If possible, you should always speak to a specialist entertainment lawyer before signing a record contract. At the very least, it is essential that you understand the key concepts and legal jargon that are included in recording contracts.
Royalties refer to the money generated by selling recordings. The record label is responsible for collecting the money and then paying the percentage agreed in the record contract to the artist.
It is essential that you negotiate a good royalty rate as it can significantly impact your future earnings.
An artist will only ever receive a percentage of the net profit i.e. the amount of money left after the label has deducted the cost of studio time, marketing, music videos and any advances already paid to the artist.
It is important to check what is included in the lists of deductions and what the stated costs are. Remember that record labels deal with music in bulk and therefore receive significant discounts; their actual costs will be far lower than what it would cost you as an individual for the equivalent product or service.
This is the money that you receive upfront when you sign a recording contract. The label will then aim to recoup all of this money (and more) from sales of your music. Never sign a contract that states that advances must be repaid as that is no different from taking out a loan from the bank.
Advances may need to be split with your band or manager and are of course subject to taxes. Remember that advances need to cover your living costs for months (if not years) so budget carefully.
If you agree to work for a flat fee, then you will receive a one-off payment in exchange for signing away any future income from royalties.
In simple terms, if your tune flops then having agreed to a flat fee would be a good result for you. However, if your song is a massive hit then you will lose out on potentially huge earnings from royalties.
You will usually be asked to sign an exclusive deal. This means that you can only release music via the label you have signed with for an agreed period of time. If you are unhappy with the label and wish to break the contract, you will have to pay a termination fee.
This specifies what parts of the world your record contract applies to. If you sign with a major label it will usually be worldwide. Some smaller labels may only sale music in specific countries or regions.
The duration of a contract is also referred to as the “term”. You will usually be expected to deliver a minimum number of songs/albums within the term. To balance this demand, you should ensure that a release commitment is included in the contract to ensure that the label is committed to releasing a minimum number of your songs within a fixed period. You should ensure that the contract states you are able to gets the rights back to your recordings and/or terminate the recording contract if the label does not honour the release commitment.
The label will have the option to extend the term; something they will be keen to do if you music is a commercial success. Be cautious of signing any contract that uses the word “perpetuity” as this means forever.
You should try to maintain creative control over your music, name and likeness (your image), videos, artwork, remixes and ideally budget. If possible, ensure that you have to give final approval in all of these areas.
Every artist dreams of making it but it is important to always take a step back and think carefully before committing to any legally binding agreement. A bad record deal is often worse than no record deal.
This article is only intended to act as an introduction to copyright law; you should always seek professional legal advice.