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Recording Contracts with Labels

A recording contract is a legal agreement that is most often made between a recording artist and a record label.

Last updated: 11 June 2021

When offered a recording contract with a label:

  • Make sure you know how and when you will be paid. Ideally you will be given a cash advance in lieu of future royalties.
  • Try to secure higher royalties after reaching a certain figure, or after the first year. Aim for a payment on 100% of all sales.
  • Make sure you know what they want from you and remember they, not you, will own the recordings. You need to check whether they want you to record exclusively for them. 
  • Ask what happens if you split up. In most cases each member will remain individually signed to the label.

Royalties from sound recording 

  • Try to secure higher royalties after reaching a certain sale figure.
  • Try to increase your rate of royalty with each new year of the recording contract.
  • Aim for payment on 100% of sales.
  • Get advice if a company insists on paying a half-rate royalty for ‘TV advertised’ product or compilations.
  • Try to ensure that you are entitled to receive 50% of any income paid to the record company by VPL (Video Performance Ltd).
  • Beware of ‘hidden’ deductions for packaging or new technologies.
  • Pay particular attention to the royalty rates that apply to digital download sales and streaming revenue. Ensure these do not include any reductions.

Advances

Advances are a financial sign of good faith from the record company. They should always be non-returnable (and only recoupable from any future record royalties). 

If a long-term contract is offered, the advance should be large enough to provide the members of the band with a reasonable living wage until any initial costs have been met and royalties are being received. 

When will I be paid?

Most companies will render a statement of account to their artists twice yearly, within 60 or 90 days of the end of June and December. If your royalty earnings are greater than the personal advances you have received and the recording costs you have incurred (in other words, you have ‘recouped’), then the statement should be accompanied by a payment.

What should be deducted?

The MU feels that only the cost of recording and personal advances should be offset against royalty income. You should try to get references to ‘other costs’ deleted from an agreement, or at least make them subject to joint agreement.

Try to limit the number of remixes the company can commission without your approval or it’s possible that recording costs will spiral. Also, never agree to cross-collateralisation of advances against non-royalty income, such as PPL, or income from other contracts.

How long will the agreement be for?

A typical record deal with a major record company might be for one year plus four options, calling for five albums.

However, past judgements in British courts seem to have frowned upon the restrictive nature of long-term recording agreements and, especially with small labels who are unable to guarantee sufficient annual advances, you should aim for as short a deal as possible.

Tips for record agreement length

  • If a guaranteed annual advance is insufficient for the members of the band to live on, then you should only commit yourself to one album.
  • There should be a time limit of one year within which this should be recorded and released, and if the period is defined by reference to the release, then ensure there is a maximum duration beyond which that period cannot extend (if there is no release).
  • Even with larger companies who can afford advances, if recordings have not been released in the major markets of the world within a certain time, you should be able to terminate the agreement.
  • Finally, it is wise to leave out extra recordings, such as ‘live’ and ‘greatest hits’, from an agreement, so you can use them as a bargaining tool later on.

Who owns the recordings?

It is important to remember that because the record company has initially commissioned and paid for the recordings, in the eyes of the law they are the owners and not you. The agreement will make this clear and assign all copyrights in the recording to them.

However, if you have made and paid for recordings yourself then you probably own copyright in them. So if a label expresses interest in releasing them you should think seriously about whether to assign your copyright to the label or simply grant them a licence to exploit the recordings.

If this situation arises, the MU generally always advises that you license your recordings and retain copyright in them yourself, unless there is a very good reason to assign them. Contact your Regional Office for advice, or if offered a contract that assigns copyrights you own, discuss it with the MU’s Contract Advisory Service.

A recording contract will require you to give consent for the company to exploit your performances contained on the recordings by selling records and authorising others to broadcast them. The MU feels that these consents ought to apply only to record sales and the right to give others permission to broadcast recordings. Vague ‘audio visual rights’ or ‘other uses’ should be subject to negotiation from time to time and not just signed away in the initial agreement.

Also ensure that session musicians sign the appropriate MU consent form and that a copy is sent to the Union.

What will the record company require of me?

  • That you record exclusively for them (although you should be allowed to do non-featured session work provided that you credit the record label on the sleeve or booklet).
  • That any tracks recorded for them will not be re-recorded for any other company for several years after the end of the agreement.
  • That you do not have outstanding agreements with any other label.
  • That you give permission for them to use approved photographs and biographical details for publicity purposes.
  • That you will devote a reasonable amount of time to interviews and promotional activities.
  • That you give them consent, in advance, to sell your recorded performances by dint of any future technologies.

Release commitment

Although it is often not the intention that the record label should release masters themselves, it is important to have a clause ensuring that somebody does, otherwise the artist’s work might never see the light of day.

Any agreement needs a clause which commits the label to secure releases in the UK for tracks recorded, or at least to enter into an agreement with an established record company whereby they are obliged to release at least one album.

In the event that the record label fails to achieve the above, the artist should ensure that they have the right to have the unreleased masters assigned to them if they come to an arrangement to repay the un-recouped recording costs or give the production company an override royalty upon such masters.

The artist should try to negotiate so that they only have to do one of the above, but their success will, as always, depend on bargaining power. It is also worth trying to secure a commitment to release in the major markets (USA, France, Germany, Japan), but few production companies will give more than an obligation to use ‘reasonable endeavours’ to secure such release as they are reluctant to commit to this contractually.

Re-recording restriction

Recording agreements almost invariably seek to prevent the artist from recording any song that has been recorded during the term of an exclusive agreement for a period after that agreement ends.
The artist should, however, seek to limit the effect of the restriction to recordings released during the term of an exclusive agreement, or within a short period thereafter.

Mechanical licences

The right to reproduce musical compositions is called the ‘mechanical right’ and is one of the rights owned by the author of the composition or their assignees (for instance, music publishers). Recording agreements will almost always contain a clause that warrants that the record company will be able to obtain such a licence.

The mechanical royalty rate in the UK is negotiated between the British Recorded Music Industry (BPI) and PRS for Music, and is calculated as a percentage of the price of records.

In Europe the rate is set by BIEM. However, in the US and Canada the mechanical licence fee is fixed by statute with the rate varying according to the length of the composition and the year recorded. Equally, you should expect a clause whereby the artist also warrants that the record company will be able to secure synchronisation licences enabling the making of videos and that where the videos are used purely for promotional purposes, this licence will be free of charge. This is standard.

It is very important that if an artist has signed a publishing deal prior to entering into a recording agreement, they ensure their publisher agrees to the contents of such clauses.

Videos

As well as the right to make records, the production company will require the exclusive right (but not the obligation) to make videos. It is unlikely that the artist will be able to secure many rights of approval as the production company will not want to be fettered in the rights it can grant a third party. The costs of videos will be an expense deductible from gross income.

Group provisions

Expect to see a clause in most record label deals spelling out what happens if one or more of the artists (assuming that they are a band rather than an individual) leaves, are expelled, or if the band splits.

The label will want to ensure that it has the option to do one or more of the following:

  • Retain the services of the leaving member(s).
  • Retain the services of the remaining member(s).
  • Terminate the agreement with respect to the leaving member(s).
  • Terminate the agreement with respect to the remaining member(s).
  • If a band splits, it is important to ensure that separate royalty accounts are maintained by the production company in respect of the leaving and remaining members.

Music production agreements

The number of so-called ‘production agreements’ being offered to artists has increased dramatically over the past few years. Production agreements are similar to recording agreements but differ in terms of what happens to the recording.

Commonly, a studio owner or a manager with studio access signs a band to a recording agreement not with the intention of releasing the recorded material themselves, but instead selling the act or its recordings on to a major or large independent record company.

If you are offered free studio time but have not signed a music production agreement, the MU offers Standard Contract M5, a short studio agreement to cover the position until the terms of a production agreement have been negotiated.

Third-party agreements

When a production company successfully sells on the recordings to a record company, the artist will be required to sign an ‘inducement letter’ with the third-party record company. This is an agreement between the record company and the artist whereby the artist agrees that, in the event of default by the production company, the record company can enforce its rights directly against the artist.

It is important that the artist be allowed to take independent legal advice on the terms of any such inducement letter. It is also likely that the production agreement will include a clause such as a “catch-all” provision, which provides that if any of the terms of the third-party agreement are less favourable to the artist than are contained in the production agreement, then the less favourable clauses will be deemed to be substituted.

It is often difficult to fight against these clauses, but it should at least be ensured that the record company cannot be entitled to a longer term or more options or a greater minimum commitment than is contained in the production agreement.

What’s a 360˚ Deal?

Unlike conventional deals, a 360˚ deal sees record companies looking after everything from management to live shows and merchandise. This is comfortable for some artists, but others might take the view that the label is taking a cut of lucrative revenue streams.

Member benefits and services

Collective Bargaining

The MU negotiates collective bargaining agreements with broadcasters and umbrella organisations for other regular employers of session musicians.

Read more about Collective Bargaining