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Record Contracts. Professor Calle MUM 2700 www.ProfessorCalle.com. 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

www.ProfessorCalle.com


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.


Marketing
Marketing

  • 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


Production
Production

  • 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.


Finance
Finance

  • Compute and pay artist’s royalties, salaries, production budgets, etc.

  • Manage the company’s income and expenses


International
International

  • Coordinates the product worldwide

  • This includes airplay, distribution, promotion, etc.


Sales
Sales

  • Responsible for getting records in the store


Term

  • 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
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.


SRLP

  • 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.


Escalations
Escalations

  • 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.


Royalties
Royalties

  • 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 + & -

  • 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 + & -

  • 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.


Deductions
Deductions

  • 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.


Recoupment
Recoupment

  • 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.


Returns
Returns

  • 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.


Options
Options

  • 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.


Term

  • 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.