Chapter 11 – Artists’ Recording Contracts – Page 1

AFTRA Agreements

  • American Federation of Television and Radio Artists
  • AFTRA National Code of Fair Practice for Sound Recordings – All major labels and many independent labels sign this agreement with AFTRA
  • Covers all singers on a recording – featured artists, backup vocalists, soloists to full choirs – the AFTRA contract covers wage scales,overdubbing, working conditions, reuse payments, and labels’ contributions to AFTRA’s Health & Retirement Funds

Vocal Contractors – AFTRA singer who performs extra duties such as contracting singers, rehearsing or coaching singers, or any supervisory duties

  • Union contractor – is required when:
  • 3+ AFTRA singers in recording – requires contractor who also will be:
  • singing member of a group – and will be present at every session and
  • supervises adherence to AFTRA code by the producer
  • Overdubbing and tracking – contractor has to keep track of both (also called stacking or overtracking – a doubling of vocal parts that results in the vocal group sounding larger than it really is) Since this practice decreases employment for some singers and increase work time for singers doing the stacking, the AFTRA contractor will keep track of all the stacking and require the producer to pay for each overtracking as if it was another “side”. Producers often find that extensive overdubbing costs them more than if they had hired additional singers in the first place.
  • Sound recording copyright shares – additional source of income results in the Digital Music Copyright Act of 1998
  • AFTRA’s Sound Recording Sessions Report – this is a report prepared by the contractor and signed by the producer which lists the hours of recording, names of all singers involved and the wages due them. Contractor turns this in to the AFTRA office

Scale – AFTRA code defines minimum payments (scale) and:

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  • Classifications of employment
  • Soloists or duos
  • Group singers
  • Soloists who “step out” of a group
  • Singers who record original cast albums (Broadway shows, etc.)
  • Choral singers recording classical music
  • Recording funds/advance – A royalty artist (under contract with label) may be advanced money for recording expenses and then earn royalties on sales after recoupment of production costs. If product is released by a label signatory to an AFTRA or FM agreement, the company may be required to pay the royalty artist up to three times minimum scale per recorded side.
  • Contingent scale payments – Prior to 1974, AFTRA singers earned no extra money based on record sales – now, if an album reaches 157,500 units sold, AFTRA singers receive 50% of their original scale – There are 15 contingent scale plateaus – the highest is 1,005% of scale for 3 million units sold – these plateaus are available for ten years after initial release of the album, not for re-releases – release of a single from the album is also eligible.
  • Payments to nonroyalty singers – AFTRA has negotiated payments to nonroyalty AFTRA singers for sale of digital downloads, ringtones, and music videos – YOU ARE NOT RESPONSIBLE FOR THE REST OF THE DETAILS OF THIS CATEGORY!
  • AFTRA Health & Retirement Funds – Labels are required to pay 11.5% of singers gross compensation of any recording (both royalty and nonroyalty singers) YOU ARE NOT RESPONSIBLE FOR THE REST OF THE DETAILS OF THIS CATEGORY!

Acquired Masters

  • Recordings by small companies and indie labels – Often made without AFTRA or AFM involvement with the hope of selling or leasing the master to a large label

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  • Signatory third party acquiring master:
  • Must ensure nonsignatory producer complied with AFTRA code – producer must sign off on this – this is to prevent producers from saving money by doing everything non-union which affects the union musicians and singers
  • Must comply with all obligations – When a third party signatory acquires a master made with AFTRA members, they are responsible for all obligations including:
  • H&R and contingent payments
  • New use of masters – for instance, a record made for commercial release is going to be used in a film, AFTRA (through the record label) will require the singers to receive the appropriate scale payment for new use.

Nonunion Recording – this happens a lot, even with union members

  • Advantages of collectivism – collective bargaining – the power of unions give professional musicians and singers a huge advantage when they reach a certain level – not really necessary for starting out
  • Changing technology – musicians and singers can “DIY” their recording and market them on CD Baby and iTunes with no union involvement
  • But AFTRA obligations must be met when distributing nationally – If a producer makes a master tape without paying the appropriate union fees and finds a national label to market it, they will then have to comply with all the AFM and AFTRA, therefore:
  • Money not saved in the long run by initially circumventing AFTRA and the AFM

AFM Agreements

Sound Recording Labor Agreement – most labels signed with AFTRA also sign the SRLA

  • Instrumentalists, conductors, arrangers, orchestrators, and copyists
  • Covers provisions for production of music videos and concert DVDs

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  • Employer pays wages + AFM Health & Welfare Fund + AFM Employees Pension Fund
  • Contract provides
  • 200% of sidemusicians’ pay for the leader (double)
  • AFM contractor for 12+ musicians (contractor can function as leader or there can be both a leader and a contractor – they both get double scale)
  • Doubling, cartage, etc… (20% for 1st double, 15% each additional double, cartage is the amount the union allow for transporting heavy instruments such as pianos, tympani, things you can’t just stick in your car)
  • Backup artists – nonroyalty artists – union provides a scale for sessions plus working conditions, breaks, overtime, etc.
  • Royalty artists – negotiate their own contract with label – they also receive union scale for sessions (although their fee can be part of the recoupable cost of production)
  • “Outside” masters – AFM has no difficulty enforcing it’s agreements with label signatories but has much less control in the case of outside masters. The label will often get a “representation of warranty” from the producer of an outside master that states all requirements of the AFM have been met. This covers the label even though the producer may be less than honest.

Sound Recording Special Payments Fund (SRSPF) – when labels sign the SRLA they also have to sign the SRSPF

  • Phonograph records
  • Record companies make payments to fund twice a year – based on the aggregate sale of recordings in the label’s catalog (currently $0.03 per unit sold and $0.005 per download)
  • Paid to musicians who performed in preceding 5 years

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  • Same scale payments for all musicians (based on how many recordings they played on, NOT how many were sold! – Example: if one musician played on ten bombs and another played on ten million-selling CD’s they both would earn exactly the same amount from the SRSPF)
  • Motion pictures
  • Film Musicians Secondary Markets Fund – in the studio, pay is pretty much by the hour.
  • Payments reflect relative success of project – exact opposite of SRSPF – musicians make more for playing on a successful film!

Music Performance Funds – MPF established in1948

  • Nonprofit organization to keep live music available to public – AFM realized way back in 1948 that recording technology was diminishing work for performing musicians and negotiated the Music Performance Fund Agreement which all signatory labels also have to sign and make contributions to based on record sales – this fund has been in trouble and has diminished in recent years!
  • Trustees schedule live music performances by AFM members
  • If no admission charged live performances may be broadcast
  • Digital downloading adversely affected physical sales and therefore MPF

Nonunion Recording – AMF & AFTRA have tried to maintain “union shops” in recording sudios for decades with mixed results – they’ve been successful in the major areas of Los Angeles and New York and in film and network TV

  • Taft-Hartley Act and right-to-work laws – have made this extremely difficult in many states such as Texas and Nevada
  • AFM control
  • Professional symphony and popular music recording
  • Less control in gospel, Christian, jazz, and country fields

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  • Young Sounds of the AFM – occasionally the AFM has recruiting campaigns focused on young musicians and offers them initial membership with reduced fees and dues – most of the new members find that it is an advantage financially to work under the protection of the AFM.
  • Spec sessions – often producers will hire musicians to play a session for partial or no payment with the promise to pay the full union scale “when the record sells” which sometimes happens and sometimes doesn’t. Either way, the union totally disapproves of this practice. The AFM does allow for a lower “demo” scale for making demos as opposed to commercial releases. If a “demo” becomes a “master” then full payment (including H&W, etc.) is due the musicians.

Royalty Artist Contracts – “getting a record contract” is still looked upon by many aspiring recording artists as the “Holy Grail.” (Whenan aspiring artist/group gets that magic deal, it’s not time for celebration yet – (1) they might not even record, (2) they might record a great CD that doesn’t get released, (3) they might make a great CD that gets released with little or no promotion, (4) the label might lose interest in them!

Types of Deals

  1. The label signs the artist; a producer handles project in-house; artist gets royalties – staff-producer gets salary and possibly a royalty override (points), label pays all production costs and may or may not pay an advance to the artist. (This used to be a very common scenario but not so much anymore!)
  2. The label already has artist under contract; retains independent producer to deliver master tape – label gives producer a production budget (and production fee – usually an advance against royalties) producer gets between 2% to 6% of retail price of units sold – percentage depends on producer’s clout.
  3. Independent producer and artist produce master tape (artist or producer, or both pay production expenses, then convince record company to acquire it.

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The label pays the artist and producer based on units sold. Producer and artist divide royalties according to prior agreement based on who paid what percentage of production cost.

  1. Master lease deal – as in #3. Above, artist and/or producer pays all recording costs and leases master to label for royalty payments. Label does not pay and advance for production costs – therefore producer and/or artist retain ownership of master. This is also sometimes described as a “distribution” deal because that is really all the label is doing (in addition to promotion.)
  2. Artist forms a production company to deliver a master tape to a label – production company will contract producer (or producer could be on staff or part owner of production company) – label pays artist’s production company and artist pays the producer a share of those royalties based on contract with producer.

Negotiations - labels choose who they sign much more carefully today than ever before!

  • Conservative signing policies – result of the cost of ‘breaking” a new artist - $500,000 to $1 million for production, promotion, and marketing
  • Terms of contract – determined through negotiations that depend on clout and good legal representation. Courts have set aside onerous contracts when the artist had no attorney
  • Maximize self-interests versus compromise – both parties (artist & label) try to get the best terms for themselves - some sort of compromise is the key to a long lasting beneficial relationship
  • Royalty rate adjustments or bonuses as plateaus are reached is one form of compromise that makes sense and seems fair

The Issues

Term – The standard used to be a 1-year contract with three to five additional 1-year options to be exercised by the label. More common today is tying the duration to the timing of master delivery release requirements and an

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evaluation period for the label.

  1. Savvy lawyers will try to negotiate a “firm” three-album contract where both parties are committed to two more releases even if the first two bomb.
  2. Labels prefer to commit to a single album with options for two more based, of course, on the success of the first and second if there is one.
  3. In a three-album deal, attorneys will try to include a financial penalty paid to the artist if the label fails to release all three albums. Labels want to limit the penalty to a sum equal to union scale for the unrecorded album(s).
  4. Many deals are heavily slanted to the labels advantage – Example: the label can exercise seven options without the artist having a chance to opt out or obligate the label to release and promote a recording.
  5. Lawyers often try to get the label to guarantee release within 90 to 120 days following delivery of the master except during the holiday months of November and December.
  6. During down financial times (as in now!) labels will only commit to singles and EP (extended play) deals which keep production and promotion costs way down. This is common for urban and alternative music genres often produced by small indie labels.
  • Exclusivity - Most contracts require the artist to record exclusively for the label during the term of the contract. Lawyers will often successfully negotiate permission for the artist to make guest appearances as a session musician
  • Royalties, advances – On average, the artist’s royalty will be from 10% to 15% of the retail price with 3% going to the producer. Major stars can make between 18% to 22% of retail. Some label contracts will use a sliding scale such as: 9% of retail for the first 250,000 sales, 10% on the next 250,000, and 12% if the record goes platinum. There is no standard on advances (which

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are recoupable against royalties). The amount will depend on clout and past sales.

  • Production budget minimums – Major acts with clout can negotiate large advances – new artists cannot. When signing with a label with limited resources it is important to demand a minimum budget commitment (at least enough to produce a good product) because without it, the project could be doomed to mediocrity.
  1. Production budget – an estimate of what album production will cost – if the project comes in under budget – label pays no more than actual production expenses
  2. Recording Fund – An actual amount set aside that is paid (sometimes 1/2 or 1/3 up front) and the balance paid upon completion and delivery of the master tape.) If it comes in under budget, some contracts allow the artist (or producer) to keep the balance. The entire sum will be recoupable from royalties.
  • Creative control – Artist’s track record (clout) determines how much. Examples: song selection, producer selection, album art, studio, arranger, side musicians, etc… New artists have to accept the judgment of the label. Labels will try to use producers with good track records and savvy labels understand the importance of a new artist working with a producer they respect and admire. They also understand the folly of trying to force an artist to record a song they can’t stand. The results are never good
  • Commitment to promote – major point of contention – if the record doesn’t sell the label blames the artist and the artist blames the label for inadequate promotion and distribution. Major artists are able to insist on major financial commitments for promotion from the label. Artists’ managers look to the labels for for tour support, press coverage, interviews, radio promotion, in-store promotion, magazine and newspaper ads, etc… In many cases, all of that cost is recoupable in addition to production costs.
  • Chargebacks – any expense related to the production cost of an album such

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as: studio rental, cost of blank tape, AFTRA & AFM union wages, music

arranging and copying, All chargebacks are recoupable from the artist’s

royalties. Once the album is finished and the remainder of the fund is paid to

the artist (and/or producer), the artist sees no royalties until all the

chargebacks have been recouped OUT OF THE ARTIST’S ROYALTIES!

Book Example: Assuming a 10% royalty for the artist is equal to $1.00 per

album sold, the label would have to sell 100,000 units for the artist to recoup