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Record Contracts. Professor Calle MUM 2700 Major Record Company. Major Signs artists Pays for production Distributes records (CD) directly or via a distributor Company is responsible for: Advertising, promotion, marketing

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record contracts

Record Contracts

Professor Calle

MUM 2700

major record company
Major Record Company
  • Major
    • Signs artists
    • Pays for production
    • Distributes records (CD) directly or via a distributor
    • Company is responsible for:
      • Advertising, promotion, marketing
      • In other words - company is responsible for everything
independent record company
Independent Record Company
  • Signs artists
  • Pays for production
  • Markets and promotes the record
  • Does not distribute directly but instead negotiates distribution deals with a distributor or a major record company
record company president
Record Company President
  • President
    • Oversees entire company
    • Chief financial officer (C.F.O.)
    • Has final say regarding artists, personnel and general direction of the company
business affairs legal
Business Affairs/Legal
  • Write and negotiate contracts with artists, distributors, publishers, licensers and other company holdings such as real estate, property, patents and trademarks
  • Primarily owners, lawyers and management
A & R
  • A & R = Artist & Repertoire
    • Ears of the company
    • Search for and select artists
    • Choose/approve material to be recorded
    • Oversee production
    • Manage the production advances or funds
    • Are often credited as executive producers
promotion department
Promotion Department
  • Primary job is to ensure radio airplay for a CD
  • Call radio program music directors
  • Try to ensure maximum exposure for their artist in media including radio, television, etc.
  • Advertising
  • Publicity
  • CD cover, artwork, etc.
  • Promo videos
  • In-store promotions
  • Promotional merchandise
new media
New Media
  • Techno folks
  • Find all new types of delivery methods and media
    • iTunes. iPods
    • Satellite radio
    • Internet radio
    • Telephones
    • DVDs
  • Producers oversee and are responsible for the creative process
  • Often help choose material and direction of the artist
  • Mostly sub-contract labor and not working full-time for a record company
product management
Product Management
  • Coordinate all record company departments
  • Ensures that all tasks related to the record production, release and promotion are timely and efficient
  • Set and monitor deadlines for art work, production, promotion, release, videos, etc.
  • Compute and pay artist’s royalties, salaries, production budgets, etc.
  • Manage the company’s income and expenses
  • Coordinates the product worldwide
  • This includes airplay, distribution, promotion, etc.
  • Responsible for getting records in the store
  • Length of contract:
    • Number of records
      • On average, records take from 9 months to 2 years to produce. Thus, 5 records can represent a much longer period of time than 5 years.
term continued
Term - continued
  • Number of years
    • Typically, contracts are written in terms of albums because years usually represent a shorter term.
    • Shorter contracts favor the artist if the artist is successful.
    • Long contracts normally contain many options.
    • Options are at the whim of the record company.
floors ceilings
Floors & Ceilings
  • Also known as Min/Max formulas
  • Contract specifies the minimum and maximum advance or fund amounts to be issued to the artists.
  • First album in the contract has a fixed amount.
  • Other amounts vary upon artist performance (sales).
cross collateralization
  • All funds, advances, expenditures and profits are combined over the course of the artist’ contract.
  • Each album/CD is not an event unto itself.
types of artists
Types of Artists
  • New artist: sold less than 250,000 records.
  • Mid-level or artist in demand: artist has sold between 750,000 and 1 million copies or is a new artist involved in a bidding war.
  • Superstars are artists who have sold 2.5 million units or more.
album awards
Album Awards
  • Gold album is one that sells 500,000 U.S. copies.
  • Platinum album is one that sells 1,000,000 U.S. copies.
royalty rates
Royalty Rates
  • New artists rates signing with an independent label - 10 and 15 points.
  • New Artists signing with a major label -13 and 16 points.
  • Midlevel artists - 15 to 17 points.
  • Superstars - 18 to 20 points.
  • The suggested retail price.
  • This is the number from which your royalty base, after deductions, is figured.
constructed retail price
Constructed Retail Price
  • Typically uplifted by calculating 130% of the wholesale price.
  • This number is usually lower than the SRLP.
  • Prospective - An escalation applied upon reaching a performance/sales marker. This escalation is applied to all units sold after the marker is reached.
  • Retroactive - An escalation applied to all records sold, from record one, upon reaching a performance/sales marker.
  • Net/Artist - The artist royalty/point rate.
  • All-in rate - The combined artist and producer point/royalty rate.
  • Producer points range from 0 to 5 points.
advances and funds
Advances and Funds
  • Advances are issued to a producer or artist. The artist or producer turns in a finished master and keeps money left over.
  • Funds are available to an artist or producer. Money not spent is not kept by the artist or producer.
Advances + & -
  • Advances +:
    • More control of funding.
    • Money saved can be kept.
  • Advances -:
    • All money issued is recoupable.
    • Large advances can prevent an artist from earning royalties because the money is not recouped.
Funds + & -
  • Funds +:
    • Typically forces lower recording costs.
    • Money saved in recording allows faster recoupment and royalty earnings.
  • Funds -:
    • Less control of funding and thus recording.
    • Does not provide an incentive for efficiency or a large cash base for artist/producer.
  • Free goods = 15%
  • Packaging = 25%
  • 10% for breakage (A&M Records)
  • Reserves = 35% (Make up for returns. Liquidated within 2 years)
  • 85% of net sales - makes up for piracy, etc.
  • Recoup - to earn back the money advanced by the record company at the point rate specified in your contract.
  • Red position - not-recouped/loss.
  • Black position - recouped/profitable.
  • Retailers can only return 20% of goods shipped without penalty.
  • All units over 20% are charged a restocking fee.
  • In the past, retailers enjoyed a 100% return privilege.
  • Firm albums are mandatory. Most new artist have one firm album with a series of options.
  • Options are exercised at the discretion of the record company based upon sales, conviction or momentum.
  • Options can be bad because they tie up the artist for long periods of time.
option negotiation strategies
Option Negotiation Strategies
  • Try to limit options
  • Do not assume you will be a failure. Try to assure better rates if you have success.
  • If offered 4 or more options try to force a 5th CD if the 4th option is exercised and so forth.
  • The term of your contract is the maximum length including all options.
  • The term is measured in CDs and not years.
  • CDs can take 2 or more years to produce.
  • The contract can be terminated by the record company at any time as specified in the contract.
late delivery of items
Late Delivery of Items
  • Producers can loose future accounts by turning albums in late because this destroys the marketing process and causes huge financial losses to companies.
  • Albums delivered late can force contract termination.
satisfactory recordings
Satisfactory Recordings
  • Technically satisfactory - Recorded and mixed professionally. Sounds good.
  • Commercially satisfactory - Company believes CD will sell and is representative of the artist image or style. “Country singers don’t make jazz CDs.”
pay or play
Pay or Play
  • Record company can shelve or not record a CD by:
    • Paying the artist the union scale for the CD.
    • Negotiate and pay the difference between the recording fund and the cost of the last CD.
    • Pay a pre-determined amount.
demo deals
Demo Deals
  • Company will pay for a 3-song demo.
  • Contract will require a period of time (30 to 90 days) during which the demo is shopped internally.
  • After this term expires, the artist can shop this demo to competitors.
  • Originally company has the right of first refusal.
demo deal advantages
Demo Deal Advantages
  • Professional recording with a qualified producer paid for by the record company.
  • Instant artist credibility.
  • High-quality demo can be used to shop at other companies.
demo deal disadvantages
Demo Deal Disadvantages
  • A lot of record company input.
  • Money must be recouped.
  • Record contracts will typically offer low point structures and be more in the company’s favor.
  • You must inform the original company in case of any offers.
  • You cannot use the master for profit unless you buy it back.
  • Money will be recoupable for any company contract issued.
demo deal calendars
Demo Deal Calendars
  • Calendar days - Monday - Sunday including holidays.
  • Work days - Monday - Friday not including holidays.
  • Calendar days defines a shorter a period of time than work days.