What They'll Never Tell You About the Music Business

by Peter M Thall

  Other audit-related issues are the following: Are there provisions covering whether the producer is bound by the accountings to the artist and/or the audit provisions of the artist’s agreement? Does the producer have the independent right to audit the record company? Can the producer piggyback on the artist’s royalty audit and ensure that his or her entitlements are covered, and claimed, as well as those of the artist in any eventual claim that is asserted following the conclusion of a royalty examination?

  Rerecording Restrictions

  Customarily, producers are expected to warrant to the artist and the artist’s record company that they will not, for a period of from two to five years after the completion of their production services, produce or coproduce a master recording for any other artist or record company that embodies any musical composition they have just produced. When the producer also writes the songs being produced, this can be an unreasonable restraint on future exploitation of the producer’s own compositions. This can be even more restrictive if the producer is also an artist and might like to record his or her own versions of these compositions.

  Song Authorship

  It has become the norm for the contract with the producer to provide that the producer must warrant that he or she has not made and will not make any contribution to the authorship of any compositions recorded and that he or she will not claim any right, title, or interest therein. If the producer has made an authorship contribution and the contract is still in the draft stage, the language can be changed. But what happens when a producer has already signed a contract containing this provision and then makes a significant authorship contribution? In such a case, I usually advise my producer clients not the leave the studio until a piece of paper confirming the coauthorship, and the exact splits, is initialed by all contributing authors.

  Sampled Material

  Most producer contracts specify that delivery of the masters is deemed not to have occurred unless and until all written licenses and permissions from the owner(s) of sampled material have been obtained and delivered to the artist and record company. More often than not, except in the hip-hop and reggae genres, it is the artist who decides whether samples are necessary and who selects them, but it is the producer who is contractually responsible for obtaining the permissions, upon terms and conditions acceptable to the artist and the record company, and it is the producer who is responsible for any fee or other payment due in connection with the use of any sampled material that is not approved by the artist and the record company. That’s quite a responsibility. Do all producers know that such provisions exist? Have their lawyers or managers ever told them about this particularly tricky delivery requirement? Sometimes a producer will become aware of this provision only when the backend advance, having been used by the record company to pay for the cost of samples, does not arrive on schedule (or at all) or has been reduced. Of course, the previous example covers the situation in which the artist is signed directly to the record company and the producer is separately, and independently, engaged. When the record company signs the producer who provides the services of the artist, or when the producer is the artist, the question of sanctions on producers, which I am suggesting be avoided in sampling situations, becomes moot.

  Indemnities

  Producers, who by definition are supposed to be the responsible ones in charge of multi-hundred-thousand-dollar budgets, are often asked to protect the record company from eventual claims arising out of a large number of potential problem areas. Producers and their representatives must be particularly careful about what the contract requires them to indemnify. For example, if the producer has nothing to do with selecting samples, he or she should not indemnify the artist or record company against losses resulting from claims by the owners of the songs, or recordings, sampled. Furthermore, the producer is in no position to warrant the originality of musical compositions written by the artist and should not be responsible for any costs related to the fact or claim that these songs have been plagiarized by the artist. Finally, as with all indemnities, no one can guarantee that a claim will not be brought by a third party seeking compensation for damages. Even unproven claims are very costly to defend, and the only thing that the indemnity should apply to is losses resulting from these claims—presumably confirming the veracity of the claims—not the cost of a successful defense of a claim.

  Claims settled without the consent of the producer should not be subject to the indemnity provision unless the producer has consented to the settlement.

  Union Requirements

  The standard contract requires that the producer adhere to all union agreements having jurisdiction over the recording, and producers and their representatives should be aware of what this entails.

  Among the most tedious responsibilities are the filing of union session reports within a set number of days (usually fourteen) following the applicable recording session. These session reports are, in themselves, rather complicated in that the producer must accurately report the number of sessions; overtime, if any; and, in the case of the American Federation of Musicians (AF of M), indicate who is the leader of the musicians. (Every union session must have a leader, who receives double scale.) Many producers have assistants who are familiar with the rules and regulations of the two principal unions—AF of M and American Federation of Television and Radio Artists (AFTRA)—involved in the making of recordings. Union regulations for theatrical productions are especially complex and costly, and some theatrical show producers are paid substantially for the services of their assistants in addition to their own fees. But any way you look at it, the record producer is charged with these responsibilities and the ramifications for failing to honor them can be serious.

  Post-Term License Income

  Post-term licensing of master recordings can be extremely lucrative. Film, TV, and commercial uses of masters generate enormous sums of money for the record company. This money is customarily split with the artist on a 50/50 basis, although it can be shared more favorably. The artist’s share must be split between the producer and the artist, and this division is normally made by the record company before distributing the artist’s share. But unless producers see or hear, or hear about, the particular TV show, film, or commercial, they are unlikely to find out about these uses, and must rely on the record companies to pay them their shares. By the way, here is another example of how producers can profit from others’ efforts long after they have completed their work and gone home. The huge staffs of the majors’ synch divisions, as well as those of publishing companies, are always working overtime to generate these monies. Songwriters and artists are also often quite involved. The producers? Well, they just collect their percentages.

  Producer-Engineers

  When a producer provides services as an engineer as well as a producer, if the fees attributable to his or her engineering services are included in the customary advance paid against producer royalties, it is appropriate to divide the advance into (1) the engineering fee, which is not recoupable against royalties, and (2) an amount, the fee, which is recoupable against producer royalties.

  The faster the advance is recouped (that is, the lower the amount of what is designated as the advance), the more quickly the producer will receive royalties that, as you will recall, go back to record one. These early royalties can accumulate in substantial amounts, and if they are never released to the producer because the advance is never recouped by the record company, there can be significant financial consequences. The lesson here is to designate as much of the signing amount as possible as an engineering cost, and as little as possible as a producer advance.

  Location of Recording

  Producers are often more comfortable in their own environment than in a different city. They know about the studios in their geographical area, and they are aware of the availability and level of quality of technicians, equipment, and parts, etc. If the consensus among the record company’s A&R person and the artist and the artist’s representatives di
ctates that the recording be made, in whole or in part, outside of the producer’s preferred location, two factors come into play. First, there will be additional costs for transporting and housing people and equipment (for example, the Pro-Tools engineer the producer prefers to work with), all of which will add to the production budget and delay the release of the producer’s royalties after the advance has been recouped. If possible, language should be added stipulating that the producer is not responsible for such additional costs. Second, the producer’s own comforts must be considered—for example, travel, accommodations, rental car, per diems, perhaps a trip “home” if the process takes more than a month or two. All will have to be dealt with, and the producer’s own manager or attorney—whoever is negotiating the agreement—should be familiar with the producer’s minimum requirements in this area.

  Complimentary Copies

  The producer’s representatives must make sure the contract contains a provision requiring the record company to deliver to the producer, at its expense, at least twenty-five copies of the CD as soon as it is released. You would be surprised how many times a record company will try to weasel out of giving producers the copies of the CD that are rightfully theirs and which they need for a variety of reasons, not the least of which is auditioning for new projects—often with the same record company.

  THE PRODUCER AS AUTHOR OF THE SOUND RECORDING

  All record companies require that producers acknowledge that their duties are performed as employees for hire and that the products of their efforts are works for hire. As discussed in chapter 23, there is a possibility that the copyright law does not permit such a concept—that their creations are merely assigned to the record company, in which case the producers may actually terminate the assignments thirty-five years after they performed the services. Section 203 of the 1976 law (which took effect in 1978) provides that authors can recapture whatever it is that they assigned, and the first test of this for records produced in 1978 was 2013.

  This issue will be of particular relevance to record producers who have contributed more than traditional production services, that is, producers who have actually created the product no less than if they were the artists themselves. Such producers have become the norm in certain genres of music. To my mind, these producers have every right to be called “authors,” and it will be interesting to see if they can garner the support for a share in the recapture wars that are certain to erupt shortly.

  Record companies are now insisting that certificates of employment be signed before the actual producer agreements are concluded. This insistence on producers admitting in writing that the record they are about to produce is a work for hire—even before they receive their start-up advance—is becoming universal in the United States. Many lawyers are up in arms about their clients signing a document that says that the record company owns the results of the producer’s services even before the deal is fully negotiated, let alone reduced to a signed writing. Some lawyers withhold their objection if they have at least a brief deal memo signed between the artist and the producer. Those with no leverage will allow the certificate of employment to be signed even if the actual deal is far from concluded—just so that the producer can go into the studio and begin working. After all, they feel, sooner or later, they will be paid for their services since a record company would be hard-pressed to say that they own something when they have not actually paid for it. In any event, here is one more document that benefits the record company. It may well turn out to be illegitimate, but it will still require expensive lawyer’s services to review.

  PRODUCERS AND NEIGHBORING RIGHTS

  As uses of recordings in new media multiply due to the spread of the Internet among all peoples of the world, assuming that unauthorized sharing and piracy can be controlled, income for all participants will increase as well. Some institutions and mechanisms exist now, and others are in the process of being established, which can generate additional income for individual producers that they do not enjoy as of the date this book is being written. While the passage of truly meaningful neighboring rights legislation has been blocked for generations in the United States, there are some cracks in the wall of resistance—notably the Digital Performance Right in Sound Recordings Act (DPRSRA) of 1995, which mandated licensing fees for certain digital transmissions by subscription services. (The term neighboring rights refers to rights that are not covered by US copyright law but that are related to rights conferred by copyright law and that are recognized by many other countries. Neighboring rights are discussed in more detail in chapter 17.)

  For the first time, artists (together with their record companies and their producers) are being paid for the performance of their music. Frank Sinatra and others whose recorded performances generated fortunes for the broadcasting industry over the years, and who fought for neighboring rights legislation for decades, must be singing for joy in the other realm.

  Over the last few decades, record producers have gotten into the act, claiming that radio performances of their music should generate a “residual” for them as well as for the music publishers and writers. Contemporary record producers see themselves not just as functionaries, but as intellectual property creators and contributors no less important to the ultimate product than the song itself. Of course, recording artists feel the same way, so there is quite a large population of people hungry for a larger piece of the pie. As the pie itself continues to grow, perhaps producers will receive their fair share.

  Record producers note that film companies refer to the script as the “currency” of the motion picture and music publishers refer to the song as the “currency” of the recording. They contend that, by analogy, their contribution as producers is the “currency” of genres like rap, hip-hop, and dance music. And frankly, they are not wrong.

  There are two issues here. The first is whether individual producers are “authors” in the sense of various world copyright conventions. For example, the Rome Convention, to which the United States is not a signatory, stipulates that when a work is broadcast, a fee must be paid to the producers, to the performers, or to both, of the broadcast work, or phonogram. The phrase “broadcasters of phonograms,” has been the subject of intense litigation in Europe because individual producers are claiming that the word producer refers both to individual producers and corporate (record company) producers. The consensus of those who have considered this issue is that it was probably the intention of the drafters of this convention and others that the “producers” for whom the conventions have sought to provide protection are indeed the record companies and not individual producers, who are trying to slip themselves into the coverage afforded by the treaties.

  The second issue is a practical one. Even if the individual producers prevail in their claim—or succeed in promoting legislation supporting their claim—is there enough support in the industry to force broadcasters to pay yet another fee for the operation of their businesses? It does not appear that there is. Currently, only some European organizations collect neighboring rights income for artists and record companies. It is probably not through the record company that the artist will be paid neighboring rights income, and therefore the traditional producer agreement and the letter of direction to the record company will not cover the issue of neighboring rights income. One of the things that the producer can do in the meantime, however, is to piggyback on the rights of artists, where they exist, and share in the same ratio as they share in other income sources via the producer agreement (for example, foreign, club, budget, and other forms of ancillary income). This will require that the producer agreement with the artist specifically identify sources of income that may not be collected directly by the record company, with the resultant pay-through of a share to the individual producer. These new sources that are collected directly by the artist will have to be accounted for and paid separately by the artist, who is not traditionally equipped to account on a regular basis to others. Thus, the producer agreement might include
a letter of direction—“To Whom It May Concern”—such that in cases in which artist income for neighboring rights is paid directly from broadcasters to artists (or to artists’ agents), the paying party is directed to also pay the producer his or her contractual percentage directly.

  Where record companies receive neighboring rights income, they customarily share it not just with their artists, but with their producers as well, in the proportions that are established by their respective contractual arrangements. Otherwise, in order to make their argument for a share of this income, producers will have to overcome the economic resistance of a large number of interests as well as the perception that their creative contribution to a master recording is something less than authorship. In chapter 17, I discuss in more detail the concept of neighboring rights and the availability of new sources of income for producers, artists, and writers.

  9 • GETTING YOUR RECORD HEARD

  A Practical Guide to Marketing and Promotion

  Half the money I spend on advertising is wasted; the trouble is I don’t know which half.

  —LORD LEVERHULME, IN DAVID OGILVY’S CONFESSIONS OF AN ADVERTISING MAN

  The record is written and recorded. It is manifested (finally) in a master recording from which “derivatives” will be made and shipped (or digitally transmitted) to the consumer. There are now left only two functional dominions—or realms—that affect the recording artist’s eventual success or failure: the contract terms and the record company’s promotional tools. The contract describes the mutual promises made between the record company and the artist; it defines and delineates the structure of their relationship and it refines how their respective rights and financial entitlements are to be governed and how they are to be achieved. The promotional tools of the record company are the hundred or so actions it can take to maximize the chances that potential buyers will hear the record and that the artist(s) will achieve the highest profile possible. Of these mechanisms, which include advertising of all kinds, videos, and public appearances, the most important is radio promotion, that is, obtaining airplay time. And whereas in the past promotional campaigns were handled and paid for by the record companies, increasingly the trend has been toward independent promotion, where, although people inside the company manage the promotional campaigns, people outside the company are charged with the real task and costs are borne in part or in whole by the artist.