subpar royalty rate—around 4% to 5%, explains lawyer Ryan Smith, partner at J Ryan Smith & Associates P.L.L.C. “Generally speaking, a new artist may get a royalty rate of 10% to 14% on the suggested retail list price from independent labels, 12% to 14% from major or mini-major labels.” It doesn’t stop there. “The costs for independent promoters, those paid to get the album played at radio stations, are sometimes 100% recoupable from the artist’s royalties. Since these fees can be tens of thousands of dollars, this is problematic insofar as artist revenues are concerned. Artists should ask for a cap on how much they can be charged for these promoters and get the recoupable percentage to 50% or lower. In addition, in normal record deals, 50% of music video costs should be recoupable against your audio record royalties. They can really nickel-and-dime you on the percentages. For any artist, you need to watch your percentages and make sure they are within industry standards.”
The best advice for any artist, in addition to hiring an experienced entertainment lawyer, is to retain the services of a knowledgeable accountant with experience in the music industry, stresses Smith.
Smith’s next tip: Protect your intellectual property. Do this by registering the words, sheet music if you have it, and master, with the United States Copyright Office. Smith surmises that more than half the music copyrights in the U.S. have not been registered. “Also, if someone is producing your music, writing a track for you, or even playing a keyboard on one of your songs, sign an agreement with any of these persons to have their rights granted to you. Without this, they may have a claim for partial ownership of your work. [And] if that is the case, it may be difficult to secure a record deal without their permission,” warns Smith.
WHAT’S THE DEAL?
The world of music is as varied as the artists that inhabit it, explains entertainment lawyer Lisa E. Davis, partner at Frankfurt Kurnit Klein & Selz PC. Some artists sign deals with major labels such as Sony BMG, IDJ, Warner Music Group, and EMI. However, more artists are opting for independent deals.
MAJOR LABEL DEAL
- Artist becomes part of label’s roster and must share attention and support
- Artist generally signs a multi-year, multi-album contract
- Label pays all charges, including marketing and promotion of recording, manufacturing, and distribution costs
- Artist typically receives a significant up-front advance and a royalty rate of 10% to 15%
- Artist can’t receive royalties until all costs are recouped by the label, including advances
- In most cases, unless the artist scores a hit record, the artist won’t see any more money after the advance
- Generally, label owns copyrights to all recordings
- Indie has own source of capital
- Indie pays for the recording costs and some promotion
- Indie may rent distribution system from the major labels, which will charge for manufacturing the CDs, converting the files digitally to make them available for download, shipping, and storage; in some cases, the label will also create cover art for an additional