Part 3: Managing Artist Relationships

Chapter 11

Start Thinking... What role do unions play in record company contracts? What are the important issues that should be negotiated in a recording contract?

Chapter Goals Learn the basic elements in a recording contract. Be able to distinguish between royalty artist issues and nonroyalty artist issues. Understand union involvement in the process and the standing agreements that the AFM and AFTRA have with record companies.

AFTRA Agreements Part of the SAG-AFTRA labor union AFTRA National Code of Fair Practice for Sound Recordings covers all singers on a recording contract addresses wage scales, overdubbing, working conditions, reuse payments, and labels’ contributions to AFTRA’s Health & Retirement Funds

AFTRA Agreements Vocal Contractors Union contractor singing member of the group supervises adherence to AFTRA code 3+ AFTRA singers in recording Overdubbing and tracking Sound recording copyright shares AFTRA’s Sound Recording Sessions Report

AFTRA Agreements Scale Classifications of employment Recording funds/advance Contingent scale payments Payments to nonroyalty singers AFTRA Health & Retirement Funds

AFTRA Agreements Acquired Masters Recordings by small companies and indie labels Signatory third party acquiring master: must ensure nonsignatory producer complied with AFTRA code must comply with all obligations H&R and contingent payments New use of masters

AFTRA Agreements Nonunion Recording Typically a disparity of bargaining power between any one artist and an entertainment conglomerate Changing technology opening the door for DIY artists But AFTRA obligations must be met when distributing nationally

AFM Agreements Sound Recording Labor Agreement Instrumentalists, conductors, arrangers, orchestrators, and copyists Covers provisions for production of music videos and concert DVDs Employer pays wages + AFM Health & Welfare Fund + AFM Employers Pension Fund Requires that all music “prepared” for recording must be handled exclusively by arrangers, orchestrators, and copyists who are AFM members

AFM Agreements Sound Recording Labor Agreement Contract provides 200% of sidemusicians’ pay for the leader AFM contractor for 12+musicians doubling, cartage, etc. backup artists Royalty artists “Outside” masters

AFM Agreements Sound Recording Special Payments Fund Phonograph records record companies make payments to Fund twice a year paid to musicians who performed in preceding 5 years same scale payments for all musicians if ownership changes over a 10-year period, new owner must honor payment obligations Motion pictures Film Musicians Secondary Markets Fund payments reflect relative success of project

AFM Agreements Music Performance Trust Fund Non-profit organization to keep live music available to public returns a fraction of lost performance income back to union musicians Trustees schedule live music performances by AFM members If no admission charged live performances may be broadcast

AFM Agreements Nonunion Recording Taft-Hartley Act and right-to-work laws AFM control professional symphony and popular music recording less control in gospel, Christian, jazz, and country fields Young Sounds of the AFM Spec sessions

Royalty Artist Contracts Types of Deals 1. The label signs the artist; a producer handles project in- house; artist gets royalties 2. The label already has artist under contract; retains independent producer 3. Independent producer and artist produce master tape, then try to induce record company to acquire it 4. Artist or production company pays all recording costs and leases the master to the label in exchange for a royalty; called a master lease deal 5. Artist forms a production company to deliver a master tape to a label

Royalty Artist Contracts Negotiations Conservative signing policies Terms of contract Maximizing self-interests versus compromise Royalty rate adjustments or bonuses as plateaus reached

Royalty Artist Contracts The Issues Term Exclusivity Royalties, advances Production budget minimums Creative control Commitment to promote Chargebacks Ownership of masters

Royalty Artist Contracts The Issues Publishing rights, controlled compositions Video rights Foreign releases Assignment Right to audit Default, cure Royalty discounts

Royalty Artist Contracts 360 Deals Also known as artist brand agreements Power shift between artists and record companies Two types of 360 deals: 1. record company gets traditional revenues + percentage of the artist’s other income streams 2. true partnership Environment = double-edged sword

Royalty Artist Contracts New Use and Legacy Royalty Rates Dramatic changes in technology Standard agreement provides for payment to the artist at different rates depending on how the record is used Digital downloads Cell phone ringtones Instant recording at live performance venues

For Further Thought... What is the difference between a royalty artist and a nonroyalty artist? Is a 360 deal better for the label or the artist? Why? Why is it possible for an artist to have fulfilled all recording obligations under a contract, have some recordings that sold well, but still not receive any royalties?