Contacts and contracts – why an artist can go gold one day and be flipping burgers the next (II)

The music industry expert continues; when I first went through the specific document we’ll be looking at, I couldn’t believe the terms. I sent it to Jacobson just to confirm that it was as bad as I thought it was. He read it over and told me, “This is the Stephen King novel of recording contracts. It made the small hairs on the back of my neck stand up it was so scary.”

The names, of course, will be changed, but the essence will be in there. Suffice to say, the artists that signed it were huge, and despite not having played together for a while, they continue to enjoy a massive following. It’s one of those groups that some radio station somewhere will have on the air every moment of the day. Yes, it’s an older contract, and today a record company might not be able to get away with a lot of the terms, at least not all of them in a single document. But it might, for two reasons: the artist might sign without benefit of legal counsel (a foolish move under the best of circumstances), or the artist might just not care so long as a record comes out (a shortsighted move, but one many artists make).

Even getting legal counsel sometimes isn’t enough. Cumberland reminded the artists who would learn from the past that “your lawyer doesn’t sign the contract, you do. Your lawyer doesn’t sit at home for seven years while a bad contract runs out [or as we’ll see in this case, doesn’t run out], you do. Your lawyer doesn’t work for nothing if he gets it wrong, you do.”

As with so many music business contracts, the artists and record company agreed to and signed this one in California. In answer to the days of the motion picture studio system, when the major movie companies put actors under contract and kept use of their services forever at a pittance compared to what they made the studio when they became stars, California instituted a statute saying that a personal service contract (like a recording or movie studio contract) can last no longer than seven years. However, this contract devised a way of circumventing that law, by starting with the phrase, “The artists agree to record for the record company a minimum number (as hereinafter set forth) of masters (as hereinafter defined) embodying performances by the Artists… in each year of the term hereof.”

By the definition of the contract (found some 22 pages later) a “master” is five and a half minutes of recording, basically the maximum that would fit on a 45 rpm single, an anachronism that, like so many provisions in contemporary contracts, remains part of the boilerplate. According to the term of the contract (this located 16 pages after the referring paragraph), the artists had to put out:

– 12 masters a year for the first two years, for which they received the princely sum of $100 each as an advance royalty.

– 24 masters a year for the next two years, this time for $200 each.

– 24 masters a year for the next two years at $400 each.

– “such additional number of masters (not to exceed ten (10)) as the record company may elect upon written notice to the artist no later than three (3) months from the end of each year in which such election is made by the record company, and such additional number of masters shall increase the minimum number of masters as required.”

Now, if you do the math on this, the artist must record between 120 and 180 masters, depending on if the record company notifies them for the extra 10, to satisfy this provision of the contract. While pretty onerous in its own right, it gets even more interesting about seven pages on, under the heading of “Failure to Perform”: “The record company, in addition to all other rights and remedies available to it, shall have the absolute right in its sole discretion to extend the then current year and/or the term of this agreement until such failure to perform is so corrected.”

Therefore, if the artists don’t record and release those 120 – 180 songs in the course of six years (an average, then, of 20 – 30 songs a year), the clock stops. A contract that legally cannot run for more than seven years can go on until doomsday.

Nor does it matter why they could not record:

 The cause of such failure, whether caused by sickness of or accident to the Artists or any of them or due to any delay or impossibility or commercial impracticability because of any act of God, fire, earthquake, strike, civil commotion, act of any government or any order, regulation, ruling or any action of any labor union or association of artists affecting the Artists, the record company or all or any portion of the phonograph record industry generally or specifically, shall not affect the applicability of this Agreement.

So, legal terms, the contract could go on beyond doomsday. Like so many things in this contract, the provision does not cut both ways. While the record company could obligate the artists to record as many as 180 masters,

Nothing contained in this agreement shall obligate the record company to record the minimum number of sides or masters specified herein or to make or sell records manufactured from such masters. The record company shall fulfill its entire obligation as to unrecorded masters by paying the Artists the amount specified under the terms of this agreement for such masters, even if such masters are never recorded.

In other words, if it wants to cut the artists loose, the record company has to pay the $100, $200, and $400 per master for which it contracted, which amounts to $31,200. Then buh-bye.

“It’s the story of the recording industry over the past 100 years,” Cumberland said. “Labels can’t make commitments to their artists, but the artists make exclusive commitments to the labels.”

Even if they do record, “all material recorded by the Artists shall be selected mutually by the record company and the Artists, and all masters shall be subject to the record company’s approval as commercial satisfactory.” So if the record company doesn’t think it can sell the record, the company doesn’t have to press it and it doesn’t count as one of the contracted masters.