Doing the Right Thing

Here’s a fascinating exchange between a pair of indie label guys who want to do the right thing in terms of artist contracts. Good will counts for a lot:

I represent an indy record label that has always tried to offer artist-friendly terms in its recording deals. We’re in the process of signing a couple of new acts and are re-thinking our form agreement. From time to time on this list people have discussed the kind of terms indy labels are currently offering. I’ve gathered that no generalizations can be made, but that many indy deals are as onerous as major label deals. If anyone would be willing to point me to artist-friendly provisions they’ve seen labels adopt without it causing the label entirely to give away the store, I’d be grateful. I’m curious how forward-thinking labels are treating ownership of masters, for example, or royalties on digital phonorecord deliveries, or packaging deductions. Are any sea changes truly taking place?

Thanks very much!
Bill Gable

Bill,

My wife and I ran an indy label called Hearts of Space from 1984 until we sold it last year. It evolved into four sub-labels and a 140+ title catalog.

Since I had worked for 15 years as an engineer/producer and had always been on the other side of the table before that, and because in our genre (ambient/electronic/new age) the artists almost always self-produced and financed their own recordings, from the start our contract was a license that did not assume ownership of the sound recording.

This is the single most artist-friendly thing you can do, because if the label
breeches the contract or goes out of business, the artist can regain control of their master without having to wage a legal battle they can’t afford against
the label or a bankruptcy trustee.

The term of the license was tied to the album being “commercially available” i.e. in the distribution system and available for purchase in normal retail outlets. Our deal had normal royalty percentages, packaging deductions and mechanical caps.

Any advances (we kept them low) were recouped before royalties were paid. We chose not to recoup the cost of creating the packaging, which we felt the label should assume, but we kept ownership and artistic control over the package.

The point was that we did not feel that recording projects that we did not finance should be our exclusive property, but we required exclusive control of the masters during the active life of the project. This vastly simplifies licensing of
sync rights and foreign territories.

In later years there were cases where we did finance the recording costs and
did assume ownership of the sound recording copyright. More risk — more
equity.

The idea of an open-ended term for a license seems ephemeral compared to
normal contracts, but in practice it proved to be quite durable and the vast majority of the catalog is still available after up to 18 years.

Surprisingly, the other thing you can do that we found is most appreciated by artists is to sell them finished CDs at the lowest possible price. They sell them to
their audience at gigs and on their own web site, and this income can become a
critical part of their cash flow. Nothing makes an artist happier than cash.

Stephen Hill, Producer
HEARTS OF SPACE