1. What Are Exclusive Production Agreements?
2. Benefits of Signing a Production Agreement

Updated July 10, 2020:

An exclusive production agreement is a contract that allows a production company to exclusively produce an artist's demos. The goal of this agreement is to produce demos that will attract the attention of a distribution company.

What Are Exclusive Production Agreements?

The goal of a musical artist is to sign with a major record label and have their music distributed as widely as possible. Before this can happen, however, artists must produce demos of their work in an effort to garner industry attention. To produce these demos, artists will usually sign a production agreement with a production company.

Once the parties have signed the agreement, several events will occur:

  • The production company will record a demo for the artist.
  • The production company will shop the demo to record labels.
  • The label and the production company will sign an agreement to distribute the demo and record future albums.

Every exclusive production agreement will have unique details, but in general these contracts will last up to a year and a half. If the production company is not able to obtain a distribution deal during the term of the agreement, the contract will expire and the artist may sign an agreement with another production company.

On the other hand, if an agreement with a distributor is reached, the production company will act as an intermediary between the distributor and the artist. In some cases, the production company may receive as much as 50 percent of what the artist earns from the agreement. This is in addition to the money the production company may take for reimbursement for producing the demos and pursuing a distribution agreement.

Record labels and production companies will enter into a producer agreement to allow for an artist's record to be produced. Exclusive production agreements are very common in the record industry, and are used to produce a record and then either license or sell the record to a third-party for distribution.

Producers should make sure that the production agreement includes a few important protections. For example, there should be a provision that prevents forcing out the production company when an artist directly signs with a record label. Although this would be a breach of contract, the producer would have no right to continue producing the artist's work unless there was a provision included in the initial agreement.

Benefits of Signing a Production Agreement

Obviously, exclusive production agreements are more beneficial for production companies than they are musical artists. The better situation for the artists would be signing with a music label directly instead of using the production company as a middle man. Because musical artists typically lack connections in the music industry, though, it can be hard to garner interest in their music. Also, music labels aren't as interested as developing emerging musical artists as they once were.

Increasingly, production companies have bridged this gap between artists and record labels. The goal of a production company is to help an artist develop his abilities so that he is more attractive to labels. Successful production companies will typically have a variety of resources:

  • A recording studio.
  • Funds needed to record a demo.
  • Connections to major record labels and individuals in the industry.

Because production companies expend so much time, effort, and money on artists, they stand to earn more money than what would be given to an individual producer. The royalties that a production company receives, however, will depend on the terms of the production agreement. Both the company and the artist should be very careful when negotiating these agreements. Production companies should insist on a production agreement, as they provide a great deal of security. Verbal agreements are very hard to enforce and should be avoided.

In producer agreements, a producer can usually expect to receive royalties of about 3-4 percent. Production agreements, on the other hand, will entitle the producer to significantly more money for her work. This is because an exclusive production agreement gives the producer an ownership percentage of an artist's master recordings, as well as the right to produce the artist's future work. With one of these agreements, production companies can also pursue digital or physical distribution deals, or can arrange an agreement between their artist and a record label.

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