Elements Of A Recording Contract In The Music Industry

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Elements Of A Recording Contract In The Music Industry

January 16, 2021         Daniel Katz

A recording contract, often referred to as a ‘record deal’, is an agreement providing a record label with ownership over an artist’s work. In particular, the label owns what is produced in the recording room, and can promote that work by virtue of their licensing rights. However, recording contracts can be complex, and detrimental to both parties if not prepared adequately.

This article will explain the elements of a recording contract. 

Elements of a Recording Contract

Term and Duration

The term of a contract stipulates the length of time that the agreement spans over. This clause is particularly important for the artist. This is because an artist is locked into dealings with the label for the duration of their contract. This could restrict an artist’s ability to explore other producers. Therefore, we recommend you carefully consider this clause while keeping in mind your goals for future success.

Exclusivity 

Beyond the rights bestowed upon the artist in a recording contract, an exclusivity clause will essentially lock in an artist. This means that the artist will not be able to record for anyone else for the duration of the contract. The reason for this is twofold. Firstly, record labels invest in an artist’s potential success, with the aim of regaining the amount of capital they invested into production. With this, an artist who records with multiple labels might mitigate the record label’s income. Secondly, a record label may have their reputation tarnished if their artists record with several companies.

Jurisdiction

Jurisdiction clauses stipulate the governing law of the contract. This is particularly helpful, as it will guide subsequent legal teams in the case of a dispute.

Income 

Clauses surrounding income can be complex in recording contracts. Generally, artists earn their income through royalties, the Australasian Performing Rights Association (APRA) and the Phonographic Performance Company of Australia (PPCA).

An artist earns a percentage of the record label’s income earned for playing their music. This is known as a royalty. There is no golden rule in determining the size of this percentage, and it will often vary depending on different circumstances.

Both an APRA and PPCA license must be obtained if an entity wishes to play music to the public. The income earned from these licenses are then distributed to the copyright holders and/or record labels. Here, a record label would then distribute a percentage of that income to the artist. 

Termination 

Termination clauses are present in the majority of contracts. Generally, record labels with tailor these clauses to ensure they recoup any and all advance payments they made to the artist.

Artistic Control and Freedom

To reiterate, a record label will have ownership of an artist’s physical recordings by virtue of the recording contract. However, these ownership rights do not cover an artist’s lyrical or musical compositions. With this in mind, both parties have some control over the artist’s freedom. However, issues can arise when an artist wishes to perform on live television, radio or in music videos. Here, record labels must permit such activities, which may restrict an artist’s stream of income. Thus, it is important for artists to carefully consider the amount of control that record labels have over their work.

To Sum Up

Artists must be able to retain some control of their creative works. Luckily, recording contracts can be tailored in a way that benefits both parties. If you are an artist or a record label, it is important to understand the elements of a recording contract.

If you need any assistance, our intellectual property lawyers are here to help! Just contact at 1300 997 337 or fill out the contact form on this page.

About Daniel Katz

Daniel is a legal intern at OpenLegal, placed in our legal content team. He is currently studying a Bachelor of Laws at the University of Technology Sydney. Daniel's interest lies in economics and media/startup law.