Loyola of Los Angeles Entertainment Law Review Volume 1 Number 1 Article 5 1-1-1981 Recording Contract Negotiation: A Perspective Jay L. Cooper Follow this and additional works at: https://digitalcommons.lmu.edu/elr Part of the Law Commons Recommended Citation Jay L. Cooper, Recording Contract Negotiation: A Perspective, 1 Loy. L.A. Ent. L. Rev. 43 (1981). Available at: https://digitalcommons.lmu.edu/elr/vol1/iss1/5 This Article is brought to you for free and open access by the Law Reviews at Digital Commons @ Loyola Marymount University and Loyola Law School. It has been accepted for inclusion in Loyola of Los Angeles Entertainment Law Review by an authorized administrator of Digital Commons@Loyola Marymount University and Loyola Law School. For more information, please contact [email protected]. RECORDING CONTRACT NEGOTIATION: A PERSPECTIVE By Jay L. Cooper* I. INTRODUCTION At the outset of any discussion of recording contracts it must be stressed that certain underlying factors play a major role in defining the parameters of every negotiation: the bargaining power of the artist, the strength of the desire of the artist to be with the particular com- pany, the type of company, and the strength of the desire of the com- pany to obtain the services of the particular artist. An artist with apparent ability, and a recording company desirous of securing the art- ist's services, will invariably improve the attorney's bargaining position and his' ability to negotiate a more lucrative contract. Typically, the attorney's strength is directly proportionate to the degree to which the recording company wants the artist. The attorney who is sensitive to this balance is in a position to exercise unusual maneuverability for his artist and devise terms beyond the scope of the standard recording con- tract. Conversely, regardless of an attorney's skill or experience, his ability to obtain a particularly favorable deal is diminished when a re- cording company is less desirous of an artist. Traditionally, attorneys represented an individual artist in negoti- ating her contract with a record company. After the contract was signed, the record company would provide an in-house producer or employ an independent producer to produce the artist. Essentially, the composition of the package was largely controlled by the record com- pany. However, in recent years, there has been a substantial trend to- © 1981 Jay L. Cooper. * Previously a professional musician, the author is a senior partner in the law firm Cooper, Epstein & Hurewitz of Beverly Hills. He received a J.D. degree from DePaul Uni- versity in 1951 and was admitted to the California Bar in 1953. Billboard Magazine named him Entertainment Attorney of the Year in 1975. He has served as a member and officer on many intellectual property and entertainment law committees and symposium panels, has authored and edited numerous articles and books in the entertainment field, and was Presi- dent of the National Academy of Recording Arts & Sciences from 1975 through 1977. He is currently a professor at Loyola Law School of Los Angeles, teaching, naturally, entertain- ment law. I. I have used the word "his" for convenience in writing only. Every "his" is inter- changeable with the word "her", and vice versa. LOYOL4 ENTERTAINMENT LAW JO URNAL [Vol. I ward what might be termed the "all-in" package, where the services of the artist and producer are negotiated in one agreement. The package is controlled either by the producer who furnishes the services of the artist, or by the artist who agrees to furnish the services of a designated or non-designated producer. Perhaps a brief description of the role of.the producer is necessary. The producer is the overall creative director of the recording product and, in some respects resembles a motion picture director. He chooses the material to be recorded, the musicians, the particular recording stu- dio and the engineer. He decides upon an arranger and is responsible for supervising the mastering of the final product. He works with the vocalist on her voice and style. Recently the producer has become so significant in our industry that many companies will enter into agree- ments with certain producers for substantial sums, even hundreds of thousands of dollars, predicated on the belief that he will deliver a suc- cessful artist or record, despite the fact there may be no particular artist contemplated when the contract is signed. Most of the contract terms discussed in this article will be those of the "all-in" arrangement, which terms, aside from the royalty commis- sions and advances, are fairly similar to those in an ordinary artist con- tract. Every company in the recording industry has its own contract "form" which varies as much as the individuals in the record business.2 There can be a great disparity between the various form contracts- each company utilizing different language. In any event, one should realize that every word and sentence should be carefully scrutinized, even when an attorney becomes familiar with the contract of a particu- lar company; for in the next negotiation, the company may have altered portions of the contract, thereby requiring a whole new analysis. Addi- tionally, one must be aware that the omission of certain language, in- tentional or accidental, could ultimately affect the client's rights. II. CONTRACT DURATION Most contracts encompass a five-year period: a one-year initial term with four options, each to extend the initial term for an additional one-year period. Occasionally, contracts specify a fiat three, six or even seven years, but the arrangement first mentioned above is the most 2. This article will attempt to provide a general guide to negotiation terms and princi- ples, although it is not an attempt to cover all the possible negotiable items, and will refer throughout to clauses delineated in the sample contract provided in the Appendix. 19811 RECORDING CONTR, CT NEGOT14 TION common.3 In addition to the period of years, the company typically provides for the right to call for a certain minimum and/or maximum amount of product during the term (usually between six and ten LPs over the agreed period of time) with the right to extend the term of the agreement if the product is not delivered on time.4 Essentially, artists and recording companies have competing inter- ests regarding contract duration and the amount of product to be deliv- ered. The artist would like to keep her contractual commitment to the shortest period of time and the fewest required LPs to be delivered, to allow for renegotiation of the agreement should she achieve early suc- cess. However, the recording company would like to retain the artist under contract for the longest period of time allowable, along with the maximum amount of LPs to be delivered, claiming that it takes be- tween two and three years and a significant amount of money to de- velop an artist and realize a return on its investment. Recording costs for relatively new artists range from $75,000 to $125,000 or more per album. A company firmly committed to an artist may spend $100,000 to $150,000 per album for promotion. If a company has spent this amount of money for three or four albums before an artist achieves commercial success, it may have an investment in the artist of close to $1 million. If the contract was of short duration, the company would not have sufficient time or product to recover its investment. There- fore, such expenditures make multiple option periods highly desirable to a recording company. Nevertheless, the onus of multiple options can be eased if a com- pany's exercise of options is tied to certain conditions, such as the pay- ment of advances. In order for the label to exercise its option for the next period, it could be required to pay the artist a specified amount of money, either as an advance against future royalties, a non-recoupable sum, or in the form of a specified album fund. There is no standard formula for determining these amounts. They may range from $ 10,000 to $1 million or more. If the company has to pay a large amount of money to exercise its option it will not do so unless it firmly believes in the artist. This insures the artist that either the recording company is committed to her future, or she will probably be free to sign with an- other label. Another method used to guarantee further commitment by the la- bel as a prerequisite to exercising the option is to require that the rec- 3. See the example of an Exclusive Artist's Recording Agreement, Appendix infra, l(a)-(b) at A-I [hereinafter cited as Sample Contract]. 4. Sample Contract, supra note 3, 2 at A-2. LOYOLA ENTERTAINMENT LAW JO URNAL [Vol. I ord company release a certain amount of product,5 such as one LP, or perhaps that the company achieve a specified minimum amount of sales of the artist's records during the preceding year. The latter re- quirement may be difficult to compute, however, because all the facts and sales figures often are not known by the end of the year due to the record company's policy with respect to returns from the distributors. For that reason, the "minimum sales perforniance" method is not often used. III. GUARANTEED RELEASE OF PRODUCT One of the most important items in the contract negotiation is the guarantee of the release of a minimum amount of product.6 Records are the artist's life-blood. The artist's entire career depends upon hav- ing record product in the marketplace.