The Business of Music: Record Label Agreements

MICHAEL DUBOFF

Being a musician is a business. Everyone has to make a living, and one way to more likely have a sustainable career as a musician is through the support of a record label, including from recording funds, distribution, and promotion.

Resources such as Manitoba Music are great to help artists attract label attention, discover what the labels are looking for, and finding the label that’s the best fit.

If you have what they’re looking for, and they’re the right partner for your needs and aspirations, you’re that much closer to signing a label agreement. Before signing, it’s important to understand what the label is proposing, to help you make an informed decision about how to respond to the offer.

Below is a brief discussion of some of the topics above the dotted line. For a complete analysis, speak to a music lawyer regarding your specific circumstances.

Master Recording License

You may be asked to give the label an exclusive license to use the master recordings of your music in a territory for a period of time. An alternative that is generally less in your favour is if you assign all rights including copyright in the music to the label.

Initial Term and Option Periods

The agreement’s initial term will likely cover a specific set of music. The label will also likely want the opportunity to exclusively represent your future music by having the opportunity to extend your commitment by way of “option periods”. During each option period, you will be required to deliver a minimum amount of music.

Advances + Recording Funds

A key reason to work with a label is their commitment to you – such as money up front in the form of an advance against money they will generate from selling your music. The funds are generally used to pay off costs of making music. As the advance should be non-returnable, you are not required to pay the advance back to the label in the event the album doesn’t sell well. Funds might also come in the form of a specific recording fund, which has its advantages over advances.

Grant of Rights

It’s reasonable to provide the label all rights it reasonably requires to exploit the master recordings. Regarding use of your image, it may be reasonable to allow the label non-exclusive rights. There are some rights that you may want to resist providing, namely the right to be your publisher as well.

Sales

The payment of funds generated from sale of your music is generally subject to the recoupment of advances paid to you by the label. There are various ways these royalties may be structured. One of the most common routes is the net profit route. Here, the label pays you a percentage of the net profit calculated by taking the gross revenue and subtracting the label’s expenses. It’s important to clarify the formulas used to calculate the gross revenue and expenses.

Mechanical Rights

Assuming you are the singer and songwriter, you will need to give permission to the label to exploit the compositions, in the form of a mechanical license. However, not all mechanical licenses are the same.

Release and Marketing

Ideally, you’ll receive a commitment for a specific release and preferably there’s a specific financial commitment for marketing initiatives. To the extent possible, you’re ideally involved with the plan.

Accounting and Audits

The label should provide clarity regarding when you will receive statements outlining everything related to the sales of your music and payment.

Breaching the Agreement

If you think the label didn’t fulfill their obligations, namely paying you sufficiently and/or on time, there should be a clear process in place to deal with this.

With a record label, like any other music relationship, the key is who you are working with because working with the right label, for you, and your project, is usually the most important consideration.

Michael can be reached at: michael.duboff@edwardslaw.ca