Decoding a recording contract is challenging. Typically, these documents are text-heavy, and contain a considerable amount of legal language.

While the content of a recording contract varies depending on the record label and the status of the artist, here are some common (and important) general themes to be aware of:

1. You can’t “self-release” or record for other record labels
   Record labels retain your exclusive recording services. This means you generally can’t release albums, EPs or singles independently (or for other labels). While there are often exceptions to this rule (e.g. when you are performing as a non-featured “back-up” musician or vocalist) a record label will ordinarily insist on acquiring rights over all work produced by you during the “term” (i.e. duration) of the contract.

   If you wish to create new material independent of the record label you are required to wait until the contract ends. There is usually no way of getting around this. If you sign with a label, then regret it, you can’t just release work under another name, hoping to sever your marriage to your label. Prince tried this back in the 90’s when he abandoned his artist name (i.e. “Prince”) in favour of an unpronounceable symbol (hence being known as 'The Artist Formerly Known as Prince'). Prince anticipated this would release him from his Warner Bros record deal, however to no avail.

   If you are signing as a member of a band, the contract will typically apply to members on a “joint and several” basis. This means each member shares the rights and obligations under the contract, providing their recording services as a band member and also as a solo performer. If a member leaves the band, the record label will customarily want the option to retain the services of the leaving members, as well as the remaining members.

   Bands will sometimes form a company, mistakenly thinking members will avoid their personal responsibilities to the record label. Their reasoning is that if a company enters into the recording contract on behalf of the band, the contract will only be enforceable against the company, not the individual band members. However, in this instance, most labels will insist on the members providing a guarantee or signing an inducement letter. In essence, these additional documents require the members to meet (and be bound by) all contractual obligations imposed on the company.

2. You might be tied into the contract for several albums
   
   Record deals require you to deliver a minimum number of recordings to your record label. This works along these lines:1) You will record an initial album or EP;

   2) The contract will be on foot for a period of time (usually 6-18 months) after the commercial release of that first album or EP;

   3) When the above period (usually referred to as a “contract period”) expires, the record label is likely to have a number of “options”, which (if “exercised” by the label) require you to deliver more recordings, and hence extend the duration of the contract. Many contracts have between two and five separate “options” (anything more than five is getting up there).

   4) Each option is exercised at the discretion of the record label. If the label decides it wants another album or EP, it will trigger the option, and you are “locked in” to record and deliver more new recordings;

   5) The contract will extend for a period of time (usually 6-18 months) after the commercial release of the “first option” album or EP, and the process will repeat, according to the number of options;

   6) If the record label chooses not to exercise an option, the contract will expire at the end of the most recent contract period. Upon expiration, you are generally free to release new records independently or via another record label.

   Back in the day, Frank Zappa signed a multiple album deal, then decided he wanted out. He then expeditiously recorded (and delivered to his record label) seven albums worth of material, hence meeting his recording obligations under the terms of his deal. These days, the terms of a record deal generally couldn’t allow you to deliver excess recordings in order to avoid future delivery obligations (or to prevent a record label’s option rights). Most record deals have a minimum number of tracks per contract period. So, for example, you may be contracted to deliver a minimum of 15 new tracks in the first contract period. If the record label exercises their “option”, you are required to deliver another 15 new tracks (regardless of whether you delivered more than 15 tracks in the previous contract period).

   Some contracts will specify that all delivered recordings must be “technically and commercially” satisfactory to the record label (which prevents you from delivering lesser quality work). This poses risk to artists because a contract can drag on until you have met this criteria. Also, assessing whether a recording is technically and commercially sufficient is subjective, which adds a degree of uncertainty to the contract.

3. You probably won’t own your recordings
   
   In most cases, you are required to assign full copyright ownership to your record label. This results in the record label owning your records “in perpetuity” (i.e. forever). So, while the record label will pay you royalties for life, you will not actually “own” your work. Your royalties are based on a percentage of income received by your record label for each recording sold, which is applied to net receipts, after deduction of the record label’s costs. These royalty clauses get fairly mathematical and complex, so need to be reviewed carefully. Note, any producer, guest performer and mixer royalties or “points” will come from your share of the pie, not the record labels!While entering into a traditional recording contract will usually mean relinquishing your copyright in your work, ownership will depend on the type of deal you enter into with your record label. So, for example, if you enter into a licensing arrangement, the record label will retain an exclusive licence to sell your work for a certain period (usually upward of 10 years) after the final contract period has expired. Unlike a traditional recording contract, once the licence period has expired, rights in your work will revert fully back to you.

Conclusion

Don’t attempt to untangle the jungle of record deal clauses yourself. It’s a task best handled with the assistance of your lawyer, and we are always happy to help. Please do not hesitate to contact Dan Chisholm, Associate (DDI 03 343 8581 / dan@mmlaw.co.nz).