Music Contract Company: Everything You Need to Know
A music contract company works with a recording artist to produce recordings, provide exposure, and offer royalties.3 min read
2. The Contract Term
3. Job Expectations
4. Management Fees and Expenses
5. What Are Production Companies?
6. How to Write a Music Contract
Music Contract Basics
When dealing with music contracts, remember to keep them simple. Form a simple document that covers the basics, including money, the length of the agreement, and the division of labor.
When you have the contract ready, don't sign it if it doesn't benefit both parties. Even if your manager has been in the business for a long time, the contract should offer equal opportunity.
The Contract Term
When working on the term of your contract, start with the length of the agreement with the music manager. You both need to agree upon a term and cancellation policy.
A fair contract term lasts one year with an option to extend at the culmination of the year as long as both parties agree. After a year, you can negotiate longer agreements.
The expectations you have of your music manager depends on where you are in your career. If you're part of a newer band, your manager should promote you to the labels and try to get you performances. If you're already established, your manager should make sure others promote your music.
Management Fees and Expenses
Standard management fees are typically around 15 to 20 percent of your earnings. The manager receives a cut of the proceeds from album sales, advances from the label, and earnings from negotiated deals. Unless otherwise agreed upon, they don't receive money from songwriting royalties, merchandise sales, or deals they haven't negotiated.
You should reach an agreement on how expenses work beforehand. You usually don't pay for your manager's phone bill, office costs, or other business expenses when it comes to promotion.
What Are Production Companies?
Production companies typically have one or two individuals that make demos or tracks for artists, who in turn shop them to a real record company. Unfortunately, sometimes the company presents an agreement that locks the artist into a long-term deal, takes a huge cut of the income the artist makes, and makes the company the artist's music publisher.
There are several differences between a production company and label, but both have access to recording studios and equipment, as well as have producers on payroll. However, a real label has the following:
- People who provide traditional marketing and publicity, as well as online social networking support.
- People who pitch records to radio.
- A video department that produces and pays for promo videos and electronic press kits (EPKs).
- Relationships with popular television shows, digital services, and music supervisors.
- Distribution capabilities with big-box chains to sell physical copies of records.
- Ability to coordinate digital distribution across the world.
- Financial capability to pay artists in advance of production costs.
If the production company isn't a real label, it should have a limited time to produce at least five or six demos that feature your best work. It should shop those tracks to real labels and do this within nine months. If the production company cannot solidify a deal, you can terminate the agreement.
The royalty for producing demos and shopping an artist is 5 to 20 percent. You should base the percentage on what the label pays you, so if your advance is $100,000, the production company can receive between $5,000 and $20,000.
How to Write a Music Contract
When writing a contract, there are certain aspects to consider.
- Know what each party expects. Have an attorney draw up the contract and state who the contract involves and what each party's involvement is.
- Use dates. Clearly show when the contract begins and ends. It should also include what each party needs to do during a specific timeframe.
- State compensation. The contract must be specific when it comes to money. Each party must know what it is responsible for when it involves expenses.
- Specify what involves a breach of contract. After you state what each party's responsibility is, make note of what the consequences are if one party fails to deliver according to the contract terms.
- Sign, date, and notarize the contract. All music contracts must have each party sign and date the document. If you have amendments, make sure those are included, signed, and dated. Always use legal names, stage names, and band names when forming the contract. Only sign the contract if you understand what your involvement is. Failing to do so will cause a breach of contract.
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