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The most important contracts in the music industry

  • 11 November 2015, Wednesday
Contracts with two hands and a pen

Most people who make music prefer to concentrate on the essentials - jamming, writing songs, and performing. Contracts often get missed out, or are not read thoroughly enough. Individual artists and bands should therefore develop an awareness of contracts when actively entering the music industry, so that - much like a Startup company - they can operate like a business in the future.

List of Contracts

1. Project/band contract

If you don't want to do business as a soloist, it is recommended that you enter into a band contract. This is used to regulate tax and legal matters within the band. The important cornerstones of the contract are: distribution of income, band name rights, distribution of jobs, withdrawal of band members, fatality, insurance, possession of instruments/equipment and voting rights within the group.

2. Transfer of rights to musicians and singers

If you hire external musicians and singers you are advised to enter a contract authorising the 'transfer of rights'. This regulates fees and profit sharing if necessary, alongside the type of related rights that are granted to the guest musician or singer. The main thing is to ensure that you can have permission to use and reproduce performances accordingly. It must be clearly stated which remuneration claims may be reimbursed.

3. Contracts with collection societies and publishers.

If you operate as a composer or lyricist you should get in touch with your local collection society as quickly as possible, and make a so called 'contract of assignment'. SUISA, GEMA etc. function as custodians of your songs, collecting payment for the use of your songs and taking a cut of merely 10%. It is important for bands to decide in advance who will take copyright shares as 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 neighbouring rights like GVL or SwissPerform. More on that here.

Another option available to authors is to 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 synchronisation rights. It is recommended that you look at sample contracts and check carefully which rights you would like to transfer under which conditions.

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4. Record deal

If a label is interested in your tracks, you can transfer the "rights in the recording" using a classic record deal. This takes care of all the manufacturing, distribution and marketing of the recording. Alongside the 'Record Deal' for individual songs or albums, there is also the exclusive artist contract. The main things regulated by record deals are: production volume, format, exclusivity, duration, sub-license rights, sync and merchandising rights.

5. Distribution contracts

Distribution contracts are usually made between record labels and distributors. If you decide to make an independent release then you will be making direct contracts with aggregators. In this way you don't usually transfer any rights to your recordings, rather merely the (exclusive) right to distribute your content to the corresponding partner shops of the distributor. If you make 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.

6. Guest performance contracts

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. It is standard for this contract to include the following points: 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.

7. Producer and remix contracts

Major labels often make a producer contract directly with the producer. He or she is then responsible for the production process, the recordings and the style of the recordings in the studio. The main thing this contract regulates is responsibility for the recordings and their affiliated compensation, in the form of a one off payment and/or a share in the profits in the form of royalties. Producers can however also enter into contracts directly with artists - in this case producers often act as 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 make external remixes. This regulates: one off payment for the commission + possible royalty shares, transfer of rights, adaptation rights (share of author's rights).

8. Management and agency contracts

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 authorisation. 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 organs, while a booking agency specialises in finding and organising performances. With these contracts it is important to make sure that you are allowed to transfer rights as appropriate, to act in your name, and make contracts with third parties.

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