A Legal Assist for Audio: “The 11 Contracts that Every Artist, Songwriter, and Producer Should Know”

Let’s face it: When it comes to navigating the legal side of their careers, audio pros can feel uneasy.

Contracts are a reality in any industry where people are doing serious business, but they can be extremely intimidating to anyone who hasn’t been trained to speak the Language of Lawyer. Fortunately, a welcome resource has arrived via a new book by entertainment attorney Steve Gordon, The 11 Contracts that Every Artist, Songwriter, and Producer Should Know (Hal Leonard).

“The 11 Contracts” by Steve Gordon is now available from publisher Hal Leonard.

With previous books and 20 years of industry experience under his belt, Gordon is well-versed in explaining law to creative types, and it shows in 11 Contracts. He uses a plain-spoken, approachable style to introduce each contract and then explain each passage as he goes, making it clear which terms are favorable, as well as which ones should be avoided at all costs — as in Chapter 2, “The Contract from Hell Which No Artist Should Sign.” Readers don’t just get examples here, they’re getting real guidance.

As recording studios evolve to encompass publishing houses and labels under their aegis, studio owners, audio engineers and producers alike will benefit from the various agreements Gordon covers, finding solid templates for the deals they may wish to offer, as well as be offered. Included in 11 Contracts are Management Agreements, Production Company and New Artist, Indie Label Deals, Sync Licenses, Producer Agreements, Music Publishing Deals, Composer Agreements, Live Performance Contracts, Music Video Production Contracts, Band Agreements and more. Extensive online companion content is available with each book purchase.

Written from the Real World

For Gordon, writing 11 Contracts was an opportunity to cover previously uncharted territory. “I often get new clients who are emerging artists, songwriters and producers,” he explains. “The inspiration for the book was my actual practice, and dealing with these new or emerging singer/songwriters/producers. My objective was to help people like them deal with contracts they are likely to encounter in their careers.

“If you look online for an artist, management, producer or any other type of music business agreement, you’re probably not going to find anything, because I’ve looked,” Gordon continues. “So this book provides, perhaps, the only place where you can actually see what these agreements look like. I give you the form — but I also explain it, with introductions, and annotations for all the key provisions. You not only have a form of agreement, you know what it means.”

In Gordon’s view, there are clear best- and worst-case scenarios that music producers in particular contend with when it comes to legal matters. “In regard to producers, the worst that can happen is that they contribute to creating a song and do not get proper credit for it, and the financial remuneration that comes from, writing a song,” he says. “The best thing that can happen is if they do.  A commercially successful record can make money in a variety of ways. Generally a producer will get a royalty of 3% to 5% for sales of a record. But the producer can do much better if he or she also has a share of the underlying musical composition. This is because radio, TV, and other music users pay songwriters for the public performance of songs — not recordings. They pay collection societies known as Public Performance Organizations or “PROs” and the PROs pay the songwriters.

“In the U.S., the three PROs, that is, ASCAP, BMI and SESAC collectively received approximately two billion dollars last year for the public performance of songs. If a producer does not receive songwriter credit in their contract, the producer will not be entitled to any of this revenue.”

Today’s pro audio hybrids — those who are songwriters, engineers, mixers and producers all in one — will also benefit from entries like Chapter 10, “Essential Business Actions,” which go beyond explaining contracts.

“That chapter is on business steps that an artist, songwriter and producer can and should do for those people who don’t have the wherewithal to hire an attorney,” he notes. “If, for instance, the reader is a songwriter or producer who creates new songs, they should become members of ASCAP, BMI, or SESAC. They are all free or charge a nominal amount to join, and without them you can’t get paid for your performance of your songs on radio or television as well as the Internet. Also if you join any of these PROs they will pay you for your live performance of your songs if you provide them a set list. I have a client who got paid $1250 each quarter from doing this with SESAC. But BMI and ASCAP have this program as well…

“Another example of a suggestion that I make in this chapter is to register your music with the U.S. Copyright Office. It’s pretty easy to do. You don’t need a lawyer. Just read the instructions at http://www.copyright.gov, and for $35 you can register your song. For $55, you can register a group of your songs. And the reason that this is important is because without registration, you can’t start a suit for copyright infringement, and if you register before an infringement occurs, you will also be entitled benefits of attorney’s fees and up to $150,000 in statutory damages.”

The book’s introduction, as well as a portion of Chapter 5, “Three Contracts Every Music Producer Should Know; How Artists Should Deal with Producers and What a Producer Should Ask for” are excerpted with the author’s permission below.

INTRODUCTION

There are usually two basic versions of even a simple agreement in the music business: one that represents the best interests of creators, including artists, songwriters, and producers, and another that represents the interests of the companies that do business with them, such as record labels, publishers, and managers.  These parties frequently have different or even opposite objectives.  For instance, record labels often will try to tap into artists’ income beyond record sales, such as monies from live performances, merchandise, and music publishing.  However, it is in the artist’s best interest to retain as much income from these other sources as possible.

Other agreements, however, such as contracts between co-songwriters or band members, are meant to delineate the rights and duties of similarly situated individuals in order to avoid disputes that might otherwise arise.  But, even with regard to these agreements, the parties may wish for different things.

In this book, I present the contracts you are most likely to encounter in your music career.  This book also provides introductions on each kind of agreement and commentary inserted into the contracts themselves so that you can understand exactly what you are agreeing to.

I focus on the types of agreements typically offered to indie artists, songwriters, and producers taking the step to the next level of their careers.  By the time you are offered a deal with a major record label or publisher, if that ever happens, you will be able to pay for the services of an experienced music attorney, or the company may even advance you additional funds to pay for a lawyer.  This book is intended to help you on your journey, wherever it may lead.

Here are abbreviated introductions to each chapter, designed to help you get the most out of this book:

Chapter 1. Management Agreements

I will guide you through a standard agreement between an artist and a manager, first from the point of view of the manager, then from the point of view of the artist.

Chapter 2. Production Company Deals (…and the Contract From Hell Which No Artist Should Sign)

Production companies are not labels.  Their function is to produce masters and shop for deals with record labels.  Production companies don’t deserve (although they often try) to get the artist to sign a “360” deal under which the company would receive a slice of every dollar the artist  earns in the entertainment business including touring, merch, and publishing, as well as record sales.  This chapter shows you what a fair deal with a production company looks like, as well as the “contract from hell” that you should never sign.

Chapter 3. Artist Recording Contracts with Record Companies

Once you have a major record deal, you won’t need this book, as you’ll be able to afford a music lawyer who can provide you with individualized advice and answer all of your questions.  But, if you get a deal with an indie record label that can only pay a modest advance, this chapter will show you what a fair deal looks like.

Chapter 4. A Simple Guide to Sync Deals

You work at a bar, but your girlfriend knows someone at an ad agency who is working on a commercial for Budweiser.  They send you a “submission form” for a demo that states you will submit music on a spec on a “work for hire” basis.  What do you do next?  Don’t sign it!  Read this chapter first.

Chapter 5. Producer Agreements

You are an artist and want to hire a producer.  Or, you are a producer.  This chapter offers three different contracts that range from pro-artist to pro-producer and explains the issues from both the producer’s as well as the artist’s point of view.

Chapter 6. Music Publishing and Songwriter Contracts

One “hit” song can subsidize, or even pay for, the rest of your life and even the lives of your children.  Learn how to make and keep the money.

Chapter 7. Music and the Movies: Composer Agreements (Written with Robert Seigel, Esq.)

So you want to write music for movies?  This is a guide on how not to get screwed.

Chapter 8. Live Performance and Booking Agreements (A Lawyer’s Guide to Structuring Paid Music Gigs)

Tips for making money and how not to let booking agents and clubs cheat you.  Learn what’s fair!

Chapter 9. Music Video Production Contracts

Making a music video?  Use this form to hire a producer/director that’s fair for both you and them.  Also, learn what you can legally include in your music video and what you need a release to include.

Chapter 10. Band Agreements and Essential Business Actions a Band (or Solo Artist) Can Take at Little to No Cost Without the Services of an Attorney

The first part of this chapter provides a roadmap for putting your legal house in order, even if you can’t afford an attorney.  The second part tells you when you need a band agreement and what it should contain.

Chapter 11. Investment Agreements

Your rich aunt wants to give you money so you can quit your day gig and do music full time.  This section will help you structure an agreement that is fair to both you and your investor.

CHAPTER 5

Introduction: Three Contracts Every Music Producer Should Know; How Artists Should Deal with Producers and What a Producer Should Ask for

Steve Gordon is an entertainment attorney whose background spans major labels to private practice and higher education.

This chapter focuses on producer agreements in the context of the indie music business rather than standard producer agreements used by major labels. A producer who works on a major label project will generally have an experienced music attorney who will negotiate these deals on their behalf. The upfront money that a small label or an indie artist can offer, if any at all, often is not enough for a producer to hire a lawyer, so this chapter is meant to help producers, indie artists, and small labels.

Major Label Producer Deals vs. Indie Producer Deals

There are a few key differences in the contracts a producer can expect to find from a major label and in the indie world. If a producer has a track record of making hits, a major label deal will generally include a producer fee upwards of several thousand dollars. The producer would also usually receive a royalty of 3-5% calculated in the same manner as the artist’s royalty. For instance, if the artist’s royalty is a percentage of the suggested retail price of a record, the producer’s royalty will be as well. Like the artist’s royalty (which typically ranges from 12-18%), the producer’s royalty will be subject to multiple deductions, such as packaging costs and a reduced royalty for foreign sales. The producer’s royalty will be deducted from the artist’s royalty, in effect making the artist pay for the producer’s royalty. Unlike the artist, the producer usually receives his royalty from the first record sold after recoupment of recording costs. This means that once gross income exceeds production costs, the producer is paid for all prior records sales—the artist is not.

When an artist or small label hires a producer, the upfront fees are usually significantly less. In many cases, the artist is also operating his own label, so it does not make sense to base the producer’s royalty on the artist’s royalty. In that case, the producer’s royalty, if any, may be based on net receipts or “profits.” See Chapters 2 and 3.

Beats

Particularly in hip hop, R&B, and pop music, artists work with drum, digital or other percussive “beats” as core elements of their recordings. Often, an artist or indie label will search online for the right beat on which to base a song. Although some beats are sampled, others are purchased or licensed from a producer who creates beats with digital drum machines or other studio equipment. Some producers of beats, such as the Neptunes (Pharrell Williams and Chad Hugo), make more elaborate beats than just drum sounds. A Neptunes production also usually employs synthesizer riffs and samples keyboard and other percussive sounds. The Neptunes created some of the biggest hip hop, R&B, and pop hits of the late 1990s and 2000s. So, acquiring a beat from them could be very expensive. However, many new or emerging producers will offer their beats at a low fee. Or, the producer may even waive an upfront fee in exchange for royalties if the artist makes money from the song.

In the studio, a producer is ultimately responsible for the final sound of a recording. However, an artist may buy or license a beat and finish the production himself or with another producer.

Two Copyrights: Sound Recordings and Musical Works

As we discussed in the prior chapter on sync licenses, copyright law protects musical works. In the eyes of the law, a musical work is defined as a song and any accompanying words, as well as orchestral works, librettos, and other musical compositions. But copyright law also protects sound recordings; that is, recordings of musical compositions. A beat is usually both a sound recording and a musical composition because the recording of a beat contains a separately copyrightable musical work.

For many years, producers generally did not create new music. They just recorded and tried to enhance songs created by a songwriter who may have been the artist. However, that has all changed. Now, producers can create new music by providing beats or even complete music floors over which an artist sings or a rapper “spits.” In that case, the producer is creating two copyrights: the sound recording and a part of the musical composition. This is why producers sometimes enter into deals with music publishers. See Chapter 6 on music publishing agreements.

Beat Agreements

A producer often sells a beat outright. In that case, the buyer will have the exclusive right to use the beat. Other times, a producer will give a non-exclusive license to use a beat and reserve the right to use the beat for himself or license it to others.

Work for Hire vs. Non-Exclusive License

As discussed in Chapter 4, if the agreement is a sale, it will usually be structured as a “work for hire.” In a work for hire agreement, the producer loses all rights in their beat, including the copyright and the right to use the beat again for any purpose. If, on the other hand, the grant of rights is a non-exclusive license, the producer keeps the copyright and retains the right to use it or make other deals. Here is a typical work for hire clause in a producer agreement:

WORK FOR HIRE: Producer agrees that all of the results and proceeds of his services shall be deemed a “work made for hire” for the Company [or Artist] under the U.S. Copyright. Accordingly, the Producer further acknowledges and agrees that Company is and shall be deemed to be the author and/or exclusive owner of the Beat inclusive of the underlying musical composition and sound recording contained in the Beat. Recordings and Musical Compositions contained therein for all purposes and the exclusive owner throughout the world of all the rights of any kind comprised in the copyright(s) thereof and any renewal or extension rights in connection therewith, and of any and all other rights thereto, and that Company shall have the right to exploit any or all of the Beat in any and all media, now known or hereafter devised, throughout the universe, in perpetuity, in all configurations as Company determines. In connection therewith Producer hereby grants to Company the right as attorney-in-fact to execute, acknowledge, deliver and record in the U.S. Copyright Office or elsewhere any and all such documents pertaining to the Beat if he shall fail to execute same within five (5) days after so requested by Company.

It’s always in the producer’s best interest to retain her copyrights. However, sometimes the work for hire clause will be non-negotiable. In this case, the producer must consider: whether the upfront money compensates for the loss of the right to use the beat. Generally, when an artist or indie label hires a producer to create a beat and fully produce one or more tracks, the agreement will be a work for hire, but the producer usually receives an upfront payment and can negotiate a “back-end” royalty.

Fees

The amount of the fee, if any, will depend on a variety of factors including whether the deal is a sale or a license. A sale would generally be more expensive than a non-exclusive license under which the Producer keeps the right to reuse the beat. But, the most important factor in determining the fee is the business reputation of the producer. A producer with a track record of a few successful tracks can demand fees of several thousand dollars or more and a producer with a track record of hits can command much higher amounts. But licensing, or even buying a beat, from a talented but unproven producer can cost a few hundred bucks or less. If the producer receives a royalty in addition to the fee, the fee will be usually structured as an “advance” which will be recoupable prior to payment of the royalty.

Royalty

As noted above, a royalty for a producer hired by an artist or small label may be structured based on net receipts or net profits. A traditional royalty for a producer who works with a big label is 3-5% based on the artist’s royalty. Net profits should be defined fairly, for instance, as the gross monies received from the sale or license of the tracks minus the producer’s fee and other production costs. See the annotations to last agreement in this chapter.

Mechanicals

Even when an agreement is work for hire, it may be possible for the producer to retain the copyright in his contribution to the underlying musical work (but not the sound recording). In this case, the label or artist will require the producer’s permission to use that contribution so that they can exploit the recording. In exchange for that permission, the producer usually receives a “mechanical” royalty, i.e., a royalty tied to the use of the underlying musical composition contained in the record. Mechanical royalties are set by statute. The current mechanical rate is 9.1 cents per song per copy sold (or for songs over five minutes, 1.75 cents per minute or fraction thereof). Since the producer probably did not create 100% of the song—for instance, where someone else (perhaps the artist) wrote the lyrics—the producer’s percentage ownership or “split” has to be negotiated. If the producer’s negotiated share is 50%, then he would receive 50% of “stat” (i.e., 9.1 cents) for each sale of the record containing the song. This would be in addition to his producer royalty, which is tied to income derived from the record rather than the song. Finally, the label usually asks the producer to accept ¾ of the stat rate. This is called the “Controlled Composition” clause. There is really no good justification for it except it is a standard clause in both producer and artist agreements, and the label can argue that it is an inducement to use the song of the producer or artist in the record.

——- end of excerpt ——-

The book The 11 Contracts That Every Artist, Songwriter, And Producer Should Know continues on with actual examples of three producer agreements.

 It is available here at Backwingstore.com.

 About the Author:

Steve Gordon is an entertainment attorney with over 20 years of experience. He served as an attorney at a law firm representing Atlantic and Elektra Records, as in-house counsel for a Hollywood movie studio, and served as Director of Business Affairs for Sony Music for more than 10 years. He currently manages his own law firm in Manhattan. As an educator, Gordon is the recipient of two Fulbright Scholarships and has taught courses on music law and business at Tel Aviv University in Israel and Bocconi University in Milan, Italy and is a graduate of New York University School of Law.

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