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Music Industry Agreements Notes

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Music Industry Agreements - Collecting Societies 1) Performing Right Society (PRS)

2) Phonographic Performance Limited (PPL)

3) Mechanical Copyright Protection Society (MCPS)

What do they do?

Collects royalties and gives licences for the public performance and broadcasting rights in music and lyrics (e.g. songs)

Examples where a PRS licence is needed

A band, X performs on the radio, a cover of another band, Y's, song

What do they do?

Collects royalties and gives licences for the public performance and broadcast of sound recordings (e.g. a song as recorded)

Examples where a PPL licence is needed

A band, X's, recorded song, as it was actually recorded, is played in a club, bar, from a jukebox, or on the radio

What do they do?

Collects royalties and gives licences for the right to make copies of the underlying work by embodying it on a sound recording

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It does not include making copies of the sound recording itself which is PPL

Examples where a MCPS licence is needed

A record company copies the underlying work, the lyrics, in band X's song, to record a new song.

Music Industry Agreements - Recording agreement 1) General nature of a recording agreement

The recording company ? acquires the exclusive right to the recording services of the artist and the products of those services

The artist ? Gains a royalty in return for their services and the right to own and exploit the product of those services

2) General points of concern / considerations for a recording agreement

1) Undue influence ? When the contract was signed

2) No independent legal advice on the terms of the contract

3) Unreasonable restraint of trade

4) The terms are unusual or harsh and should be interpreted contra proferentem

3) Terms of the Recording Agreement

1) Duration / term of the contract

a) Fixed period Usually for a fixed initial period of one year

b) Minimum recording commitment The term can normally be extended until an agreed number of recordings have been completed, delivered and accepted by the record company (e.g. one album per contract period)

c) Record company will usually have renewal options

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Extends the agreement for further contract periods, usually requiring a further album in each contract period

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The number of options is a key negotiating point

2) Acceptance of recordings

a) Technically / commercial satisfactory

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Will be made subject to them being technically /
commercially satisfactory

b) Standards detailed

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The contract should detail these standards so that the recording company cannot keep rejecting recordings, resulting in the artist becoming 'stagnant'

3) Exclusivity

a) Exclusive recording rights

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The record company will want exclusive recording rights

b) Side-projects

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Artist may want to exclude any side-projects they are involved with e.g. separate bands / acting

4) Release commitment

a) Release within a particular time

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Commitment to release the record within an agreed period from acceptance of the recording e.g. 6 months

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Prevents the artist's work becoming 'stagnant'

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Failure to release within time should entitle the artist to terminate the contract

b) Specify the release market

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Should specify the geographical market of release

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Should specify the type of release e.g. CD / itunes

5) Territory

a) Territory in which the recording company owns the rights

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Can be worldwide / universe / continent

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If the record company doesn't have a presence in a particular county, the artist may wish to exclude this country from the agreement

6) Advances

a) When the advance will be paid

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In each contract period, in stages such as:

1) On signing the contract;

2) On starting to record the minimum recording commitment;

3) On acceptance of the recorded album by the record company; and 4) On release of the recorded album b) How the advance will be recouped

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Will be recouped against royalties

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Not usually repayable if the royalties are insufficient

c) The size of the advance

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The more popular the artist, the higher the advance will likely be

d) Cross-collateralisation and other ways of recouping advances

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Allows the record company to recoup advances against royalties generated across the entire deal, rather than being limited to particular album

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More constraining and onerous on the artist

7) Royalties

a) How the royalty is calculated

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What percentage of the 'dealer price' of the record will be given as royalties to the artist e.g. 15%

b) Different royalties across different media

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Whether the royalty percentage will be the same for CDs and for digital downloads

c) Deductions to be made on the royalties

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Whether packaging, marketing, reduced price marketing sales will be removed before the royalty is paid

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Record company will try to make as many deductions as possible from the royalties

d) Share of profits rather than royalties

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Independents rather than majors, may not be in a position to offer much of an advance and may instead want to share the profits of each sale of the record with the artist

8) Payment and audit

a) Payment of royalty after advances have been recouped

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Will normally be paid half yearly in arrears

b) Details about the how and when these royalties will be paid

9) Granting of rights

a) Assignment of copyright in the sound recording - s.1(1)(b)

b) Right to exploit these recordings in all media

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Will usually state all media, known or hereafter invented

c) Duration of the copy right in sound recording

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May be expressly set out that the copyright lasts for 50 years from the end of the calendar year in which the recording is made; or

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If during that period it is released, 50 years from the end of the calendar year in which it is released - s.13A(2)

10) Ancillary rights

a) 360 degree deals

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Boosting margins but including a percentage of artists income in 'ancillary areas'

b) Which ancillary areas the record company will claim

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Records, song writing, touring, merchandise, sponsorship

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