Undercurrents Music Legal Forum

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The Undercurrents Series of Music Business Educational Forums is designed to assist musicians, songwriters, bands and music industry professionals with continued growth and knowledge of the music / entertainment industry. These forums and the information provided is practical rather than legalistic in its approach and should not be used as a substitute for legal advice in relation to any particular matter. Undercurrents, Inc. accepts no liability for any errors or omissions.

Contracts:
band member agreement
management agreement
recording contract
booking contract
producer agreement
publishing agreement
work for hire agreement

Licenses and Royalties
mechanical license
performance license
synchronization license
print music

Entertainment Attorneys
Contract Negotiating Guidelines

Band Member Agreement

If you are in a group (as opposed to a solo artist), and if the group has not already formalized its relationship by way of a partnership agreement, incorporation, or limited liability company ("LLC"), there should at least be a clear and simple written agreement among the group members. Also, it is always a good idea to deal with the issue of the ownership of the group's name as early in the group's career as possible.

(click here for a sample band membership agreement.)

Copyright

Copyright protection is acquired automatically when a work is "created". The definition of "created" is when a work is fixed in a copy or recording for the first time.

Proof of ownership and copyright is achieved by registration of the copyrighted song. This is done by filing Copyright form PA or form SR, with a check for $30, and one copy of the unpublished song on a record, tape, CD, or lead sheet. If the song has been published, two copies are sent. Registration becomes effective upon receipt of the application form, copies of the song, and the fee.

Registration of songs is necessary in order to protect a song from being used without permission, and is necessary to present in a court of law and to sue for copyright infringement.

Copyright forms PA and SR can be found in many published books, or may be obtained from the copyright office:

Copyright Office, Library of Congress
Washington, DC 20559
or Go to www.copyright.gov for details.

Put a copyright notice on all published copies of the song. A circle with a small 'c' [©] in it is the usual mark, but the word 'copyright' is also acceptable. Follow the mark with the year and the songwriter's name. Note: the year stated is the year the song was 'first published', not when the song was written. Unpublished works need no copyright notice, but it is still a good idea to put the mark and use the phrase, for example "unpublished 2002, James Jones".

A copyrighted work has protection under the law for the life of the songwriter, plus 75 years after his/her death.

Please note: Song titles are not copyrightable. But be aware that using the exact title of a song that has established itself as part of the culture, can open the doors for a lawsuit based on property rights in the title, which belong to the copyright owner of the famous song.

The sound recording copyright (registered with form SR) is for the protection of the sounds on the recording, and usually belong to the record company who has released the CD or tape. The PA copyright form is the copyright of the work on the CD or tape, and usually belongs to the Publisher of the song. If the same person owns the recording and the song, use one SR form.

Work for Hire Agreement

In the case of a work made for hire, the employer or other person for whom the work was prepared is considered the author for purposes of this title, and, unless the parties have expressly agreed otherwise in a written instrument signed by them, owns all of the rights comprised in the copyright.

For any session people, engineers, etc. whom you are hiring, it is wise to have them sign a short and simple "work for hire" agreement, to preclude any possible future claims by them that they are owed royalties or that they have ownership rights in the masters. Do this BEFORE you go into the studio.

(click here for a sample work for hire agreement)

Management Agreement

Managers are responsible for developing and advancing the artists career. Managers should have strong contacts with record companies, agents, promoters, lawyers and accountants leaving the artist free to create, perform and record. In theory a good manager should organize the business aspects of an artists career. The artist needs someone who will be efficient, trustworthy, honest and keep them totally informed, whilst at the same time cutting through the huge swathe of hopefuls to get you noticed and then negotiating the most favorable contracts!

(click here for a sample management agreement)

Booking Agreement

Contracts for booking can come from an agency who books you into a venue or can be one that you supply to the venue for your musical services. Agencies will charge a fee for their booking service.

(click here for a sample booking agreement)

Producer Agreement

A music producer may sign a producers agreement with an artist, a production company, or a record company. The producer’s job is to help create and deliver quality master sound recordings. A music producer’s agreement may be for a single song (master), or may cover an entire album.

(click here for a sample copy of a producers agreement)

Publisher Agreement

A "music publishing agreement" is a copyright contact that a song writer signs with a music publishing company. A publisher is assigned certain designated copyrights from the song writer. In a publishing deal, a music publisher basically "owns" or "rents" some (or all) of your songs for a certain period time and in a certain territory. Publishers administrate and exploit the song writers musical product as much as possible in order to generate more income for you and them. A music publisher agreement seeks to either assign or license certain songs to a music publisher to either own and/or administrate for a designated time and in a specified territory. Thus, a music publishing agreement is an agreement between a songwriter (who owns the copyright in songs) and the music publisher (which seeks to own or administrate the songs.)

(click here for a sample copy of a publishing agreement)

Recording Contract

Any Recording Agreement is a formidable document which even the most experienced music business attorney will find difficult to comprehend on a first reading. Anyone who is not an attorney is likely to be confused if presented with the copy of the document and is told to read then sign it. This summary has been prepared as a general explanation of recording agreements and does not explain any specific agreement. I do hope that this explanation will enable you to read any agreement with some basic understanding of all details involved and will prompt you to ask questions on the specific agreement with which you're involved.

(click here for a sample copy of a recording agreement)

1. Before the agreement
Most groups have probably been working together for a while before they actually sign an agreement. All financial records related to expenses and income should be kept from day one. They should also be made available to the groups accountant as soon as possible. The accountant can then establish the fact that the group has had trading years before they signed agreements which may be advantageous from a tax point of view, because it's better if substantial advances do not come in the groups first year of trading. This should be discussed at an early stage with an accountant.

2. Duration of the agreement
Most agreements are presented as if they can only last for a maximum of five years but this is rarely the case. What is important is how many albums the record company is able to ask for. If they are able to ask for eight albums then the agreement will last as long as it takes for eight albums to be properly recorded, releases and promoted (probably about ten years i.e. Dire Straits have done four in about five years). However if a record company loses interest in an artist then the recording agreement may last twelve months or less.

3. What you will be paid
The record company will make two types of payments: advances and royalties. Advances are pretty straight forward but remember that the majority of them are only payable if the record company decides it wishes to continue with the agreement. Royalties are the payments that the recording artist is entitled to receive as recording artist (as opposed to songwriters) in respect of every record sold by the company and not returned to the company. The calculation of royalties is a complex subject involving a large number of factors.

Example:
Let's say the royalty is 10% of the retail price payable in respect of 90% of sales:
1. the 90% means that the royalty will only be paid on 90% of sales, i.e. for 10% no royalty will be paid at all.
2. the retail price is calculated by a formula which is linked to the company's dealer price and a market survey of retail prices.
3. from the retail price the company deducts packaging costs (could be 15% for an album) and VAT.
4. the record company then pays the artist 10% of that price and if a group the artist shares those payments among themselves and their management.

A. No royalties are paid until all advances and recording costs have first been recouped from royalties.
B. The record company will pay 1/2 rate royalties or no royalties in respect of the following sales:
1/2 rate:
budget records, TV advertised records (this is a very dangerous clause - you could sell 200,000 copies or more in respect of Album 1 and the record company could advertise the next album on TV from the beginning and pay you half rate royalties on all sales of such album. They can even put out an album, sell a lot of copies the advertise on TV and apply the half rate to previous sales), sales to armed forces, compilations, premium records, multiple record sets, 12" singles, colored vinyl sales, picture discs, mail order sales and others.
No royalty:
deletions, cut outs, free goods, promotional copies.
C. The royalty quoted will almost always be inclusive of producers royalty and so any payments to a producer will be deducted from royalties payable to the artist.
D. US royalties: industry practice in the USA means that your royalties will suffer very large reserves provisions in respect of sales in the US. American companies also operate a 'free goods' scheme to dealers which means that there are a very large number of records for which you are not paid. This can be as many as 50% of singles.

4. When you will be paid
If any royalties are due they are normally paid on March 31st and September 30th of each year sales outside the record company's country and sales by third parties (i.e. K-Tel) may take as long as two years from the date of sale to the date of payment of royalties. If the company does not get paid you won't get paid. In any event no royalties are paid until advances, recording costs, video cost and tour support are recouped. All of these are recouped out of your royalties after deduction of the producer's royalties. I.e. the producer does not contribute to video or recordings costs or your advances or tour support.

Example:
if a group:
A. receives an advance of $50,000
B. spends $100,000 on recording costs
C. has three videos made at $15,000 each (assuming only 50% recoupable from record royalties)
D. receives $20,000 tour support
then it will need to sell about 450,000 albums to recoup such payments and by that time may well have received further advances, incurred further recording costs etc. Some of the recording costs e.g. remixing costs, cutting costs, producer advances etc. may well be outside of your control.

5. What you have to do
You must record a certain number of recordings for the record company. The producer, the title and the studio will be selected by the company. The contract will be an exclusive contract so you may not record for anybody else nor even do session work. You will almost always need the record company's permission to do any instrumental only works (this can obviously be very important in the context of dance music especially).

6. What the record company does
In practice a great deal but as far as the recording agreement is concerned very little. It will agree to make recordings, pay advances and royalties, but will not often commit to releasing the recordings. This can be a real source of frustration if you and the company disagree over the quality of the product you record.

7. Who controls the recordings?
The record company takes the view that it pays for the costs of making the recordings, takes the risk and therefore will own and control the recordings. They will own them forever and will have complete marketing control so that they will decide if and when to release the recordings, how many singles will be taken from an album, what the artwork will be, how the records will be released and where they will be released.

To quote two extremes:
A. your recordings may never been released
B. they may be released in every country and every format including record clubs, readers digest packages, K-Tel compilations, Greatest Hits packages or in TV advertisements (Sting objected to 'Don't stand so close to me' being used in a TV advert but could do nothing about it). You will have lost all control of the recordings but you will be paid royalties in respect of all such users. The company will also be able to use your photographs, biographies and likenesses in connection with all such uses. The record company will claim all rights in respect of every recording made during the term of the agreement even if they did not pay for them and even if they were not intended for release.

8. Your obligations
In practice, provided that you do your best to record in time to the best of you ability, any responsible record company will leave you alone but the recording agreement will list a number of obligations that you should consider very carefully. A few common ones are:
1. the songs you record must not be defamatory or obscene
2. you must be free of any other recording obligations
3. you must not record for anyone else
4. you must not re-record any of the recordings for anyone else
5. you must be prepared to make personal appearances in connection with the recordings
6. you must own the name that you use professionally.
It is very important to be aware that in the case of a group of artists (as opposed to a solo artist) the liability under the recording agreement is designed in such a way that all the members of the group are liable for a breach by anyone of them.

9. If you leave as a member of a group
The company will still have control over your exclusive recording surfaces under the terms specified in the agreement and the company will almost certainly be entitled to terminate the whole agreement if any one person leaves. In addition if you leave towards the end of an agreement it is very likely that you could be tight to the record company for longer then if you had stayed in the group. Remember also your joint as well as several tax liabilities. The record company also ends up controlling the group name so that leaving members could not use the name once they left even if they were the founder members. It is important that the only people who signed the agreement are those that everyone expects to stay in the band for the foreseeable future. If people leave who have signed it it will cause expensive legal problems for all concerned.

10. The 75% mechanicals clause
Put simply in respect of the USA and Canada even though the respective governments have provided that a certain amount must be paid to songwriters in respect of every record sold, the record company will specify that they will only pay 75% of that amount and will pay 75% of the amount applicable at the date of recording (or when it should have been recorded if earlier) even if the rate goes up.

Cover recordings can actually eat into your recording advances and royalties. This is because normally the publishers of the cover songs will not accept the 75% clause and so the record company will have to pay 100%, but they will want to recover the extra that they pay from you recording and/or publishing income and if you end up doing a number of covers it can very seriously erode your income. If a producer or a friend or indeed anyone other then someone who has signed the record agreement write songs for you or you record songs they have previously written it is important that they accept this clause in writing. Your management should be told by you to contact them. An established songwriter may refuse to accept the clause but it's always worth a try. An approach should be made to their publisher and it has to be made a long time before you record the song.

11. Prior recordings
You should draw up a list of all recordings (not just under a group name but as a session man, previous group, etc.) you have ever made listing the following:
A. demos and who owns them
B. all released Masters and who released and owns them
C. all unreleased Masters and who owns them.

12. The group relationship
When a number of people perform together as a group you have formed what in legal terms is described as a partnership. This is quite a complicated arrangement but most importantly you should be aware that you are all liable for the group debts. Equally important you must be aware that if one member of the group does not pay his/her tax the others can be liable for it even though they have paid their own tax. It's important to have a good accountant and to ensure that he ensures that everyone pays their taxes. It's not very fair for one member to pay his taxes and the other to spend his money on wine, women and song only to find the sensible one has to pay more to compensate for the other's good time. Some accountants approach the inland revenue and agree with the revenue that the group is not a partnership but a collection of individuals and that there is no joint and several liability for the groups taxation. Each member would then only be liable for their share of tax on their share of profits only.

Tips for working with a Recording Company

Mechanical Rights

For any cover songs appearing on the record, you must obtain a mechanical license from the owner of the song (i.e., the song's publisher), authorizing the song to be recorded and providing for the payment of mechanical royalties. In many cases this license can be obtained from The Harry Fox Agency (212/ 370-5330). Allow six to eight weeks for this process.

For songs not licensable through Harry Fox, you must contact the publisher directly. Usually the easiest way to do so is to obtain the publisher's contact info from the "song indexing" departments at ASCAP and BMI

The Mechanical rights and the Performance rights to a song are the two separate rights granted to the owner of the song. Mechanical rights are given in order to reproduce the song on actual CD's and tapes, and to sell the reproduced copies to the public. It is the responsibility of record labels to pay mechanical royalties to the owner of the song, for the sale of CD's or tapes.

As of 2002 the mechanical royalty rate is 8.0 cents per song, per CD or tape sold. Adjustments to this rate are made every two years. Additional rates apply for songs over 4 minutes.

Performance Rights

Performance rights are granted in order for the song to be sung or played (recorded or live), in a public place or on radio and television. It is the function a Performance Rights Organization to grant these licenses and pay the owner of the song for the use of the song on the radio, TV, hotels, clubs, colleges, some restaurants and bars, elevators, doctors offices, stores, etc. There are three Performance Rights Organizations in the United States. They are BMI, ASCAP, and SESAC.

Synchronization License

A song that is reproduced on a soundtrack for a film or a TV show is called a synchronization, and the film or TV producer must secure a synchronization license from the owner of the song. (commonly called a 'synch' license.)

Two other sources of income for a songwriter and publisher are sheet music sales, and songs used as jingles or ads.

Print Music Income

Print music income: paid by music printers for sheet music and folios based on the exclusive right to distribute copies of copyrighted material

Selecting An Entertainment Attorney

Tips for Selecting the Right Entertainment Attorney

1. Get a Specialist.
The value of a music attorney is determined in large part by the quantity and quality of his or her contacts in the music / entertainment field.
Artists should be cautioned against the natural inclination to use a friend, relative ("My Cousin Vinny"), or family lawyer to fill their entertainment law needs. This is fine if they're qualified. However, the trend today is toward greater legal specialization than ever before because of the increased complexity of our commercial society.

Unless a lawyer regularly deals with management, recording, and music publishing contracts; copyright protection and administration; and licensing of intellectual and artistic property, chances are he or she won't sufficiently understand or appreciate the industry and its peculiar problems.

2. Get a Referral
A referral from a satisfied client is a good start but...

3. Get References
Always ask the attorney for at least two client-references you can call. This is a perfectly reasonable request and any lawyer who has a problem with this should be your cue to exit.
Be sure the work the lawyer did for the client is similar to what you need and be sure also that the work was performed in the last 6 months to a year (this business changes too fast for sporadic legal excursions).

4. Get the Dirt
(if there is any). You can make two important phone calls to find out if there have been any complaints lodged in your city or state against this attorney. They're calls worth making:
A. Secretary of State's office (look for the phone number in the "Government" section of your phone book).

B. The Better Business Bureau . The Better Business Bureau Directory lists the addresses and phone numbers of Better Business Bureaus in the U.S. and Canada.

5. Have a Meeting.
Most attorneys will waive their usual hourly fee for the first consultation. At this consultation meeting you'll want to:

A. Ask the attorney about his/her basic philosophy of life. Why? Because this will help you understand his/her worldview, a significant relationship component. If your worldview turns out to be diametrically opposed to the attorney's, it probably means you're not a good match for each other.

B. Inquire about the extent and quality of the attorney's pertinent industry contacts.

C. Find out how the fee structure would work to avoid any misunderstandings.

A note on legal fees: Sometimes you'll need legal counsel for short-term projects like putting together the appropriate performance and partnership agreements, trademarking your business / band name, incorporating your business, and copyright registration. These kinds of projects are usually paid for as a "flat fee" based on the attorney's hourly rate.

Longer-term projects and legal representation to the music industry (to labels, publishers, merchandise companies, etc.). These are often paid in "points" (percentage points) of contract advances and/or future royalties.

D. Feel the vibe--Trust your instincts.

6. Do-(some of)-it-Yourself.
A lot of groundwork can be done by yourself when it comes to short-term legal needs. For example, modern communication technologies like the Internet, let you do a national trademark search from your desktop.

Contract Negotiating Guidelines

If you're involved in the music business, sooner or later you'll sit down with someone you have to negotiate an agreement with. It may be a management or record contract, or perhaps a "work for hire" agreement where you provide music for some particular use. Use the following general guidelines to keep the communication on the best level possible.

And always think "win/win".

Negotiate only with those in authority to agree to your requests.
Have a prioritized agenda. Start with the most incontestable items and work downwards to the stickiest points.
Put yourself in the other person's place and structure your arguments to address his or her concerns.
Never issue ultimatums.
Never concede a point, however small, without winning a comparable concession in return.
Take notes and verbally summarize each point agreed to before you move on to the next so that there's no misunderstanding.
Follow up negotiations with a memo or letter summarizing what was agreed, and ask for a written response within so many days or hours if any points are disputed.
Make the other party feel good about the outcome.