Holly WinnBefore I start, I want to say that some artists have actually seen a great deal of success from 360 contracts such as Paramore — so although there’s been some negative comments around labels dipping into areas where they don’t contribute as much, I would never tell an artist to not even consider this type of contract. A contract should be reviewed on a case by case basis.
If you want a quick review of pros and cons of the all-inclusive deal, you can read on here. Otherwise, continue on for a review of an example contract from an artist manager’s perspective who is looking to get the best deal for his or her artist.
Here’s the contract I will be reviewing. Note: I am not a lawyer and, as always, an entertainment lawyer should be consulted in review of any artist contracts. So, let’s get started…
- By not mentioning the term length (i.e. only what is expected in the term), they leave the door open to a Frank Zappa scenario where the recording is completed pretty quickly before they have time to set up marketing and then hold off on paying the artist, because they have to approve it first. I want it clearly outlined what criteria the artist needs to meet. Even saying “commercially successful” is subjective. It would be good to know how long the initial term and option periods are, so that the artist doesn’t wind up in a situation like Leann Rimes. These terms not only impact money made from recordings, but ancillary activities too.
- It’s only one recording, and the option gives the artist a way out as well. But if it’s only for one master, the artist could be at a disadvantage if takes him or her awhile to gain traction and they don’t exercise the options. Then, the artist is out money on advances without time to recoup and start actually earning. The artist is heavily reliant on them in a 360 deal to do what’s needed to make this album successful, so there should be some liability on their end as well like they don’t get paid if they don’t do their job to help the artist sell those albums.
- Even if they’re fronting the artist money ($15,000 recording fund is pretty advantageous so long as you aren’t forced to use their costly facilities and team), if they get a split of royalties and advance paid off first, the artist may then be motivated just as much as them to have a successful album. The tiered system for the royalty points is a great offer and incentive for the artist to push their album. While half a point does not seem like much, it is a very scalable number that can make a significant difference.
- The artist wouldn’t want to be hindered on creative control. I see in one section, it says that if there’s debate, UMG basically gets final say not just on music, but also artwork.
- With subsequent LPs, putting it on net royalties could limit the artist’s future funds, being that we’ve seen in a lot of cases, artist’s net royalties are not that much when all is said and done. Inclusive of other’s advances aside from the artist’s own means he or she doesn’t get much at the end. Royalties, US rate is low, but how international varies form Canada and UK is unclear, does this impact DPRSRA royalties? The international royalties are certainly lackluster as we move into a global music industry. While I do agree that the overall royalties earned should be less considering conversion rates and outsourcing to other companies, I disagree with some of the most powerful markets only earning half of their standard royalty rate. For major markets like China, Hong Kong, and Japan, the artist would seek at least 75 percent of the standard US rate. Mechanical Royalties is a controlled composition clause that changes the US law statute provision for what the artist gets. “75% minimum statutory rate, subject to 11x “cap” for LPs and 5x cap for the EP.” The artist will want 100%.
- I would want to limit any exclusive agreements they mention here that could lead to cross-collateralization. I get that it’s a 360 deal, so it’s kind of hard to say that they shouldn’t get a cut of these activities they participate in — but I want to limit that cut.
- I generally error on the side of caution that it’s better to state not involved in or not getting paid out in an area than to not mention at all and leave it open to interpretation. It would be good to guarantee and provide time frame of release as well since it pretty much just covers recording and then mastering the final deliverable. For example, I would prefer to have the contract explicitly state that if UMG decides not to extend, then the artist shall have the right to either release an LP upon my own independent terms (recorded within a third-party studio of my choosing) or terminate the UMG’s option (plus any subsequent options) altogether.
- Even though the contract mentions worldwide territory and international percentage rate of royalties, there’s no mention of if it’s guaranteed to be distributed internationally. I want to know if packaging, technology, breakage, and free goods costs are included in this and depending on how my music is distributed, determine if those cost deductions make sense.
- The phrase “20% of net receipts in connection with Artist’s ancillary activities (including, but not limited to touring, endorsements, acting, publishing, sponsorships) in the Territory provided” would make me think about why their percentage doesn’t change along with escalations on the artist’s end — so as he or she gets more or less successful, they still take that same cut? They mention some other areas like acting and endorsements briefly, but not in more detail like they do touring or publishing. I would want a note being more specific that they can only take a cut during that term and not after, and only of those activities where they played a main role in securing or fronting costs for. It should not include any pre-existing revenue streams. Lady Gaga is a great example as to why this is an issue. If this was in her contract, she would have had to pay the label 20 percent of her salary for her recent film. In addition, she would have had to pay her manager and agent. This is one area where UMG is asking for too much.
With review of any contract, keep in mind that you can also request they add certain sections or clauses that may be missing.
I would certainly insert a clause of the contract that dictates what state, providence, country that this contract is governed by and where any litigation would occur. This is an incredibly important clause. Hypothetically, the artist could file suit in another country or state and this would incur a high cost on UMG by having to hire a local legal team in addition to the already high costs of litigation.
UMG has not offered any tour advances or offered any funds/materials for marketing and advertising. UMG does demand that the artist contribute to this, but the artist likely is not able to create marketing materials and would have to sink their advances/revenue earned into hiring someone to produce that content. UMG knows how to sell and market music. Additionally, they have the talented staff to fulfill these orders. I would want to either have them create the marketing plan or to offer a recoupable advance for the purpose of creating the marketing material. They want to take a cut of touring, but yet, they don’t offer an advance or specify what help they will give for it?
And that about covers the basics.
Keep in mind that you do have options beyond what’s initially presented. Some artists find that they prefer to be locked into longer contracts, because if their first album doesn’t do well, they have a chance to try again. Others, may want a per single or per album contract, so they can “test” out the relationship. Still others go in for a distribution only deal, knowing that labels still have solid relationships with radio such as Mackelmore and Ryan. Don’t be afraid to ask and negotiate, but make sure you have some clout and leverage before you do so.
