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.

It goes on and on and on.  With all the “extras” an 11% royalty is reduced to less than 6%.

5. 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.”
6. 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