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9 most important contracts in the music industry

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Most important contracts music industry imusician

Although it’s mostly the creative and entertaining sides of the music industry that are advertised, legally enforceable agreements, such as contracts, make up an essential part of each musician’s profession. Unfortunately, it’s still common that artists aren't aware that certain contracts need to be in place or do not read through them thoroughly enough which can lead to serious consequences down the road for an artist’s professional life. In this article, we’ll guide you through the most important contracts you should know of in the music industry to protect your career and put you on the path towards success.

What are the most important contracts in the music business

1. Band contract

  • Between: individual members of a band
  • Duration: based on mutual agreement

Whether you’ve known each other for months or a lifetime, it’s essential to sign a band contract with your bandmates. It should actually be the first thing you do when you form a band with someone.

A band contract is used to regulate tax and legal matters within the band, such as distribution of income and jobs, insurance, possession of instruments/equipment, and voting rights within the group. It also becomes incredibly handy in case any difficult situation or legal dispute arises concerning the name of the band, withdrawal of band members, split of the group, or any other serious matter. Essentially, having a band contract in place avoids situations that can be very expensive, time-consuming, and energy-draining.

2. Transfer of rights to musicians and singers

  • Between: a solo artist and external musician(s)
  • Duration: a minimum of a year or a duration of a project

If you perform as a solo artist and decide to hire external musicians and singers, you are advised to enter a contract authorizing the 'transfer of rights'. This agreement will regulate fees and profit-sharing if necessary, alongside the type of related rights that are granted or transferred to the guest musicians or singers.

The transfer of rights must be concluded in a written form and while the document doesn’t require any specific ‘magic word’, it has to clearly demonstrate the artist’s intention to transfer the copyright. The main thing is to ensure that you have permission to use and reproduce performances accordingly. It must be clearly stated which remuneration claims may be reimbursed. Generally speaking, the more specific and detailed the written transfer language is, the better.

3. Contracts with collection societies and publishers

  • Between: a musician and a publisher or a collecting society
  • Duration: a minimum 1 year followed by various option periods

If you operate as a composer or lyricist you should get in touch with a collection society as quickly as possible, and enter a so-called 'contract of assignment'. It’s good to know that most countries have their own operating collecting societies, such as SUISA, GEMA, and others which work together globally. That means that your royalties will be collected internationally, as well. The collection societies function as custodians for your songs, collecting payment for the use of your songs and taking a small cut of 10%. It’s important for bands to decide in advance who will take copyright shares as an author, and who won't. This way you will avoid ugly discussions later on (you can also regulate this in the band contract). Your copyrights can be protected using copyright authorities for neighboring rights like GVL or SwissPerform.

As collecting societies may provide different offers, it’s essential to be careful with the agreement you’re about to enter and to read it thoroughly. GEMA, for example, only offers an all-in contract, meaning that the agreement will apply to your whole body of work. You can’t then select which tracks they should take care of and which to leave out.

Authors and lyricists can also transfer part of their copyright to a music publisher. In this case, there are single title contracts or exclusive author contracts, for which a corresponding advance is paid. The most important elements of these contracts are contract length, territory, extent of rights, duties of the publisher and author, and synchronization rights. It is recommended that you look at sample contracts and check carefully which rights you would like to transfer under which conditions.

4. Record label contract

  • Between: an artist and a record label company
  • Duration: initial length is minimum one year. Unscrupulous labels can offer even 5- or 10-year contracts

By signing a record label contract, you transfer the "rights in the recording" to the label interested in your tracks. It’s vital to know that a classic record deal is a complex document and may therefore be a tough one to get the hang of for musicians. It takes care of all the manufacturing, distribution, and marketing of the record and concerns everything from what advance you’ll operate with, to what percentage you will receive out of the contract, to whether or not the label takes care of your social media. Other things regulated by record deals are production volume, format, exclusivity, duration, sub-license rights, sync, and merchandising rights.

The initial length of a recording contract is usually one year, typically followed by several option periods. Before entering a record deal, it’s therefore absolutely essential to be transparent about your goals with the label company and make sure that you completely understand every aspect of the contract. Things you should definitely watch out for in a record deal are reasonable royalty rates, hidden royalty deductions, or whether a release commitment is included. A year is a long time period to be in an agreement that is both unfavorable and unprofitable.

5. Distribution contracts

  • Between: A label/independent artist and a distributor
  • Duration: Between 1 and 5 years

Distribution contracts are usually signed between record labels and distributors. This may be one of the reasons why record labels seem attractive to musicians - they take care of the extensive background work, but, traditionally, for the price of their ownership rights. If you decide to make an independent release without the participation of a label, then you can make a direct distribution contract with aggregators yourself. In this way, you don't usually transfer any rights to your recordings, instead just the (exclusive) right to distribute your content to the corresponding partner shops of the distributor, both digital and physical.

In the case of a physical release, there are also combi-contracts, which don't just include the distribution of your product, but also the manufacture. In a distribution contract, the following points are regulated: distribution area, recordings covered by the contract, release, costs and payment, transactions with collection societies, protective rights, and stock management.

The duration, as well as the conditions of a distribution contract, generally differ depending on the music distribution company. At iMusician, you can join over 400,000 DIY musicians by choosing one of our distribution plans based on your needs and desires. By signing an agreement, you, as a musician or a label, will be under no obligation to stay with us for any particular period of time, meaning you can leave anytime. Additionally, you won’t be bound by any exclusivity oath. You can have a closer look at the products we offer and our distribution packages on our website!

6. Guest performance contracts

  • Between: a promoter and an artist’s manager/booker
  • Duration: for the duration of the performance

At concerts and gigs, there needs to be a guest performance contract between the promoter and you or your manager/booker. According to the size of the act booked, these contracts can be extremely long and full of special requests, extensive provisions, and expectations. However, they are absolutely essential as they help prevent any misunderstandings and disagreements from occurring. The guest performance contract can be initiated either by the performing artist or the organization that’s hiring the performer. It guarantees that the musician shows up at the performance as promised and, at the same time, ensures that the performer is paid in return by the venue.

The basic points in the guest performance contract include location and length of the performance, fee, and type of payment, duties of the artist and the promoter, technical riders, costs, transport and logistics, cancellation agreement and related fees, insurance, social security, and collection society contributions. More specific and lengthy performance contracts can include additional information and requests regarding backstage perks, merchandise sales, guest lists, or permission for the recording of the performance.

7. Producer and remix contracts

  • Between: artist/record labels and producers/producing companies/music engineers
  • Duration: may differ but it’s advisable to agree on an initial period of 12-18 months

Music production contracts are traditionally signed between producers and production companies, or music engineers and the respective record labels or artists they are working with. Producers are in charge of the production process, the recordings, and the style of the recordings in the studio, and a production contract regulates their responsibilities and their affiliated compensation. Such compensation is usually granted in the form of a one-off payment and/or a share in the profits in the form of royalties. In case a production contract is signed between producers and artists, producers often take on the role of investors, who believe in a certain act and seek to farm the artist off to a record label after the production of successful recordings.

A contract is also highly recommended if you engage a producer to carry out an external creative remix of a song you control. This agreement will mostly regulate a one-off payment for the commission (an upfront fee) and possible royalty shares, or a combination of both. Additionally, the copyright in the original and remixed master is either retained by the artist or the contract will regulate the transfer of rights and adaptation rights (share of author's rights) to the producer.

8. Artist management and agency contracts

  • Between: an artist and a manager/booking agency
  • Duration: initial period is 1 year, then it can be extended

Managers and booking agents operate as separate firms, which work in your name and support your business activities after entering into a contract with you. They often need special legal authorization. Managers function best as the central point of reference between the people making music and their business partners like record labels, distributors, publishers, and press organizations. The decision to get a manager is a serious one and definitely worth consideration. The more time you, as an artist, have to spend on negotiating, creating, and organizing strategies around your career, the less time and energy you have for your work and the less money you can then make. An artist management contract shall outline the relationship between the two parties and state the management duties and compensation. Moreover, the document should also emphasize what the artist can’t do without violating the contract and agreement.

Booking agencies assist artists in finding and getting more bookings for live gigs and performances. The agency contract then defines the terms of the cooperation between the agent and artist, specifies the length of the document and the compensation for the agent.

9. Music licensing contracts

  • Between: a song owner (an artist/record label) and a second party that seeks to use the owner's piece of music
  • Duration: may differ depending on the agreement but an artist should request a rather short term

Sync or music licensing contracts are legal agreements between owners of songs or master recordings and parties that are seeking to use those pieces of music. These agreements are used to license the synchronization of the copyrighted music with any other type of content. It can be audiovisual content, including films, television series and advertising, video recordings, and video games, as well as non-visual works, such as theatrical performances and productions and radio advertisements.

A sync licensing contract should specify how the body of work will be used, the length of the segment, the prominence of the cue, as well as the monetary compensation for the artists.

Conclusion

In this article, we have covered some of the most common contracts and agreements you may come across in the music industry. All of them are incredibly important for you as a musician and it’s crucial for you to read them cautiously before signing them. What’s even more important, however, is to be completely confident and sure of your professional needs and ambitions. Remember that a long-term contractual commitment is very difficult to change or terminate once signed.

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