The Music Business Buddy
A podcast that aims to educate and inspire music creators in their quest to achieving their goals by gaining a greater understanding of the business of music. A new episode is released each Wednesday and aims to offer clarity and insight into a range of subjects across the music industry, all through the lens of a music creator for the benefit of other music creators. The series includes soundbites and interviews with guests from all over the world together with commentary and clarity on a range of topics. The podcast is hosted by award winning music industry professional Jonny Amos.
Jonny Amos is a music producer with credits on a range of major and independent labels, a songwriter with chart success in Europe and Asia, a senior lecturer in both music creation and music business at BIMM University UK, director of The SongLab Ltd and the author of The Music Business for Music Creators.
www.jonnyamos.com
The Music Business Buddy
Episode 24: Decoding the Dynamics of Record Deals
Explore music recording contracts with me Jonny Amos in this empowering episode of Music Business Buddy. Prepare to revolutionise your approach to music agreements by understanding them not as daunting hurdles but as essential tools for artistic success. I draw from my own experiences to dismantle the fear surrounding contracts, offering insights into how the digital age has ushered in greater transparency and fairness. From traditional record deals to licensing agreements, I break down the components that can significantly impact an artist's career, ensuring that you enter negotiations with confidence and clarity.
Journey through the critical clauses that define the recorded music industry landscape, including options, territory, term, advances, recoupment, and key person clauses. I highlight the importance of proactive strategies, encouraging artists to arm themselves with knowledge before contracts come into play. The episode focuses on fostering a collaborative and open dialogue during negotiations, empowering music creators to protect their interests and capitalize on opportunities. Whether you're an aspiring artist or a seasoned professional, this episode is packed with valuable insights to navigate your music career successfully. Don't miss the chance to enhance your understanding and take control of your professional journey.
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The Music Business Buddy. The Music Business Buddy Hello, a very warm welcome to you. You're listening to the Music Business Buddy with me, johnny Amos, podcasting out of Birmingham in England. I'm the author of the book the Music Business for Music Creators, available in hardback, paperback and ebook format. I'm also a music creator with credits on a variety of major and indie labels. As a writer, producer, I'm also a senior lecturer in both music creation and music business. Wherever you are, whatever you do, consider yourself welcome to this podcast and to a part of the community around it. I'm here to try and educate and inspire music creators from anywhere in the world in their quest to achieving their goals by gaining a greater understanding of the business of music.
Speaker 1:Okay, so today we're talking about recording contracts and negotiation of recording contracts, so let's get into it. Okay, the first thing to say is please don't be afraid of contracts, and that comes straight from my heart and from a voice of experience, because I used to be terrified of contracts. I know it sounds really silly, but I did. Now, whether that's, you know, recording side, or publishing, or management or whatever it might be, you know it's something that you have to face up to at some point whereby you know there's going to be two parties, ie you and another entity that is trying to agree on how best to work together, and the idea of signing a contract can in itself be a little bit terrifying, but it needn't be. I think one of the things that kind of makes it a bit terrifying is all the horror stories that we hear. You know whether it's you know, roughly speaking between the 60s and the 90s, and they kind of slowed down a lot after that. If you think about kind of the birth of the Internet or widespread mainstream use of the Internet, it was around about the turn of the century Now, since then there has been a great deal of transparency that comes with the internet and as a result of that I am seeing far less in the way of kind of sharky kind of record deals out there these days. I'm also seeing a lot more short term deals now than I've ever seen before.
Speaker 1:So please don't let you know the idea of a contract be something that intimidates you. You know the idea of a contract be something that intimidates you. It's seldom the case of you know the big bad record company trying to get the artist to sign a bad deal. You know this is something that we often see in movies or books, but they are things from bygone times, you know, before the transparency of the internet era, let's say so. You know, often fears relate to the complexity of the wording of contracts rather than the actual day-to-day practices of the music industry as well. So you know, contracts often use complex legal jargon, but it's not an intention to be deliberately awkward or to mislead the creator. It's just the way it is right. Things have to be kind of watertight in contracts so that nothing is left open to interpretation. It's not trying to blindside music creators most of the time. So, yeah, contracts allow things to happen, right. So it's just about kind of being at peace with that.
Speaker 1:Now, the other fundamental thing to think about here is the actual art of negotiation, or let's say, the act of negotiation. And the first thing to acknowledge here is the simple fact that you can Often, many of us tend to kind of define our understanding of a subject when we see it written down. You know, it's a very human, instinctive thing, I think, to see something written down in print or a digital document on a piece of paper and just kind of take it for what it is, and it doesn't need to be that way. Everything in a contract pretty much everything is negotiable and negotiation doesn't need to be sort of confrontational or tense or awkward or anything like that. I mean, for example, if a music creator queries a clause in the contract, it doesn't mean that they're jeopardizing their chance of seeing that contract through. If anything, they're just kind of showing their honesty.
Speaker 1:Look, you know, there's something here I don't understand. Or could you just explain that to me a little further? Or whatever it might be, and that might be a conversation between a music creator and a record company, or it could be a conversation between a music creator and a lawyer. Whatever it is, it's okay to ask those things. It always is.
Speaker 1:I mean, just because you, you know you create music and you've got this ability to be able to kind of create original music and try and do something with it, it doesn't necessarily mean that you have this inbuilt knowledge of knowing how contracts work. So it's perfectly plausible to just go hang on. What does that mean? You know, it doesn't necessarily mean that you're being overly cautious or dubious about something. It just means that you're querying something and that's really really healthy. You know it's about two parties agreeing on something at the end of the day, and so there are several aspects of a contract that can be negotiated on. Now, it's all well and good me saying that, but what are those things? Sometimes it helps us to be able to actually understand the different components that are mentioned inside of a recording contract. So let's have a look at those and let's see which ones are negotiable. Here we go.
Speaker 1:So the first thing to think about is what type of record deal is this? Is it a traditional record deal whereby there is an advance and there is money paid, and out of that money paid, you have to cover the costs of the recording? If so, that's fine. That's perfectly normal in many contracts. However, it might be that it's a licensing deal, whereby you are literally licensing the music that you have already made to that record company, so you're effectively signing over the rights of that music for a set amount of time on a licensing deal. There's two differences there between two different types of deals, and that's the first thing to think about.
Speaker 1:The next thing to perhaps think about is what the royalty rate is. Now, the royalty rate refers to the revenue splits between the label and the artist. You know, and it might be subject to change, by the way, based on how a contract moves forward on the level of recoupment against an advance. So it's always worth negotiating on the breakdown of revenue. So, for example, master sync fees will go directly to a record company for the use of a recording, so it could perhaps be agreed that any such fees could be reflected in the scale of the advance repayment. Another factor to consider is whether the record company is willing to offer a higher artist royalty rate once the advance has actually been recouped. So these things we can kind of see as being variable things. Once a record company has recouped, it doesn't have to be, but again, that is something which can be negotiated on, as can the actual royalty rate. By the way, you know, if we're talking about, you know, an indie label, you know perhaps a 50-50 split is more akin to that style of doing things. But if we're talking about, you know, a pop act signing to a major record company, the royalty rate is going to be significantly lower, perhaps even let's put a figure on it somewhere between perhaps 12 and 20 percent royalty rate for the artist, which might seem incredibly low and is incredibly low really. But but we have to offset that against the risk that the record company's taking and generally on a, a pop act, on a major recording contract, there is a lot of investment, a lot of time put in, so that would be reflected in the contract. So royalty rate that's something to consider here.
Speaker 1:Another thing to think about are options. Now, options are flexible clauses which allow the record company to build an immediate kind of follow-on should an unexpected wave of success perhaps arrive. For example, the record company may wish to have the option on a follow-up release once the term has ended. It also could be a stack of options built into a contract. So option one could be one single option two could be another single option three could be an album. They're all negotiable options and very often if there is an advance in place with that, the advance should generally increase in price as the contract goes on. It's very important to understand what those options are, because there's a lot of grey area when it comes to delivery. So it's good to be able to put a time frame against each option. It's good to be able to put a time frame against each option.
Speaker 1:Territory relates to the country or countries or continents in which the record company plans to make the recordings available to music consumers. So you know, in almost all cases a record company will want exclusive access to for the entire world. For the entire world and the word universe is becoming quite normal in contracts now due to the kind of potential for expansion of recorded copyrights beyond earth in the future. That sounds exciting, doesn't it? The term is important Now. The term refers to the duration of the contractual period. Now this is usually measured in either years or it could be measured by the number of of products being agreed upon. So, for example, it could be two EPs and an album with X amount of singles. Now that it's very important that, if it's, if it looks like that in the latter kind of example there, that there is a time period associated with it. Because if there isn't, then it could well be that you know, if a record company slows down their activity or they kind of, you know, sit on a project for too long and think about it, then you know an artist could be kind of in a position where they go well, I kind of feel a bit trapped here because there's no time period associated with what we said we do. So it's very important that those two aspects are considered in the term. So the amount of time that's actually being contracted in the contractual period and what a record company actually plans to do during that time, those two things are very important. They also link back to the options clause which I mentioned earlier.
Speaker 1:Ok, advance and recoupment must also be considered carefully in contracts. Now I'm going to be kind of general here by saying that generally, the higher the advance, the worse the royalty rate is for the artist, right, really broad stroke generalisation there. But it's kind of true. In most cases it's basically a simple kind of risk reward ratio for both parties, right? So when negotiating on an artist advance, the label will consider the costs associated with you know, the releases that are in the contract. Now, of course, there are other factors as well which may affect the size of the advance, and that includes things like you know the artist's past accomplishments. Maybe, if that's relevant. Also, you know existing data as well on the artist. You know we're in a very, very, very data-driven, data-heavy industry now. So things like streaming figures, current streaming figures, current social media engagement rate, and also a kind of informed projection of how well the artist may fare in the marketplace in the coming future. These will all kind of you know, affect the advance, the size of the advance, kind of you know affect the uh, the, the advance, the size of the advance. And also if other labels are also bidding on that artist, this may also increase the, the size of the advance being offered.
Speaker 1:Now the process of repaying in advance from sales streams, revenue sources etc. Is called recoupment. Now recoupment is an interesting one to try and understand because there are a few variables and it's difficult to really really really generalise this subject. So the things to look out for are to build an understanding of the things that are not going to be recouped through artist royalty rate, because these could usually include things like manufacturing, shipping, but could also extend to sort of like promotion and advertising and that kind of thing as well. So it's very important to try and build an understanding in the contract of what is recoupable and what is not recoupable.
Speaker 1:Now there's often a key person clause in the contract and this basically just reflects the importance of kind of one or more key people in agreement. So there's two different aspects to it from two sides, so we'll look at both. One could relate to a creative, a key sort of creative person. Let's say, for example, you know a singer, songwriter in a band whose presence is viewed as quite essential by the record company. If this key person were to leave the band, the record company would have the right to end the contract. Again, these are all negotiable terms, right? Alternatively, you know, the key person clause could also relate to a specific manager being involved with the act, so it could also relate to the A&R perhaps as well, who signed the act. So the artist may wish to have a clause in place stating that they can terminate their contract should the A&R that signed them depart from that company.
Speaker 1:Now it often happens, of course, that A&Rs sign artists and then they move on to a different company and their replacement A&R person may not quite believe in the artist in the same way or have the same kind of relationship with the artist, and that can really disengage an artist and kind of ruin their relationship with the label. Unfortunately, that thing that I just explained there is quite common, especially when it comes to A&R scouts and A&R managers at larger record companies, because they move around so much. It's just the nature of an A&R. So you know that is something to consider A lot of record companies, don they move around so much. It's just the nature of an A&R. So you know that is something to consider. A lot of record companies don't like the idea of a key person clause because they know that A&Rs move around quite a lot, but nevertheless it is a consideration to think about.
Speaker 1:Okay, another thing that we mentioned the contract is the PPD, which is the published price to dealer, and this is the wholesale unit price of a recording. It's often used as a kind of basic figure in the context of royalties within contracts, and yet a contract rarely actually explains what it means. So a digital store, for example, that retails a track, you know a label, will have a receiver royalty as the PPD. So the artist royalty is usually calculated against this PPD. Now, it might not necessarily be something that you can necessarily negotiate on, but it's just good to know what those figures look like.
Speaker 1:It's also worth thinking about the actual concept of the master recording. Now, the master recording refers to the original studio recording of a song. So the title master is the copy of the recording from which all the other copies are made. So, for instance, a nine track album will have nine masters, so it won't just have a. You'll have a product code for an album, but you'd also have every single track on the album. I say track because we're talking about recordings here rather than songs.
Speaker 1:This is recording contract language, not music publishing language. So even though the artists might think of those as their songs, it's really their recordings of those songs. But a nine track album, for example, would have nine masters, so nine different isrcs attached to each one. So master rights refers to the ownership of those rights of the master recording, and these are typically owned by a record company because they are financing their recordings, unless it's a licensing deal, which is the first point I mentioned in this. So if it's a licensing deal, it would probably be more a case of the artist licensing those recordings to a record company but then negotiating on when the rights of those recordings revert back to the artist. That is a highly negotiable item in a contract.
Speaker 1:Now, something else that will be mentioned in the contract is something along the lines of how the record company encourages the artist to seek legal advice over that contract. Now, it's good that that's in there. It's not always in every contract, but it kind of should be, because it is a thing. It's a moral right as well as a sort of legal right, if you will. So it's always recommended that an artist does seek out legal advice, not only to be able to perhaps negotiate on something, but also to understand something.
Speaker 1:Now, one of the key things here is in education. Once an artist understands why a record company asks for this or that to be placed into a contract, or what does this clause mean? How does it relate? It's very important that an artist gains an understanding of all of this. If they just hand it over to a lawyer to handle, don't get me wrong. I know that's the dream. The dream is to create music and not have to worry about any of this stuff, but that's not the reality. The reality is to create music and not have to worry about any of this stuff, but that's not the reality. The reality is this it's very, very, very important that music creators understand what they are buying into.
Speaker 1:Even though it might not be as appealing to learn about these aspects of the business, it's crucial. You will see one day how crucial it is that you understand what it is that you're selling and what it is that you're buying into, and a lawyer is there to kind of navigate that process. But ultimately, there's a sense of accountability on the artist, on the music creator, to be able to go. What is it that I'm actually agreeing to here, and what does that look like three years from now? And where does it leave me 10 years from now? These are all things to understand, and you can't truly, I don't think understand that until you know what it is that you're actually signing.
Speaker 1:Okay, so there's a few considerations there to think about when it comes to negotiation and what the state of recording contracts can look like and can feel like, and what they can relate to and what they all mean. So you know and, by the way you know, it's very often a reactive thing, right? I see kind of music creators go oh I need to have this contract looked at because it's been put in front of me. That's natural, right, that's normal. But what I think would be better than that is for music creators to look ahead. I've often found that success can be brought into your career if you look ahead and you start to strategize it, and so preparing to understand what a contract is going to look like when it's in front of you is a crucial process, because I guarantee you'll be more ready for it when it's in front of you.
Speaker 1:So I hope that you found this episode useful. Do feel free to reach out to me with any questions or queries that you have, or any other subjects that you want covered in this podcast that relate to this or any other aspect of the business. Okay, so that will be it for now. Thank you for being here. Thank you for being with me. I hope you've enjoyed this. I hope you've found it useful, and may the force be with you. The Music Business Party.
