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

Nor does the artist always get a full royalty:

As to sales of prerecorded magnetic tapes… the royalty payable to the Artist shall be one-half (1/2) of the royalty rate applicable in the respective period to sales of phonograph records… .As to any device utilizing a new medium of sound and/or sight and sound reproduction, the royalty payable the Artists shall be computed in the manner hereinabove provided for prerecorded magnetic tapes.

Now, when they drew up this contract, the compact disc still had not come to market. That would make the CD “a new medium of sound and/or sight and sound reproduction.” The artists in question continue to sell hundreds of thousands, or even millions of CDs a year.

While they have since made concessions, giving up certain rights that the company let them retain and renegotiated that point, for quite some time they received half royalties on CDs.

The 50 percent royalty also applies to “all sales outside the United States, its territories and possessions, and Canada.” This, too, is not an unusual clause.

Another common clause involves who owns the actual recordings, or masters:

All recordings made by the Artists or any of them during the term hereof… and the copyrights and/or copyright renewal rights therein and thereto shall be entirely the property or the record company, free and clear of any claims of the Artists… . The record company shall have exclusive and perpetual right throughout the world to edit, cut and otherwise control such masters and recordings and performances and may manufacture, advertise, sell, lease, license, or otherwise exploit the same.

Some artists manage to hold onto their masters and lease them to the record company – Frank Zappa (and his estate) and David Bowie notably retain these rights.

Some of the conditions of the contract are almost laughable. For example, under the heading of “Advertising”: “The right granted under this section shall include any professional name by which the Artists are or may be known and shall allow the record company to fictionalize any biographical material to the extent that the record company so desires.” The artist is a mutant Venusian come to Earth to make it safe for sound.

However, most of this contract is no laughing matter, particularly this passage:

 Any and all original musical compositions, and original arrangements of musical compositions in the public domain, including the title, words, and music of such compositions authored, co-authored, composed, or co-composed by the Artists or any of them… hereinafter shall be the subject of a copyright and shall be assigned by the Artists and/or any publishing affiliate of the Artists or any of them to any publishing company or companies designated by the record company, with statutory fees applying.

What just happened in that paragraph is that the artists gave away their publishing right. The relationship between the composer and the publisher generally calls for a 50/50 split of the revenues. Mechanical royalties get paid directly to the publisher (in this case, the record company pays mechanical royalties over to its publishing division) and the publisher is responsible for paying the songwriter it represents.

The performance royalty organizations (ASCAP, BMI, and SESAC in the United States) pay equal amounts to the publishing company and the composer. However, many composers retain all or a portion of their publishing, cutting out the outside publisher, as an added stream of income. They can have a publisher administer the songs through a sub-publishing deal that earns the sub-publisher a cut of the publishing in exchange for doing all the paperwork, collecting foreign royalties, and trying to exploit the copyrights. After signing this contract, these artists no longer had that option.

Again, this is not an uncommon ploy for record companies, especially independent ones, to attempt. In the same way that the songwriter might want to form her own publishing company to get both the songwriter’s share and the publisher’s share of the royalties, the record company wants to hold onto the stream of potential income these rights offer:

All recording costs incurred by the record company under this agreement with respect to masters to which royalties are payable… shall be charged against royalties, payable hereunder. All advance payments made to the Artists by the recording company under this Agreement shall also be charged against the royalties payable hereunder.

These royalties include the mechanical publishing royalties that Jacobson mentioned earlier, so the move to retain the publishing covers the record company’s financial assets against the liabilities of records that sell too little to recoup on their own.