Recording Contracts: The Real Story

People have a habit of mystifying music and musicians. When someone’s on the radio, MTV, a record label, a stage, people make assumptions about them, like, oh, they live lives like rock stars, or they’re so rich, or they’re snobs. Which is about as silly as thinking oh, that person is an honest, truthful, upholder of the law because of their occupation—police officer/senator/president/judge. In this section, I want to demystify what it means to have a record contract, to demystify that realm of music for people.

Breakdown of a Recording Contract
A record deal is a legally binding contract between musicians and a record company, where the artists agree to make 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—that’s why guest appearances on other artists' records will carry a notice "artist appears courtesy of (the name of the label)", and the label may receive a percentage of sales. The copyright in all recordings made under the contract is, in nearly every case, granted to the company by the artist, as well as the rights for the company to use the artist's name and image to sell the recordings. The company’s granted unlimited and exclusive rights to manufacture distribute and sell records derived from the recordings, and the right to license other companies to do so. The company also has the right to sit on the record and never release it or promote it if they don’t like it.

Contracts usually promise money to the artists on the condition that it has to be paid back to the company in time. A record company will often give money to artists to record their albums, which the artists spend on recording space and time, producers, sound engineers, technicians, studio musicians, art directors and coffee. All of that money, though, is given on loan and needs to be paid back regardless of whether the record sells or not. For every record that is sold, the artist receives a royalty, which can be as little as a few cents, which then often has to be divided up again to the record company, the song publishing company the artist has a deal with, the artist's manager, or anyone else who has their hands in the artist’s pockets.

With some exceptions made for well-established musicians who’ve already demonstrated that they can turn a good profit for their company, recording companies will demand a certain amount of creative control over a musician’s recordings. Generally, the company will keep control over what material is released on an album, what studio it’s recorded in, and the personnel involved in making it. This can lead to nasty little moments like legendary producer Phil Spector—who is now being tried for murder—holding up the Ramones at gun point, demanding that they add orchestral strings to songs they were recording with him..

The record company takes responsibility for promoting and distributing the finished album. As money-making operations, they’re more likely to spend their time and money promoting and distributing music that they believe is going to sell than music that is the most innovative and interesting. This leads to mainstream record stores being filled with crappy new music that fits into a popular formula of music that brings in the big bucks, and albums that have been determined to be best sellers and are thus called “classics.”
 
In many contracts, the label is not committed to actually release the finished product. Whether it's released or not depends on "acceptance" by the company. The label can reject delivery of an album by relying on quite precise conditions contained in the contract. The company will want the contract to say that each album must be "commercially acceptable" and a lawyers acting on behalf of artists often tone this down to "technically acceptable." If the album is accepted then most labels agree to a "release commitment" which will provide that they release the album in as few major territories as they can get away with.

The insult of “don’t quit your day job” is actually sound advice. It is very hard for musicians to get by who aren’t superstars selling shitloads of CDs. Some musicians tour incessantly. Others work. Still others try to balance the two, and have to deal with the stress of asking for time off from work, using up sick days, or losing a job entirely to go on tour. In a contract, there are usually certain advances made in the way of tour support or equipment being bought to tour with. This clause will vary significantly from deal to deal. Many of the major labels have their own "in-house" touring departments which handle nearly all aspects of an artist's tour, from transportation and equipment, to promotion and investment. These departments are also responsible for the hiring and payment of touring personnel, such as roadies and drivers. But, when artists sign to smaller labels, they are responsible for more of the work that goes into touring.

In some record deals, artists are given a certain amount of CDs for free and are then able to buy more from the company at a discounted price. Since few musicians can afford to get by on their royalties—and many actually lose money from making albums—they’ll sell these CDs at shows or through their website. This money—along with profits from merchandise and shows—is what the artist has to work with.

When a recording goes out of print, it’s usually because the contract with the artist has expired or the company has decided that continuing to sell or distribute the album is no longer profitable. Sometimes labels will stop distribution as a way to punish an artist who fails to comply with a contract, or as a strategic measure if negotiations for a new deal prove difficult. Like other businesses, record labels can go bankrupt, and they’ll sell or trade their masters and copyrights as part of their assets. If a record company goes out of print, artists signed to that label find themselves up shit creek without a paddle. They can’t legally record for any company other than a failed one that can’t sell or distribute their music. Some artists have the chance to buy their masters and copyrights back, but often many can’t afford to.

If a band splits up, they may still have to release albums to fulfill their contractual agreements. The Mamas and the Papas, for example, broke up in 1968, and were forced by Dunhill Records to record People Like Us in 1971. This may also explain how many artists release live and greatest hits album, regardless of whether or not they suck live or they have any “greatest hits.” With record contracts, the band is signed both as a single entity and as individuals. Thus, the label can claim rights to any side projects or new bands people signed to it create.