Recording contract
Encyclopedia
A recording contract (commonly called a record deal) is a legal agreement between a record label
and a recording artist (or group), where the artist makes a record (or series of records) for the label to sell and promote. Artists under contract are normally only allowed to record for that label exclusively; guest appearances on other artists' records will carry a notice "By courtesy of (the name of the label)", and that label may receive a percentage of sales.
in the records their artists make, and also the master copies
of those records. An exception is when a label makes a distribution deal
with an artist; in this case, the artist, their manager, or another party may own the copyright (and masters), while the record is license
d exclusively to the label for a set period of time. Promotion
is a key factor in the success of a record, and is largely the label's responsibility, as is proper distribution
of records.
While initial recording deals usually yield a smaller percentage of royalties
to the artists, subsequent (or renegotiated) deals can result in much greater profit, or profit potential. A few acts, such as Madonna
, Michael Jackson
, and U2
, among others, have signed multimillion-dollar deals. Whitney Houston
signed a $100 million dollar deal with BMG
to deliver just six albums. Robbie Williams
signed an £80m (US$125m) contract with EMI
. For many other artists, though, for the millions to become tangible, hit albums meeting or exceeding their previous sales figures must follow. Recording contracts may include opt-out clauses for the label in the event an act's popularity dips or the act releases non-hit albums under the deal; for instance Mariah Carey
's unprecedented $100 million five-album contract with Virgin Records
was bought out by Virgin for $28 million, after her album released by the company sold poorly.
Record companies put forth huge sums of money to produce, release, and promote an album. Recording time, manufacturing, packaging, photos, distribution, marketing, and music videos are just some of the areas where the label must spend money on an act it has signed. The label usually absorbs these expenses, but in some artists contracts, some of this money may be due back to the label, unless otherwise worded. Advances (upfront money that is paid directly to a recording artist) are normally always owed back to the label. Once (and if) the advance has been paid back from record sales, the artist then begins to see royalty payments for additional sales. Advancing an act money is a risk the label endures as it does not know how well the act's album will sell. Capitol Records
suspended Linda Ronstadt
's contract in the early 1970s, as Capitol had spent more money on Ronstadt then it had yielded. She continued to tour partly to pay Capitol back for her 1960s deal, and a string of hits in the mid-1970s allowed her to finally clear the debt. Record companies expect to make a profit, and little concern themselves with a given performer's lack of business or financial savvy, as artists such as George Michael
have discovered. "Walking out" on a deal is very difficult or nearly impossible, as is attempting to strike a new deal without completing an old one. Donna Summer
signed a new deal with Geffen Records
in 1980, and released an album on Geffen. She was then told by her previous label, Casablanca Records
, that she owed them another album, per her agreement. She recorded and delivered an album to Casablanca that the label released, and it became a hit. Summer then went back to recording for Geffen Records for her next project. The Mamas & the Papas
were forced into a reunion, years after their 1968 breakup, by the letter of their Dunhill Records
contract, which required one more album to be completed (1971's People Like Us).
Record companies will generally increase royalty rates or give artistic freedom to get acts to re-sign contracts with them. Established acts may otherwise go where they see better opportunity. During 1980, Diana Ross
released her album Diana, which fulfilled her contract with Motown Records
. The album spawned three Billboard Hot 100 hits (a #1 and two top tens). Ross, however, felt she was never fairly compensated by Motown for her work with The Supremes
or her solo releases. When RCA Records
offered her $20 million to sign with them, Ross gave Motown the chance to match the deal, or at least offer something comparable. Motown, believing Ross's solo career was too up-and-down, and not seeing any reason to now compensate her for her earlier Supremes work, offered $3 million. Split with the decision to remain with the label that made her famous, or sign a deal with a company that was willing to pay her what she felt she was worth, she ultimately signed with RCA. §
like any business, and their masters and copyrights sold or traded as part of their assets. (Occasionally these are purchased by the artists themselves.)
Recording artists signed to a failed label can find themselves in limbo, unable to record for anyone but a company that is out of business (and thus cannot sell or distribute their records), and with their existing works unavailable for sale. When one label "buys out" another (or a label is purchased by an outside party), any existing copyrights and contracts held (and masters, if owned by the label) normally go with the sale. This often benefits recording artists, but not always.
Distribution deals are often renewed, but occasionally the label and the copyright owner cannot come to terms for a renewal. The reason is usually that one party expects too much money, or too large a percentage of profits, to suit the other.
Record label
In the music industry, a record label is a brand and a trademark associated with the marketing of music recordings and music videos. Most commonly, a record label is the company that manages such brands and trademarks, coordinates the production, manufacture, distribution, marketing and promotion,...
and a recording artist (or group), where the artist makes a record (or series of records) for the label to sell and promote. Artists under contract are normally only allowed to record for that label exclusively; guest appearances on other artists' records will carry a notice "By courtesy of (the name of the label)", and that label may receive a percentage of sales.
Copyrights, payment and royalties
Labels typically own the copyrightCopyright
Copyright is a legal concept, enacted by most governments, giving the creator of an original work exclusive rights to it, usually for a limited time...
in the records their artists make, and also the master copies
Master recording
A multitrack recording master tape, disk or computer files on which productions are developed for later mixing, is known as the multi-track master, while the tape, disk or computer files holding a mix is called a mixed master.It is standard practice to make a copy of a master recording, known as...
of those records. An exception is when a label makes a distribution deal
Distribution deal
A distribution deal is a legal agreement between one party and another, to handle distribution of a product....
with an artist; in this case, the artist, their manager, or another party may own the copyright (and masters), while the record is license
License
The verb license or grant licence means to give permission. The noun license or licence refers to that permission as well as to the document recording that permission.A license may be granted by a party to another party as an element of an agreement...
d exclusively to the label for a set period of time. Promotion
Promotion (marketing)
Promotion is one of the four elements of marketing mix . It is the communication link between sellers and buyers for the purpose of influencing, informing, or persuading a potential buyer's purchasing decision....
is a key factor in the success of a record, and is largely the label's responsibility, as is proper distribution
Distribution (business)
Product distribution is one of the four elements of the marketing mix. An organization or set of organizations involved in the process of making a product or service available for use or consumption by a consumer or business user.The other three parts of the marketing mix are product, pricing,...
of records.
While initial recording deals usually yield a smaller percentage of royalties
Royalties
Royalties are usage-based payments made by one party to another for the right to ongoing use of an asset, sometimes an intellectual property...
to the artists, subsequent (or renegotiated) deals can result in much greater profit, or profit potential. A few acts, such as Madonna
Madonna (entertainer)
Madonna is an American singer-songwriter, actress and entrepreneur. Born in Bay City, Michigan, she moved to New York City in 1977 to pursue a career in modern dance. After performing in the music groups Breakfast Club and Emmy, she released her debut album in 1983...
, Michael Jackson
Michael Jackson
Michael Joseph Jackson was an American recording artist, entertainer, and businessman. Referred to as the King of Pop, or by his initials MJ, Jackson is recognized as the most successful entertainer of all time by Guinness World Records...
, and U2
U2
U2 are an Irish rock band from Dublin. Formed in 1976, the group consists of Bono , The Edge , Adam Clayton , and Larry Mullen, Jr. . U2's early sound was rooted in post-punk but eventually grew to incorporate influences from many genres of popular music...
, among others, have signed multimillion-dollar deals. Whitney Houston
Whitney Houston
Whitney Elizabeth Houston is an American singer, actress, producer and a former model. Houston is the most awarded female act of all time, according to Guinness World Records, and her list of awards include 1 Emmy Award, 6 Grammy Awards, 30 Billboard Music Awards, 22 American Music Awards, among...
signed a $100 million dollar deal with BMG
BMG
Bertelsmann Music Group, , was a division of Bertelsmann before its completion of sale of the majority of its assets to Japan's Sony Corporation of America on October 1, 2008. It was established in 1987 to combine the music label activities of Bertelsmann...
to deliver just six albums. Robbie Williams
Robbie Williams
Robert Peter "Robbie" Williams is an English singer-songwriter, vocal coach and occasional actor. He is a member of the pop group Take That. Williams rose to fame in the band's first run in the early- to mid-1990s. After many disagreements with the management and certain group members, Williams...
signed an £80m (US$125m) contract with EMI
EMI
The EMI Group, also known as EMI Music or simply EMI, is a multinational music company headquartered in London, United Kingdom. It is the fourth-largest business group and family of record labels in the recording industry and one of the "big four" record companies. EMI Group also has a major...
. For many other artists, though, for the millions to become tangible, hit albums meeting or exceeding their previous sales figures must follow. Recording contracts may include opt-out clauses for the label in the event an act's popularity dips or the act releases non-hit albums under the deal; for instance Mariah Carey
Mariah Carey
Mariah Carey is an American singer-songwriter, record producer, and actress. She made her recording debut with the release of her eponymous studio album in 1990, under the guidance of Columbia Records executive Tommy Mottola, whom she later married in 1993...
's unprecedented $100 million five-album contract with Virgin Records
Virgin Records
Virgin Records is a British record label founded by English entrepreneur Richard Branson, Simon Draper, and Nik Powell in 1972. The company grew to be a worldwide music phenomenon, with platinum performers such as Roy Orbison, Devo, Genesis, Keith Richards, Janet Jackson, Culture Club, Lenny...
was bought out by Virgin for $28 million, after her album released by the company sold poorly.
Record companies put forth huge sums of money to produce, release, and promote an album. Recording time, manufacturing, packaging, photos, distribution, marketing, and music videos are just some of the areas where the label must spend money on an act it has signed. The label usually absorbs these expenses, but in some artists contracts, some of this money may be due back to the label, unless otherwise worded. Advances (upfront money that is paid directly to a recording artist) are normally always owed back to the label. Once (and if) the advance has been paid back from record sales, the artist then begins to see royalty payments for additional sales. Advancing an act money is a risk the label endures as it does not know how well the act's album will sell. Capitol Records
Capitol Records
Capitol Records is a major United States based record label, formerly located in Los Angeles, but operating in New York City as part of Capitol Music Group. Its former headquarters building, the Capitol Tower, is a major landmark near the corner of Hollywood and Vine...
suspended Linda Ronstadt
Linda Ronstadt
Linda Ronstadt is an American popular music recording artist. She has earned eleven Grammy Awards, two Academy of Country Music awards, an Emmy Award, an ALMA Award, numerous United States and internationally certified gold, platinum and multiplatinum albums, in addition to Tony Award and Golden...
's contract in the early 1970s, as Capitol had spent more money on Ronstadt then it had yielded. She continued to tour partly to pay Capitol back for her 1960s deal, and a string of hits in the mid-1970s allowed her to finally clear the debt. Record companies expect to make a profit, and little concern themselves with a given performer's lack of business or financial savvy, as artists such as George Michael
George Michael
George Michael is a British musician, singer, songwriter and record producer who rose to fame in the 1980s when he formed the pop duo Wham! with his school friend, Andrew Ridgeley...
have discovered. "Walking out" on a deal is very difficult or nearly impossible, as is attempting to strike a new deal without completing an old one. Donna Summer
Donna Summer
LaDonna Adrian Gaines , known by her stage name, Donna Summer, is an American singer/songwriter who gained prominence during the disco era of the 1970s. She has a mezzo-soprano vocal range. Summer is a five-time Grammy winner and was the first artist to have three consecutive double albums reach...
signed a new deal with Geffen Records
Geffen Records
Geffen Records is an American record label, owned by Universal Music Group, and operated as one third of UMG's Interscope-Geffen-A&M label group.-Beginnings:...
in 1980, and released an album on Geffen. She was then told by her previous label, Casablanca Records
Casablanca Records
Casablanca Records was an American record label started by Neil Bogart, who partnered with Cecil Holmes, Larry Harris, and Buck Reingold in 1973, and based in Los Angeles. The label was formed after all of them had left Buddah Records and secured financing by Warner Bros. Records to start the venture...
, that she owed them another album, per her agreement. She recorded and delivered an album to Casablanca that the label released, and it became a hit. Summer then went back to recording for Geffen Records for her next project. The Mamas & the Papas
The Mamas & the Papas
The Mamas & the Papas were a Canadian/American vocal group of the 1960s . The group recorded and performed from 1965 to 1968 with a short reunion in 1971, releasing five albums and 11 Top 40 hit singles...
were forced into a reunion, years after their 1968 breakup, by the letter of their Dunhill Records
Dunhill Records
Dunhill Records was started by Lou Adler, Al Bennett, Pierre Cossette and Bobby Roberts in 1964 as Dunhill Productions, originally for the purpose of releasing Johnny Rivers recordings on Imperial Records. It became a record label in 1965 and was distributed by ABC Records...
contract, which required one more album to be completed (1971's People Like Us).
Record companies will generally increase royalty rates or give artistic freedom to get acts to re-sign contracts with them. Established acts may otherwise go where they see better opportunity. During 1980, Diana Ross
Diana Ross
Diana Ernestine Earle Ross is an American singer, record producer, and actress. Ross was lead singer of the Motown group The Supremes during the 1960s. After leaving the group in 1970, Ross began a solo career that included successful ventures into film and Broadway...
released her album Diana, which fulfilled her contract with Motown Records
Motown Records
Motown is a record label originally founded by Berry Gordy, Jr. and incorporated as Motown Record Corporation in Detroit, Michigan, United States, on April 14, 1960. The name, a portmanteau of motor and town, is also a nickname for Detroit...
. The album spawned three Billboard Hot 100 hits (a #1 and two top tens). Ross, however, felt she was never fairly compensated by Motown for her work with The Supremes
The Supremes
The Supremes, an American female singing group, were the premier act of Motown Records during the 1960s.Originally founded as The Primettes in Detroit, Michigan, in 1959, The Supremes' repertoire included doo-wop, pop, soul, Broadway show tunes, psychedelic soul, and disco...
or her solo releases. When RCA Records
RCA Records
RCA Records is one of the flagship labels of Sony Music Entertainment. The RCA initials stand for Radio Corporation of America , which was the parent corporation from 1929 to 1985 and a partner from 1985 to 1986.RCA's Canadian unit is Sony's oldest label...
offered her $20 million to sign with them, Ross gave Motown the chance to match the deal, or at least offer something comparable. Motown, believing Ross's solo career was too up-and-down, and not seeing any reason to now compensate her for her earlier Supremes work, offered $3 million. Split with the decision to remain with the label that made her famous, or sign a deal with a company that was willing to pay her what she felt she was worth, she ultimately signed with RCA. §
Termination
When recordings go out of print, this typically happens because either the label has decided that continuing to sell (or distribute) the record will not be profitable, or the licensing agreement with the artist has expired. (Labels may also stop distribution as a punitive measure, if an artist fails to comply with their contract, or as a strategic measure if negotiations for a new one prove difficult.) Record labels can also become bankruptBankruptcy
Bankruptcy is a legal status of an insolvent person or an organisation, that is, one that cannot repay the debts owed to creditors. In most jurisdictions bankruptcy is imposed by a court order, often initiated by the debtor....
like any business, and their masters and copyrights sold or traded as part of their assets. (Occasionally these are purchased by the artists themselves.)
Recording artists signed to a failed label can find themselves in limbo, unable to record for anyone but a company that is out of business (and thus cannot sell or distribute their records), and with their existing works unavailable for sale. When one label "buys out" another (or a label is purchased by an outside party), any existing copyrights and contracts held (and masters, if owned by the label) normally go with the sale. This often benefits recording artists, but not always.
Distribution deals are often renewed, but occasionally the label and the copyright owner cannot come to terms for a renewal. The reason is usually that one party expects too much money, or too large a percentage of profits, to suit the other.