Music Contracts 101

Clay Aiken

Clay Aiken

With the recent news of the departure of Clay Aiken from RCA Records, there has been much speculation and discussion regarding music artists and their contracts with record labels.

We’ve all heard the stories criticizing major record label contracts. It is understood that many of the deals signed by artists are bad, but what does bad mean and how bad are the deals?

According to the Future of Music Coalition, the majority of artists sign contracts that seem to go against their best interests as a concession for gaining access to the means of production, distribution and promotion that is controlled by the major labels.

Since no one in the general public is privy to the exact contents of Clay Aiken‘s contract or any other artists contract, all the information here is discussed in general terms and is standard in the music/label field.

A contract between a record label and an artist can easily be 100 pages long and is full of doublespeak that makes the documents very confusing.  Experts on both sides recommend that no one sign a contract without consulting an entertainment lawyer to interpret the contract and to help negotiate terms.  If I recall, that option was not given to the American Idol contestants until Clay and Trenyce demanded that they have the option to consult a lawyer.

There is no way a blog could ever cover all the information in a music contract, but a few important topics should be mentioned.

  1. Transference of Ownership:  The musician has no ownership or control whatsoever in the sound recording copyright created under the contract.  If he doesn’t recoup the costs necessary to produce, market, and distribute the record, he will never see another penny beyond the advance.  The musician will never be able to authorize the use of the sound recording in any movie, advertisement, TV show, doll, or any other commercial endeavor.  And he cannot re-record the songs on a new CD.
  2. Length of Term:   The contract that is signed affects the musician for many years.  It goes way beyond the end of the contract period or the delivery of your last album.
  3. Royalties: The artist receives $0.056 per song.  This is the minimum rate and you get the same amount for a 2 minute song as a 10-minute song.  Artists get royalties on a maximum of 10 songs per album even if there are 12 songs on an album…so that is $0.56.  The artist does not get paid for “free goods.”  This usually mean promo albums and give-aways.  The major labels define “free goods” as 15% of the records they sell.  So, the artist only gets royalties on 85% of records sold.
  4. Returns, reserves, and other standard deductions:  This gets complicated, but lets give it a try.
    1. Definition of  “Net Sales” :  …85% of gross sales, less returns, credits and reserves against anticipated returns and credits.
    2. Container Charge:  25% of Gross Royalty Base retained by Label for CD’s and new technology (Digital).
    3. From the same royalty section:  “No royalties shall be payable to you in respect of Records sold or distributed…..as “free”, “no charge”, or “bonus” records.
  5. It goes on and on and on.  With all the “extras” an 11% royalty is reduced to less than 6%.

  6. Coupling clause: This gives the label the rights to do what it wants with the artist’s music created under the contract.  It gives the label the right to couple an artist’s recording    with other artists, or make compilations.  So, if you are a Christian artist, you could someday see your song compiled with an explicit rap song on “Greatest Hits of the Century.”
  7. Reserve limits:  Basically, this is easy to understand.  Retailers insist upon being able to return product they can’t sell.  The labels shift that burden to the artist by holding onto a portion of royalty payments until they can verify product shipped has been scanned and sold.


So, the big question is why would anyone sign a recording contract?  According to the American Federation of Musicians, there are at least two good reasons.

  • If you hit big, you will make some money, but you will not make a lot of money compared to the label but you will make some.
  • It is the best way to get mass-media exposure.


It is obvious that anyone who is a recording artist must have a good team behind them to help protect them and work with the label to get a level playing field.

This article has only touched on a few of the thousands of clauses in the standard artist’s contract.  For more information, you might find these sources interesting:

American Federation of Musicians

Music Business Registry

Law Depot

Future of Music Coalition

How Stuff Works

Clay Aiken News Network is an unofficial fansite. We are not affiliated in any way with Clay Aiken or his management. This website was made by fans for fans and makes no impression or impersonation of the official site, which can be found under the domain clayaiken.com.

Comments

  1. Wow, thanks for the information! Nice and short so I could get the gist of it… plus links to find out more. Excellent!!!

  2. Good Lord! It is pathetic that an artist only gets $.56 for each CD sold. That information alone is worth the time to read this informative and enlightening article.

    Thanks (!) for a great site here.

  3. We’ve been hearing for years about the artist that selling millions of cd/albums/songs and is broke all the time. The record companies are in business for the record companies. The artists are all expandable, by their philosophy.

  4. Thanks for this very informative article. I know that many artists have finally figured out that the real money is to be made in publishing. Ownership of the songs themselves (songwriting) is where the real money lies.

  5. Thanks for condensing the information into an easily understandable format. The links you provided back up what you have said. Good job with your research.

  6. So the label is not required to do anything other than promote and distribute as they see fit and I guess that could be different in each artist’s contract. I would think Clay has been just waiting for his contract to be up so he could re-negotiate or dump RCA.

  7. Really does seem everything is heavily weighed in the label’s favor, without being held accountable for mismanaging or underpromoting an artist.

  8. My goodness…. A lot of research went into this….

    It’s mind boggling, isn’t it…No wonder you have to have top lawyers in all of this. I have a feeling Clay utilizes his lawyers a lot…he’d have to….as any artist would have to. You’ve got to protect yourself…

    Thanks for all of this.. It really is interesting..

    Hugs,
    Judy

  9. MusicFan – thank you so much for the information. I agree. A HUGE amount of research mhas gone in to it and every fan of any singer, should read this.

  10. Thanks for the research on this excellent article. It’s apparent that the last one to benefit from the recording is the artist. Explains why so many are in financial trouble.

  11. Thanks so much for the information and the other links you provided. This will be an eye opener for those that thought an artist made his money with his CDs and shows why they need to tour and make other appearances. Thanks again.

  12. Thank you so much for this information. Using the formulas herein, Clay could almost end up owing the label. This after they did so little to promote it and he did all the work to produce that gorgeous album, OMWH.
    I remember what happened to the Turtles. The were in bondage to their label for 30 years because of a horrible, horrible contract.

    Your article is so informative.
    Those of you here at CANN do an incredible job!

  13. Wow, wonder that any artist would sign a contract. It would be more beneficial for Clay to be his own label.

  14. Great article and so informative. I am so impressed by this site and make it a point to stop in daily.

    I have a question, since we all love Clay’s tours and many of us have thought that is where he makes his money. Would this be true? How much would an artist stand to make touring and how much of it goes to his label?

    • None of an artist’s touring money goes to the label. That is totally separate. Except for the new “360” deals that some labels are now trying to use. Clay wasn’t under one of those though.

  15. I like finding out the behind the scenes stuff that we as fans generally know nothing about. Thanks for doing this research and presenting this info to us.

  16. What a well-written, informative article.
    The contract for an unknown American Idol
    contestant must be one of the worst, most
    one-sided contracts to ever be written by
    the music industry. The real shame for any
    artist is that they lose control over the
    recordings they make for a label once they
    leave unless they have enough money to buy
    the rights to them and, I suppose, if the
    label is willing to sell them.

  17. Very interesting read. Clay was smart enough to have a lawyer the first time around. My goodness…….it’s enough to make one’s head spin! I’m sure he has learned a lot the past 6 years, and when/if he decides to sign with a new label, I hope it will be one that respects his talent and shows their support.

  18. Thanks for the great information! I trust Clay and I think his next decision will be very beneficial for him. He has learned a lot in the past 6 years!

  19. Thank you for putting all this information in one place. It has been very informative as well as eye opening.

    Thank you again for all the hard work you have been doing. It is very much appreciated.

  20. Unsurprised at the $0.56. I’m an author, and my first book sold for $8.95 per copy. I received $0.85 of that. Heavens, in 25 years, I’ve made far more from Canada’s $0.09 per withdrawal royalties from the Library Commission. Ironically, its audience is small, written as it is about the problems faced by women with disabilities, and at its core is a word familiar with Clay’s fans: inclusion. The artist is always the one EXcluded in the payment. See why we thank God for lectures, tours. and for me, universities.? But NOT for TV and radio, which provide promotion IF we’re fortunate to speak well and IF the researchers have done their homework. Ah well, as hubby’s fond of saying, “Better’n a kick in the butt.’

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