So, you’ve done the hard yards by tirelessly putting on gigs and using your savings to produce albums. A label has approached you and wants to sign you up to their artist roster. Signing a contract is a big decision. Below, we set out the types of agreements bands sign with record labels and what you should look out for in a contract.
When you sign a recording contract with a record label, the key clauses will address who owns the copyright to the music while you are on their artist roster. These contracts typically state that the label will own the copyright and so you should ensure you are comfortable with this arrangement before signing. Such clauses are standard because the creator of the music otherwise owns the music and this may not be commercially viable for the label.
A royalty contract specifies the amount of money the label pays copyright owners so that others can use the music to generate revenue. Under this type of contract, the label pays your band to distribute and promote the music so they can make a profit. So, your band retains the copyright, but you provide the label exclusive use of the music.
A distribution contract differs from a recording contract in that it deals with the label distributing your music rather than just recording and owning the copyright. A distribution deal is similar to a royalty contract in that the creator licenses the record to the label for a specified period.
Under a promotion contract, you agree to license your music in exchange for the label promoting your music. Again, check that you are not assigning your copyright ownership to the label under this contract. Doing so means that you lose the right to distribute and promote the music you have created as you will no longer own the copyright.
Common Clauses to Check
Some important clauses are common to artist contracts. For example, most will specify the duration and termination of the deal in terms of a certain number of albums (i.e. producing five albums in a five-year period). Ensure you carefully review these clauses so as to understand when you can exit the contract and when you can look at signing to another label.
Another reason that it is important to check termination clauses in your artist contract is in case a label becomes bankrupt (if an individual) or insolvent (if a company). If you have signed a contract that you cannot terminate if the label winds up, then it is possible they can sell your copyright as an asset.
Another clause you should review is an opt-out clause in the label’s favour if musicians perform poorly (e.g. underwhelming album sales or risking the label’s reputation). It is important to be aware of any of these clauses to make sure that you are complying with performance standards under the contract.
This is an exciting time for you as a musician, but you must check what type of agreement you are entering into before signing the dotted line. Ask yourself:
- Will the label own the copyright or will I?
- When does the agreement end and what options do I have to terminate?
- Are any opt-out clauses in the label’s favour for poor performance?
If you have any questions or need assistance reviewing your agreement, get in touch with our contract lawyers on 1300 544 755.