Recording Contracts

John Macy · From: Rockport TX/Denver CO

Here is an interesting take on recording contracts. Anybody want a record deal???

Recording Contract Basics
Dear Artists, You Lose!

By Liza Dewabrata, MBA and Jack Williams, CPA, 7/13/2000

This month we’ve set ourselves a challenging goal: Convey the basic elements of a typical 60-80 page new
artist recording contract in understandable language in the few paragraphs allotted here. After first acknowledging
that (a) we’ll need to confine ourselves to the high points only, (b) our bias about the fairness of certain provisions
is sure to be revealed, and (c) a bit of oversimplification is inevitable, let’s give it a try...

Dear Artist:

You will record exclusively for our company during the term of this agreement. After completing your first album,
we can obligate you to record up to seven additional albums, but the choice of extending the agreement is entirely
ours; in fact, we are not even required to release the album(s) after they are recorded.

We will pay the costs of recording each album, but these costs will be deducted from any royalties due to you
from record sales. We will also deduct 50 percent of certain other costs from your record royalties, such as video
production and independent marketing and promotion costs.

For each album recorded you will receive an advance, paid in two parcels, the first when recording begins and the
remainder when it is completed. The amount of the advance will be calculated by means of an impossibly
convoluted formula taking the sales of previous albums into account, ranging from $30,000 to $200,000 per LP.
All “advances,” whether received in cash (commencement & delivery advances) or paid on your behalf (such as
recording & video costs) are deductions against your royalty earnings; if the total of the deductions is greater than
your royalty earnings you will not have to reimburse us.

Despite the fact that the cost of recording your albums ultimately comes from your pocket, we will own them, and
will make all decisions on how to exploit them, such as promotion, marketing, pricing and so on. We will also
decide whether, and on what terms, to license your music to third parties, such as record clubs, motion pictures,
and producers of compilation records.

Your base royalty for sales in the U.S. will be 12 percent of the retail price. To the uneducated eye this may
appear to result in a royalty of $2.04 for each $16.98 CD shipped to our customers. However, our computation
will include a number of reductions for “container,” “free goods,” and a “CD adjustment,” after which the royalty
will actually be 97¢ per CD. And by the way, the producer’s royalty must be paid from your share, so after this
royalty is subtracted your earnings will be 73¢ per CD, or about 8 percent of the CD’s wholesale price. But on the
bright side, your basic rate of 12 percent will increase by a percentage as sales surpass 250,000 units, and again
after 500,000 and 1 million unit levels are attained. Also, if all eight albums are recorded, the basic 12 percent rate
will gradually increase to 16 percent, so that if your eighth LP goes platinum, each CD we ship will produce a
royalty to you of $1.18.

Sales outside the U.S., most of which is conducted through our affiliated companies, will be paid at a royalty rate
lower than your basic rate; the reduction ranges from 85 percent to as low as 50 percent of the U.S. rate. Should
records begin to be distributed electronically (or by any other means not currently in use,) not only will we retain
the no-longer applicable “packaging” deduction, but we expect to be so unprepared for the new technology that it
will be necessary to further reduce your royalties. Thus, your basic rate for all “new technology” sales will be 70
percent of the rate otherwise paid.

Your royalties will not be paid in full every period. As a buffer against possible returns of albums we have
shipped, which generally occurs at a rate of 5-10 percent, we will withhold 30 percent of the units as a reserve, and
pay these out to you gradually over a two-year period. We will pay mechanical royalties due to the publishers of
the songs you record—up to a point. If your albums contain more than 10 songs, as many do, we will charge the
“excess mechanical” royalties against your earnings. So, for example, if 12 songs are included on your first album,
the rate paid to you of 73¢ mentioned above would become 58¢ for each CD shipped to our customers. In
addition, we will pay only 75 percent of the usual mechanical royalty for songs that you write or publish, the
so-called “controlled compositions.”

Unless you specifically object to any royalty statement within two years from the time it is issued, you will lose
your rights to dispute the statement. If you do object to our reported royalties, you can conduct an audit of our
books and records, at your own expense.

Very Truly Yours,

The Label

(Courtesy of Music Row Magazine)

[This message was edited by John Macy on 18 July 2000 at 04:06 PM.]

Joseph Barcus · From: Volga West Virginia

hey i would jump on the wagon just for the heck of it, is there any truth in this or just a joke. just wondering joe

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carter single 10

John Macy · From: Rockport TX/Denver CO

While the article is slightly slanted against the record companies, it is pretty much accurate. I deal daily with such contracts, both recording and publishing, from a record company point of view.

What they do fail to mention is the cost of the machinery to make the records work, and the failure rate of most projects.

Jump on, who knows, you might one of the few that it works for.

P Gleespen · From: Toledo, OH USA

That is right on the money, maybe even a little kind.
When the hardcore band that I was in in the early/mid '90s was negotiating our contract with Columbia we fought tooth and nail over every penny, particularly recoupable tour support. Of course, we usually lost, but we did get a lot of things changed from the standard contract.
Then, when we had finally hashed it all out and we had our lawyer approve the finalized contract, they sent us the original, unedited "form letter" contract to sign.
When we called and got the real contract sent, They SAID it was a mistake, but I'm sure if we'd been dumb enough to sign it, we'd have been screwed.
Record companies (big ones) are not about music.

Joseph Barcus · From: Volga West Virginia

if time is all thats involved id give a few weeks or months up just yo play around with such a project after all its not or would not be comming out of my pocket. if anybody knows a contact person let me have it ill give them call and see what its about. Joe

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carter single 10

Herb Steiner · From: Spicewood TX 78669

My group just signed a record deal with Columbia, and it's a good deal, I feel.

We get the first 12 albums for a penny, and we only have to buy 6 more the first year at the regular price! I can fill out my Jerry Vale and Robert Goulet collection in no time.

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Herb's Steel Guitar Homesite

Jim Cohen · From: Philadelphia, PA

Good information, John. I understand that there's also a downside to the recording industry...

JB Arnold · From: Longmont,Co,USA (deceased)

The speech by Courtney Love that was referenced here a week ago is directly to this point-She takes it a step further, and implies that losing your major label deal is the best thing that could possibly happen to you.

The only way this works out for the band is this-Say you're a big buzz band and manage a hefty signing bonus. (of course you owe it all back from royalties). You win either by selling Shania Twain or Garth numbers, and forcing a renegotiation, or you tank so severely that all involved run like dogs from a skunk and burn your master to hide the evidence. The A&R guy who signed you is found wandering the desert in a hallucinogenic haze brought on by inhaling smoke from the cloud of dust that used to be his career. You keep the money and set up your own label and distribute thru MP3 and the internet. You let the A&R guy shag donuts for the road crew.

It's the folks who bust their chops, sell about half a million, and tour relentlessly that wind up working for less than you could make at the 7-11. In other words, most of them.

John

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Better Late than Never!
www.johnbarnold.com/pedalsteel

Chris Bauer · From: Nashville, TN USA

The only real problem with this version of the 'typical contract' is that it implies a much greater potential than usual to actually come out ahead!

John Macy · From: Rockport TX/Denver CO

You want more????

Major Label Deals

The Problem With Music.

by Steve Albini
excerpted from Baffler No. 5

Whenever I talk to a band who are about to sign with a major label, I always
end up thinking of them in a particular context. I imagine a trench, about four
feet wide and five feet deep, maybe sixty yards long, filled with runny,
decaying ****. I imagine these people, some of them good friends, some of
them barely acquaintances, at one end of this trench. I also imagine a
faceless industry lackey at the other end, holding a fountain pen and a
contract waiting to be signed.

Nobody can see what's printed on the contract. It's too far away, and
besides, the **** stench is making everybody's eyes water. The lackey
shouts to everybody that the first one to swim the trench gets to sign the
contract. Everybody dives in the trench and they struggle furiously to get to
the other end. Two people arrive simultaneously and begin wrestling
furiously, clawing each other and dunking each other under the ****.
Eventually, one of them capitulates, and there's only one contestant left. He
reaches for the pen, but the Lackey says, "Actually, I think you need a little
more development. Swim it again, please. Backstroke."

And he does, of course.

I. A&R Scouts

Every major label involved in the hunt for new bands now has on staff a
high-profile point man, an "A&R" rep who can present a comfortable face to
any prospective band. The initials stand for "Artist and Repertoire," because
historically, the A&R staff would select artists to record music that they had
also selected, out of an available pool of each. This is still the case, though
not openly.

These guys are universally young [about the same age as the bands being
wooed], and nowadays they always have some obvious underground rock
credibility flag they can wave. Lyle Preslar, former guitarist for Minor Threat,
is one of them. Terry Tolkin, former NY independent booking agent and
assistant manager at Touch and Go is one of them. Al Smith, former
soundman at CBGB is one of them. Mike Gitter, former editor of XXX
fanzine and contributor to Rip, Kerrang and other lowbrow rags is one of
them. Many of the annoying turds who used to staff college radio stations
are in their ranks as well.

There are several reasons A&R scouts are always young. The explanation
usually copped-to is that the scout will be "hip" to the current musical
"scene." A more important reason is that the bands will intuitively trust
someone they think is a peer, and who speaks fondly of the same formative
rock and roll experiences.

The A&R person is the first person to make contact with the band, and as
such is the first person to promise them the moon. Who better to promise
them the moon than an idealistic young turk who expects to be calling the
shots in a few years, and who has had no previous experience with a big
record company. Hell, he's as naive as the band he's duping. When he tells
them no one will interfere in their creative process, he probably even
believes it.

When he sits down with the band for the first time, over a plate of angel hair
pasta, he can tell them with all sincerity that when they sign with company X,
they're really signing with him and he's on their side. Remember that great,
gig I saw you at in '85? Didn't we have a blast.

By now all rock bands are wise enough to be suspicious of music industry
scum. There is a pervasive caricature in popular culture of a portly, middle
aged ex-hipster talking a mile-a-minute, using outdated jargon and calling
everybody "baby." After meeting "their" A&R guy, the band will say to
themselves and everyone else, "He's not like a record company guy at all!
He's like one of us." And they will be right. That's one of the reasons he was
hired.

These A&R guys are not allowed to write contracts. What they do is present
the band with a letter of intent, or "deal memo," which loosely states some
terms, and affirms that the band will sign with the label once a contract has
been agreed on.

The spookiest thing about this harmless sounding little "memo," is that it is,
for all legal purposes, a binding document. That is, once the band sign it,
they are under obligation to conclude a deal with the label. If the label
presents them with a contract that the band don't want to sign, all the label
has to do is wait. There are a hundred other bands willing to sign the exact
same contract, so the label is in a position of strength.

These letters never have any term of expiration, so the band remain bound
by the deal memo until a contract is signed, no matter how long that takes.
The band cannot sign to another label or even put out its own material
unless they are released from their agreement, which never happens. Make
no mistake about it: once a band has signed a letter of intent, they will either
eventually sign a contract that suits the label or they will be destroyed.

One of my favorite bands was held hostage for the better part of two years
by a slick young "He's not like a label guy at all,' A&R rep, on the basis of
such a deal memo. He had failed to come through on any of his promises
(something he did with similar effect to another well-known band), and so
the band wanted out. Another label expressed interest, but when the A&R
man was asked to release the band, he said he would need money or
points, or possibly both, before he would consider it.

The new label was afraid the price would be too dear, and they said no
thanks. On the cusp of making their signature album, an excellent band,
humiliated, broke up from the stress and the many months of inactivity.

II. There's This Band

There's this band. They're pretty ordinary, but they're also pretty good, so
they've attracted some attention. They're signed to a moderate-sized
"independent" label owned by a distribution company, and they have
another two albums owed to the label.

They're a little ambitious. They'd like to get signed by a major label so they
can have some security—you know, get some good equipment, tour in a
proper tour bus—nothing fancy, just a little reward for all the hard work.

To that end, they got a manager. He knows some of the label guys, and he
can shop their next project to all the right people. He takes his cut, sure, but
it's only 15%, and if he can get them signed then it's money well spent.
Anyway, it doesn't cost them any thing if it doesn't work. 15% of nothing isn't
much!

One day an A&R scout calls them, says he's "been following them for a
while now," and when their manager mentioned them to him, it just "clicked."
Would they like to meet with him about the possibility of working out a deal
with his label? Wow. Big Break time.

They meet the guy, and y'know what—he's not what they expected from a
label guy. He's young and dresses pretty much like the band does. He
knows all their favorite bands. He's like one of them. He tells them he wants
to go to bat for them, to try to get them everything they want. He says
anything is possible with the right attitude. They conclude the evening by
taking home a copy of a deal memo they wrote out and signed on the spot.

The A&R guy was full of great ideas, even talked about using a name
producer. Butch Vig is out of the question—he wants 100 g's and three
points, but they can get Don Fleming for $30,000 plus three points. Even
that's a little steep, so maybe they'll gowith that guy who used to be in David
Letterman's band. He only wants three points. Or they can have just anybody
record it [like Warton Tiers, maybe—cost you 5 or 10 grand] and have Andy
Wallace remix it for 4 grand a track plus 2 points. It was a lot to think about.

Well, they like this guy and they trust him. Besides, they already signed the
deal memo. He must have been serious about wanting them to sign. They
break the news to their current label, and the label manager says he wants
them to succeed, so they have his blessing. He will need to be
compensated, of course, for the remaining albums left on their contract, but
he'll work it out with the label himself. Sub Pop made millions from selling off
Nirvana, and Twin Tone hasn't done bad either: 50 grand for the Babes and
60 grand for the Poster Children—without having to sell a single additional
record. It'll be something modest. The new label doesn't mind, so long as it's
recoupable out of royalties.

Well, they get the final contract, and it's not quite what they expected. They
figure it's better to be safe than sorry and they turn it over to a lawyer—one
who says he's experienced in entertainment law—and he hammers out a
few bugs. They're still not sure about it, but the lawyer says he's seen a lot of
contracts, and theirs is pretty good. They'll be getting a great royalty: 13%
[less a 10% packaging deduction]. Wasn't it Buffalo Tom that were only
getting 12% less 10? Whatever.

The old label only wants 50 grand, and no points. Hell, Sub Pop got 3 points
when they let Nirvana go. They're signed for four years, with options on each
year, for a total of over a million dollars! That's a lot of money in any man's
English. The first year's advance alone is $250,000. Just think about it, a
quarter-million, just for being in a rock band!

Their manager thinks it's a great deal, especially the large advance.
Besides, he knows a publishing company that will take the band on if they
get signed, and even give them an advance of 20 grand, so they'll be
making that money too. The manager says publishing is pretty mysterious,
and nobody really knows where all the money comes from, but the lawyer
can look that contract over too. Hell, it's free money.

Their booking agent is excited about the band signing to a major. He says
they can maybe average $1,000 or $2,000 a night from now on. That's
enough to justify a five week tour, and with tour support, they can use a
proper crew, buy some good equipment and even get a tour bus! Buses are
pretty expensive, but if you figure in the price of a hotel room for everybody
in the band and crew, they're actually about the same cost. Some bands
(like Therapy? and Sloan and Stereolab) use buses on their tours even
when they're getting paid only a couple hundred bucks a night, and this tour
should earn at least a grand or two every night. It'll be worth it. The band will
be more comfortable and will play better.

The agent says a band on a major label can get a merchandising company
to pay them an advance on t-shirt sales! Ridiculous! There's a gold mine
here! The lawyer should look over the merchandising contract, just to be
safe.

They get drunk at the signing party. Polaroids are taken and everybody
looks thrilled. The label picked them up in a limo.

They decided to go with the producer who used to be in Letterman's band.
He had these technicians come in and tune the drums for them and tweak
their amps and guitars. He had a guy bring in a slew of expensive old
vintage microphones. Boy, were they "warm." He even had a guy come in
and check the phase of all the equipment in the control room! Boy, was he
professional. He used a bunch of equipment on them and by the end of it,
they all agreed that it sounded very "punchy," yet "warm."

All that hard work paid off. With the help of a video, the album went like
hotcakes! They sold a quarter million copies!

Here is the math that will explain just how ****ed they are:

These figures are representative of amounts that appear in record contracts
daily. There's no need to skew the figures to make the scenario look bad,
since real-life examples more than abound. Income is underlined, expenses
are not.

Advance: $250,000
Manager's cut: $37,500
Legal fees: $10,000

Recording Budget: $150,000
Producer's advance: $50,000
Studio fee: $52,500
Drum, Amp, Mic and Phase "Doctors":
$3,000
Recording tape: $8,000
Equipment rental: $5,000
Cartage and Transportation: $5,000
Lodgings while in studio: $10,000
Catering: $3,000
Mastering: $10,000
Tape copies, reference CDs, shipping
tapes, misc expenses: $2,000

Video budget: $30,000
Cameras: $8,000
Crew: $5,000
Processing and transfers: $3,000
Offline: $2,000
Online editing: $3,000
Catering: $1,000
Stage and construction: $3,000
Copies, couriers, transportation: $2,000
Director's fee: $3,000

Album Artwork: $5,000
Promotional photo shoot and duplication:
$2,000

Band fund: $15,000
New fancy professional drum kit: $5,000
New fancy professional guitars (2): $3,000
New fancy professional guitar amp rigs
(2): $4,000
New fancy potato-shaped bass guitar:
$1,000
New fancy rack of lights bass amp: $1,000
Rehearsal space rental: $500

Big blowout party for their friends: $500

Tour expense (5 weeks): $50,875
Bus: $25,000
Crew (3): $7,500
Food and per diems: $7,875
Fuel: $3,000
Consumable supplies: $3,500
Wardrobe: $1,000
Promotion: $3,000

Tour gross income: $50,000
Agent s cut: $7,500
Manager's cut: $7,500

Merchandising advance: $20,000
Manager's cut: $3,000
Lawyer's fee: $1,000

Publishing advance: $20,000
Manager's cut: $3,000
Lawyer's fee: $1,000

Record sales: 250,000 @ $12 =
$3,000,000 gross retail revenue Royalty
(13% of 90% of retail): $351,000
Less advance: $250,000
Producer's points: (3% less $50,000
advance) $40,000
Promotional budget: $25,000
Recoupable buyout from previous label:
$50,000
Net royalty: (-$14,000)

Record company income:
Record wholesale price $6.50 x 250,000
= $1,625,000 gross income
Artist Royalties: $351,000
Deficit from royalties: $14,000
Manufacturing, packaging and distribution
@ $2.20 per record: $550,000
Gross profit: $710,000

The Balance Sheet: This is how much
each player got paid at the end of the
game.

Record company: $710,000
Producer: $90,000
Manager: $51,000
Studio: $52,500
Previous label: $50,000
Agent: $7,500
Lawyer: $12,000
Band member net income each:
$4,031.25

The band is now 1/4 of the way through its contract, has made the music
industry more than 3 million dollars richer, but is in the hole $14,000 on
royalties. The band members have each earned about 1/3 as much as they
would working at a 7-11, but they got to ride in a tour bus for a month.

The next album will be about the same, except that the record company will
insist they spend more time and money on it. Since the previous one never
"recouped," the band will have no leverage, and will oblige.

The next tour will be about the same, except the merchandising advance will
have already been paid, and the band, strangely enough, won't have earned
any royalties from their t-shirts yet. Maybe the t-shirt guys have figured out
how to count money like record company guys.

Some of your friends are probably already this f***ed.

P Gleespen · From: Toledo, OH USA

Steve Albini quoted on the Steel Guitar Forum! I have to admit, I never thought I'd see THAT!
Funnier (and in some ways more accurate) than Courtney's anti-record company rant sure, but old Steve is a LOT less easy on the eyes.

Steve B · From: Garland Texas

Steel, players, being hired guns, dont really need to worry about getting a record deal. As long as the person that has a deal, rich parents, or a good job, pays $100 a show per band member he will have a band on the stage. It really dosent matter where that $100 came from, as long as it is cash (dont ever take a check). What Steve Albini says sounds pretty much on target. If you really want the low down on the music business, check out the book "All you need to know about the music business". This book is written by an entertainment lawyer, and tells it like it is. I got my copy at Borders.

[This message was edited by Steve B on 21 July 2000 at 07:51 AM.]

Larry Bell · From: Englewood, Florida

The availability of decent recording facilities and CD duplication/printing for reasonable rates ($5 or so per cd) makes the indie route more and more attractive. We're in a 'rich get richer -- poor get poorer' mode here. Only the artists with major support from the labels will ever get anywhere in the traditional marketing approach.

Interesting, too, that this is spreading to publication of the written word. I understand that Stephen King is selling his new novel in installments via the internet. You pay a buck for each section of the book you buy -- on the honor system. That may not work, but alternative distribution and sales systems for artistic endeavors will certainly change the lay of the land over the next 5 years OR LESS.

LTB

Bob Hoffnar · From: Austin, Tx

I've been through a couple major contracts with bands. Its like you just don't get paid alot more money.

Now I just get the cash and leave all the "band" stuff to somebody else. As far as that goes when a band wants me to join it usually translates into they don't want to pay me.

All this business crap will really suck the life out of you if you let it.

Bob

Janice Brooks · From: Pleasant Gap Pa

quote:
Despite the fact that the cost of recording your albums ultimately comes from your pocket, we will own them, and
will make all decisions on how to exploit them, such as promotion, marketing, pricing and so on. We will also
decide whether, and on what terms, to license your music to third parties, such as record clubs, motion pictures,
and producers of compilation records

word just came out MCA is editing Lee Anne Womack's "I Hope You Dance" for easy listening pop radio

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Janice "Busgal" Brooks
ICQ 44729047

Jason Odd · From: Stawell, Victoria, Australia

Woah, as always Steve is on the job.
That's a guy who has done the whole dirty punk/indie rock tour circut and become a 'producer of note', while remaining incrediably independant of the major label scene, yet aware that he has worked within it.
I think Steve's old group Big Black were totally brilliant and would be lucky to have sold as many albums and Cd's as a tee shirt stall for one of the many K-Mart punk bands that have the word 'ska' somewhere in their press promos.
Actually if you want to hear Steve's production work on a beautiful countryesque artist, then try some Will Oldham {aka Palace Music}.

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The future ain't what it used to be

P Gleespen · From: Toledo, OH USA

Hey Jason, did you ever listen to Shellac, Albini's latest (as far as I know) project? Great stuff.
That bit about the ska bands really made me giggle!

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