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RECORDING CONTRACTS
What the major labels don't want you to know



Recording Contracts

What the major labels don't want you to know about their recording contracts

Major record labels talk the talk about how they care for their artists, that they want them to get their fair share, that by preventing piracy artist will make more money. Do their actions match their talk?

They say:
Shutting down peer-to-peer file servers will end piracy and get artists the money they deserve.
They do:
They get Congress to pass legislation giving artists 45% of Internet performance royalties. But interactive play such as downloading is exempted from royalties. Net gain for the artists? Zero. And the labels prohibit anyone else from licensing music rights, again, to "prevent piracy" which also means no one else can pay royalties to the artists.
They say:
They are partners with the artists.
They do:
They treat artists as "work for hire" without any employee benefits. Any work the artists do while under contract belongs to the record company and stays with the record company even after the artists are no longer under contract.
They say:
They want to protect the artist's rights.
They do:
They lobby congress to retroactively make artist's work as work for hire so the artists will lose their copyrights for future work as well as past work.

If major labels really want their artists to get paid a fair share, why did the New York Attorney General investigation show the labels had not paid $50,000,000 in royalties to artists. And why did California have to pass a law making it affordable for artists to audit their record labels? 1 2 3


Recording contract comparison

Here is a simple comparison of the differences you might find between the standard recording contracts offered by major record companies and Emerald Bay Records:

Standard Recording Contract Emerald Bay Recording Contract
Long exclusive recording contract
Label may require lengthy contract or many albums requiring years to fulfill. California passed a law forbidding personal service contracts exceeding seven years. The music industry got an exception for music artists. Getting a seven-record deal could tie you to the Label for ten years if they are only lukewarm about producing your albums.
One record - one year contract
Contracts are typically for one album to be completed in one year. If the artist and label feel good about the working relationship, a longer contract can be negotiated at the end of the first year.
10-15% royalties
Labels pay royalties on 90% of sales which assumes 10% breakage, a holdover from the vinyl days. From that amount is deducted the advances and recoupable expenses such as studio time, engineers, producer, etc. However, a distributer is often given 15-30% of his albums free on which there is no royalty. Overseas sales and sales to military stores are at a greatly reduced royalty. Some Talent may be more popular overseas than in America which means they see very little royalties. If albums are returned and then sold at discount, Talent receives virtually no royalty on those sales.
Up to 50% royalties
Royalties are not based on the number of albums "sold" but on actual revenue received less any returns and out-of-pocket expenses. Even if a distributer were given 30% of the albums free, the Talent would still receive the same amount of royalties.
Work for hire / Independent contractor
When it comes to copyrights, Talent is considered "work for hire" and does not have any rights. This statutory employee status also makes the Label the boss who has final say in the work performed. However, when it comes to employee benefits, Talent is considered an independent contractor and has no benefits.
Joint venture
Label considers Talent a participant in the joint venture of producing record albums. Label has contracted with Talent to produce and market the Talent's creative perspective which is agreed upon by mutual consent.
Label owns copyright
Label owns all songs written by Talent as Talent's work is considered "work for hire." This also means Talent does not receive royalties for mechanical rights if their recordings are used on other albums or another artist records the songs. Label also owns the copyright of actual sound recordings.
Talent owns copyright
Although Label can publish songs written by Talent through Emerald Bay Music (on agreement from Talent), the Talent receives royalties from mechanical rights on all music performed by other artists as well as albums which contain Talent's songs. Label does own copyright of actual sound recordings since this is a collaborative work that includes producing, engineering, mixing, etc.
35% reserves
35% of royalties held back in case of unsalable album returns.
25% reserves
Albums are produced on demand lessening the number of returns.
Digital performance rights
Congress mandated 50% to copyright holder, 45% to main artists, and 5% to non-featured artists. When Labels form exclusive contracts with webcasters, Talent may lose most or all of it. Any royalty due is subject to recoupable expenses.
Digital performance rights
Talent receives full amount. Not subject to recoupable expenses.
Leaving member clause
Standard contracts require leaving members of a group remain under contract of the Label as a solo artist.
No leaving member clause
Members of a group who leave are free to start a solo career. Royalties are paid to the "group." Financial distribution of royalties is determined by the group.
25% packaging charges
Labels typically charge a 25% packaging charge on albums even if they are sold over the Internet and there are no packaging charges.
No fixed packaging charges
Only actual costs incurred can be deducted from the total on which royalties are determined.
No royalties on concert sales
If Talent wants CDs to sell at concerts, they are charged the regular wholesale rate. However, they do not receive royalties on these albums.
Royalties paid on concert sales
Talent may buy CDs at wholesale rate to sell at concerts. Since this is revenue for the Label, royalties are also paid on these albums as the Talent is acting as a distributor. The Talent also keeps all revenue received from their own sales.
High recoupable expenses
Any money given to talent and any expenses incurred are deducted from royalties. Recoupable expenses may never have actually occured. Packaging and breakage are examples. Profit is also part of overhead so many expenses are charged to Talent at inflated rates. Studio time is a good example. Labels use these recoupable costs as a way to enhance revenue at the Talent's expense.
Low recoupable expenses
Label doesn't have a lot of money to "loan" Talent so recoupable expenses are kept low. Only actual expenses are recoupable. Services are never "resold" to Talent at a high markup. Label enhances revenue by keeping expenses low.

The record company is basically in the business of loaning money to artists so the artists can produce music recordings which then belong to the record company. This is what recoupable expenses are all about. Of course, the record company also gets to set the price of the expenses in such a manner that they may have no relation to the actual costs. Perhaps this is their way of earning interest on the money they have loaned.


So what kind of contract do you want?


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