The Amend a Music Industry Agreement - Case Study Example

Further to reviewing the draft recording agreement (the Agreement), I set out requested amendments on behalf of the Artist below on a clause by clause basis for ease of reference. Clause 1(a) - Please amend to include sideman clause. Record labels usually require artists to sign to the label exclusively (Harrison), which prevents the artist recording for another label without permission or terminate if unhappy with the label (Passman). Record labels invest large sums of money into making an act successful and argue that such control through an exclusivity clause is necessary to protect their investment and ensure profit or alternatively, minimisation of losses in the event that the act flops (Passman). However, the changing nature of the contemporary music business marketplace has made it in the commercial interests of an Artist to collaborate and record with other bands and artists (Passman). In some cases, this can even help break a new artist (Carrey & Verow). Accordingly, the inclusion of a sideman clause will enable the Artist to do studio work and collaborations with other bands and artists (Carrey & Verow). Without this, the Artist is narrowly restricted in being prohibited from performing for any other label or band under this contract. Clause 1(b) Please amend re-recording restriction to cover records actually released under contract with the label This clause prevents the Artist from re-recording music on another label post termination or expiry of the contract. Whilst the five year period is an industry standard (Harrison), the clause should be amended to only cover records actually released by the label as my view is that this is sufficient to protect the label’s interests. Furthermore, please refer to my other comments in relation to clause 3 with regard to the inclusion of a general long-stop provision to ensure protection regarding the maximum duration of the Term of this Agreement. Clause 2 (c) - Please amend the ninety day cure period to read ten (10) days. Record companies have a time limit within which to exercise their option to extend the term of an agreement. The time period in this case is that the option must be exercised before the expiry of the prior contract period. The notice requirement is implemented to remind the label of the option period by placing the onus on the Artist to remind them under what is labelled a “cure period” (Passman). However, a period of ninety (90) days seems too long for a cure period, particularly in light of the recording commitment of the Artist. Moreover, the ninety day period leaves the Artist in an uncertain position as to their rights under contract and prevents negotiation with other potentially interested labels (Harrison). Clause 3) Recording Commitments – Please see general amendment suggestions below. During each option period, the record label should guarantee a fixed number of master recordings equivalent to an album and include an express provision setting this out as a maximum guarantee (Harrison). Accordingly, please remove clause 3c) requiring the delivery of “such further masters as are required”. Any further masters required should be specified and the fixed amount should be stated as the maximum delivery requirement (Carey & Verow). This is necessary in order to create certainty from the Artist’s perspective as to what they are committing to under the contract and prevents the risk of being subject to an open ended recording commitment that can tie them up for many years (Passman). Moreover, in order to exercise the options as stated in clause 2, the Agreement should be amended to provide that the label shall have “released” those masters or a percentage of those masters during the specified territory during each contract option period. It is insufficient for the artist to just record and submit the masters; the label needs to release these (Harrison), which is further reflected in my suggestions regarding clause 7 below. Clause 3d) Please delete “commercially”. The commercially acceptable principle is in respect of the record label’s desired for radio hits (Passman) and if determined not to be commercially acceptable, it will have a knock on effect on how long the Artist is tied to the contract (Carey & Verow). If a record label is only willing to accept commercial recordings in place of merely technically satisfactory ones, this will potentially result in the Artist having to continuously rework or record material before the label is happy of commercial chart potential (Passman). Moreover, this could result in overrunning of the contractual option periods, in which the album under the commitment clause is due before the album commits to a release date (Harrison). The inclusion of “commercially acceptable” leaves it to the record label discretion to determine the album’s success, which impacts the release commitment obligation and delays the exercise of the next option (Carey & Verow). As such, it is therefore further advisable to include a long-stop provision in the Agreement to limit the overall duration of the contract to not more than six or seven years (Passman). Clause 4a) - Please amend to include a copyright reversion clause at a specified future date or on termination, whichever is the earlier date. Most exclusive recording contracts require an artist to assign copyright in the sound recordings to the record company (Bainbridge). Moreover, an assignment will generally be for the life of the copyright, which in the case of sound recordings is 50 years from the release date (Copyright, Designs and Patents Act 1988). There are two central issues of concern for the Artist with this clause as currently drafted. Firstly, this clause requires an assignment in respect of unreleased recordings, copyright ownership of which remains with the label for the entire duration of the Artist’s career (Bainbridge). Secondly, once the label has recouped all costs incurred on breaking the Artist, the label still owns the masters, which is clearly not desirable from the Artist’s perspective (Bainbridge). As such, it would clearly be preferable to include a reversion of title clause specified to occur at a future date (one option would be for after recovery of costs) or alternatively on termination of the agreement (especially if a key person involved in the Artist’s signing to the label leaves, which is discussed further below). Clause 4b) The clause currently is drafted widely in applying to “exploitation of the Masters”, which is equivocal in potentially applying to many circumstances. As such, the name and likeness clause should be amended to grant a right to use the name and likeness only in direct connection with the sales of the records and not the business of the label (Bainbridge). Clause 4c) The label should not have unrestricted rights to licence the name and likeness for any other purpose such as endorsements for example (Bainbridge). Moreover, no money should be paid to the record company for rights to use the name and likeness and the licensing requirements in clause 4c) need to be amended accordingly. Additionally, the Agreement itself refers throughout to exploitation in any “Media” which remains undefined. Moreover, the Agreement itself should specifically include an express purpose clause stating the definition of exploitation to include without limitation the following: 1) Physical sales through CD, vinyls and cassette; 2) Public performances of works; 3) Sale of digital products such as downloads and ring tones (which should be included in the definition of Media); and 4) Audio-visual devices including DVDs (Bainbridge). This is important to the Artist in relation to the label’s release commitment (Passman) and royalty payments under the Agreement. Clause 5) Royalties/Advances The definition of “Net Receipts” must be specific in referring to income received from exploitation of the following (without limitation): 1) Physical sales through CD, vinyls and cassette; 2) Public performances of works; 3) Sale of digital products such as downloads and ring tones (which should be included in the definition of Media); and 4) Audio-visual devices including DVDs (Bainbridge). This clause should further be amended to state that the advance in subsequent contract option periods is payable on the basis of percentage of previous royalties, as well as higher advances for the albums in later years (Harrison). Moreover, the recoupability of advances against royalties and “all bona fide costs” needs to be taken out as the clause as currently drafted enables the label to recoup advances against subsequent royalties and sums. As such, this means that if sums are unrecouped in one option period and the Artist is entitled to another advance as under this Agreement, any amounts unrecouped will be offset against subsequent advances (Passman), which is clearly undesirable. Furthermore, this clause is phrased in the language of cross-collateralisation, whereby the unrecouped sums in one option period can be used to recoup unrecouped advances under the recording agreement in subsequent option periods (Harrison). Clause 7(a) and (b) Clause 7 should be amended and redrafted to secure a positive release commitment from the label in the UK (Carey & Verow). Moreover, the definition of “Territory” covering the “Universe” should be amended and if worldwide, the release commitment should include a positive release commitment in the territories covered by the Agreement (Carey & Verow). This is clearly desirable in light of the recording commitment obligations of the Artist under the Agreement. Moreover, failure to comply with the release commitment should enable the Artist to terminate the Agreement and/or buy back their recordings with reversion of copyright on termination for failure to comply with the release commitment (Bainbridge). This would then enable the Artist to license their recordings to another label or self-release (Bainbridge). Moreover, the release commitment clause should incorporate a clause with a minimum marketing spend to support the release, which is not recoupable (Passman). Clause 8 b) This should be amended as considerable costs are incurred on marketing and promotion and it is undesirable for these sums to be recouped from the Artist (Harrison). Moreover, whilst significant costs may be incurred, “with a likely earnings ration of 3:1 in the label’s favour, they’re going to break even a lot quicker than any artist can recoup” (Salmon). Clause 11 Whilst prior consent is required in respect of artwork, it would preferable for the Artist to have consent in respect of synchronisation and an express clause requiring the record label to observe and not infringe the moral rights of the Artist in the recordings (Bainbridge, Copyright Designs and Patents Act 1988). Clause 13 This clause should be amended and drafted as a mutual warranty between the label and the Artist. Moreover, loss should be limited to direct loss and preferably subject to cap on the indemnity figure (Bainbridge). Clause 14 There should be an express provision in this clause to clarify and protect the Artist’s position in ensuring that the label cannot recoup advances paid to leaving members for solo releases against the remaining members’ royalties. Moreover, there should be incorporated into the Agreement an express key-man clause (Passman). If a key A&R member at the label as left or the Managing Director, this could prejudice the priority accorded by the label to breaking the Artist. Accordingly, there should be a provision enabling the Artist to terminate the agreement in this situation (Passman). Bibliography Bainbridge. Intellectual Property. Pearson Longman. 2007. Carey, P. and Verow, R. Media and Entertainment Law. 2nd Edition Jordans. 2002. Harrison, A. Music: The Business: The Essential Guide to the Law and the Deals. 3rd Edition Virgin Books. 2005. Passman, D. All You Need to Know About the Music Business. 5th Edition Free Press. 2003 Copyright, Designs and Patents Act 1988. 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