Employment Law

7 Things To Consider Before Signing a Contract in the Music Industry

Doing a bulk of the work on the front end can save you a world of headaches down the line. Keep these seven tips in mind before you sign your name on the dotted line.

Getting ready to enter into a contract with a record label is one of the most exciting moments of any artist’s career. The support of a record label to help expand your talents as a musician is not only a major career move but getting in with the right company can help push your career in the right direction. Because of how high the stakes can be, there are some things to consider before you sign a contract in the music industry. Here are seven tips you should keep in mind before you put your name on the dotted line. 

1. Don’t Be Afraid to Negotiate

As with any industry, almost any role in the music industry was built to be negotiated on. Before you enter in on a contract, make sure that you have negotiated all the terms within it. More often than not, a record label typically drafts a contract so that it benefits them more than it does the artist. 

The label will typically expect that an artist will not accept a contract in his first offer. Instead, it’s almost expected that artists and their agents offer a revised contract with revised terms and conditions. Do not be afraid of the back and forth. This little dance is the perfect opportunity for you to counter offer terms, conditions, and payments that favor you as well. 

2. Ensure Initial Terms Last Only One Year

One of the biggest things to consider before you sign a contract in the music industry is your initial term lock in period. As a new artist, you want to have as much control as possible over your career’s future. If you sign a contract with a record company that locks you in for five or even ten years, you’ve effectively given up any options and opportunities that may pop up as your career progresses. 

The music industry can be a lucrative business in that opportunities arise overnight and can launch you in a realm that you may not have expected. If you sign in with a record company and your initial term period is longer than a year, you’re effectively giving up control of your career for that time period. 

3. Secure a Relief Commitment

When you enter into a contract with a record company, it’s important to secure a release commitment. A release commitment in your contract is a commitment from the record label to release at least one album during the course of your first term. Release commitments ensure that your record label is actually working on your behalf and it gives you as an artist a sort of leverage in the contract. If you have a release commitment and you’ve recorded all the necessary tracks to put together an album and your record company fails to release that album, then there are grounds for a termination of contract to take place. 

4. Understand Your Royalty Rate

Royalty percentage rates differ from artist to artist and company to company. There’s no one set magic number to lean on. Still, you should understand the general guidelines of royalty rates. For undiscovered artists who are new to the industry, royalty rates will typically teeter from 5 to 10 percent. Artists who are gaining traction and have somewhat of a following can garnish around 10 to 14 percent royalties. The professionals in the industry will typically bring in the highest royalties at around 18%. Knowing this general baseline will keep you from accepting a low ball royalty percentage. 

When you are signing on in the music industry, be aware that some record companies may try to cheat you out of a suitable royalty rate so be sure you understand where you fall as far as what an adequate royalty percentage for your work is. Additionally, keep an eye out for record companies that offer a substantial sign on bonus. This lump sum payout is often used to overshadow a lowball royalty rate. 

5. Audit the Company

A record company is only as good as its business model and bookkeeping. Unfortunately, some record companies run shady businesses to the point that artists will never reap the rewards of their contracts. While that’s certainly the worst case scenario, it’s always best to do your due diligence to make sure you’re not getting into the worst case scenario. The best way to do this is by auditing the record label. 

As an artist, you can and should get an independent auditor to look at the books and records of the label. In doing so, you can get a sense of security in knowing that the company you are signing on with is doing its part finance wise. 

As part of the audit, you should ask questions about royalty deductions and what the extent of these deductions are. Not doing so may lead you to enter in a contract with a company that has enormous royalty deductions that could significantly impact your royalty check. It is best to get a closer look at how the company runs before you enter in a contract with them. In doing so, you will avoid unnecessary conflict that may arise throughout the duration of the contract. 

6. Play It Safe and hire Legal Counsel

Some contracts are designed in a way that having legal counsel is the safest and best way to proceed. The music industry is no different. Record companies hold an enormous amount of power when it comes to your career, how you’re paid, and even your future. By hiring legal counsel, you have the benefit of an experienced individual that is working on your behalf. 

Legal counsel not only covers you at the time of your signing but having good legal guidance on your behalf can keep you from having to face lawsuits down the road. You shouldn’t sign away your career without doing your due diligence and having an additional set of eyes and ears to help guide you, the same goes for the music industry. After all, entering into the right music contract can determine not only your music career but the rest of your life. 

7. Envision the End of the Contract

While it might seem silly, it can be helpful to envision what the end of your contract would look like before you even enter into it. Thinking long-term about potential hiccups down the road can allow you to prepare for discussions about what should go into your contract. By thinking about things like members of the band splitting up, termination of the contract initiated by the record company, and other factors, you will be better equipped and more knowledgeable when it comes to understanding, drafting, and negotiating the terms and conditions of your contract. 

Final Thoughts on Music Industry Contracts

When it’s all said and done, entering into a contract in the music industry should not be something that you take lightly. Doing a bulk of the work on the front end can save you a world of headaches down the line. Keep these seven tips in mind before you sign your name on the dotted line. 

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