being no advance, have no minimum commitment (financial or otherwise) for the labels. This effectively means there is no legal means of exit for the artist in the event that the label does nothing to promote the artist or unduly delays the release of recorded material.
Some contracts have a term of X years, with the option to renew for Y additional 1-year periods. For example, a 4-year contract, after which the label is entitled to exercise the option to renew the contract for 2 additional terms of one year. Chances are that you’re renewing because the artiste has “blown” by year 3 or 4. The artist’s expectations are likely to have changed with his stature.
But the labels aren’t in it for charity either. At the end of the day, they invest in the artist to reap a profit, like any other businessman. With the dependency on reformed(?) pirates for physical “sales”, digital suffering from the abundance of free music and quality videos costing what they do today, a long contract is probably the best way to hedge against un-recouped investment. And if the vast income spent in years 1 and 2 of a 4-year contract is rewarded with dismal revenues, what’s the incentive to keep spending for years 3 and 4? And why let the artist go after year 4 if your net profit is still a negative sum?
Additional Info: TexTheLaw
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