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Modified from an article originally published in GIG Magazine in April 1998

The Recording Contract from Hell
© 1998-2000, Diane Rapaport. All Rights Reserved. Used By Permission.

A few weeks ago, the guitarist from a well known Native American instrumental group made a distress call.* He figured out that the recording contract his band signed with an independent record label took away the band's publishing rights. The moment of truth dawned when the band discovered that one of their songs had been licensed to a German record label naming the artist's record company as the owner of the copyrights. "Aren't we owed mechanical royalties in addition to recording royalties," they asked? "Shouldn't our publishing company have granted a mechanical lisense for the song to the German record label?"

"Didn't you understand what you were signing?" I asked.

"We were afraid the record company wouldn't sign us if we gave them a hard time."

"Didn't you have a lawyer look over the contract before you signed it?"

"We were too broke."

This isn't the first time bands have signed bad contracts because they were intimidated into believing that if they didn't, the contract would be withdrawn. And it's not the first time bands haven't bothered hiring a lawyer. Intimidation is one of the most commonly used 'tools' of negotiation and so is the phrase "trust me."

Here are the worst clauses in this one page contract:

" For the use of the recorded material and for all rights thereto and sole control thereof, [Record Company] shall pay a nonreturnable advance royalty of $1200 to the Artist following satisfactory recording of the Artist's songs. Such payments shall constitute an advance against royalties, if and when earned, on the basis of $1.00 per cassette and $1.50 per compact disc sold. These royalties are figured at 10% of the retail list price. The books and accounting records of [Record Company] shall fix the royalties to be paid Artist.

Upon payment of the aforementioned royalty, all right, title and interest in and to the recorded material and recordings, and the use and control thereof become the property of [Record Company] free of any claims by Artist or by any person representing Artist. The music will be published by (Artist's Publishing Company). Licensing and publishing fees will be divided equally between [Record Company] and Artist."

Here are some of the questions the band should have asked prior to signing.

1. What does the following phrase mean? "For all rights thereto and sole control thereof." The wording of both paragraphs is entirely unclear as to what rights are meant.

Typically the record company has the right to control promotion, sale and distribution of the record. The composers own the rights granted to them by the U.S. Copyright Office.

2. What type of royalty is being referred to? Typically a record company pays two royalties: one to the band recording the compositions, known as a record royalty, and one to the copyright owners of the songs and publishing company, commonly known as a mechanical royalty.

3. If the music is published by the band's publishing company, why are licensing and publishing fees being "divided equally between Record Company and Artist"? Does the word 'licensing' refer to the issuance of mechanical licenses? If so, what fees are involved? What publishing fees are being referred to?

4. Who issues mechanical licenses if another band or producer wants to rerecord one of our songs? Since our band is specified as the publisher, wouldn't we do this?

Had the band asked any of these questions, they would have begun to unravel the tangled assumptions of this contract and discovered that the record company was about to walk away with their publishing rights. They wouldn't have had to act "heavy" when asking. Looking for information and clarification is the sensible thing to do.

All contracts, even the simplest ones, are the means by which business people open the door to negotiation. The parties are expected to question the clauses they don't understand, push forward their vested interests, and come to a mutual agreement about how they can work together to make the record successful. Otherwise, why bother?

This contract succinctly stated the vested interests of the record company: they wanted to pay as little as possible for all rights. In this case, the contract seemed to mean recording rights, copyrights, publishing rights and artistic rights.

The band never stated their wants: fair pay for giving the record company a way to handsomely profit from the band's creativity; retention of all publishing rights; control over their productions and budget. They were so happy a record company liked their music that they were afraid to make them unhappy by questioning the flaws in the contract. They were unhappy to betray their ignorance by asking what might seem like foolish questions. Unhappy relationships between labels and bands often produce unsuccessful records. And once a rift forms, no contract can shrink that rift and make the parties want to work together. In this case, the band found a new record company. And this time, they found a lawyer to help them negotiate their deal.

Interestingly enough, this story may eventually have a happy ending. One of the band members recently called to tell me that Harry Fox is suing the record company for nonpayment of publishing royalties. . . not just for the band I'm writing about but for many others on the label as well.

Here's what bands need to know:

1. Understand the difference between a record company and a publishing company. The former is in the business to sell records; the latter profits by actively selling songs to other record companies, bands, producers, filmmakers and so on. Although an argument can be made that a record company exposes the band's songs to a wide audience, thereby enhancing the potential for further publication, the record company is only a passive participant. Few bands these days sign away their rights as composers to record companies. They hold those rights as leverage for making a deal with a publishing company that actively wants to exploit their songs.

2. Hire a lawyer specializing in music business to negotiate for you. Read the contract and ask him/her about any phrase you don't understand. If you're really cool, you'll also read one the good books available on record and publishing contracts so that you won't be charged for the time spent being educated by your lawyer. Use the lawyer's time for his/her best skills: negotiating with the record company on your behalf.

3. Remember these sentences: "You don't ask. You don't get."

*The name of the band and the record company are withheld at their request.