The recording contract series; (part 17) Video games and Group provisions

Video games

The latter example, computer games, may be called a “secondary” exploitation right, but I can assure you that the revenues that are starting to be generated from this area are becoming mind-boggling, and this industry is far from secondary. Some observers believe that income from video game synchronisation will actually overtake traditional sales in years to come. In fact, some artists, like Aerosmith, are already creating content specifically for these games and using the game to launch the song and ultimately, the album. “Guitar Hero” is one obvious example.

Before the popularisation of music in the video game industry, most of the entertainment software music was provided by employees of the publisher or by amateur composers through simple consulting agreements. Often, library music was used. But as hardware, bit rates, visual quality, overall technological quality and consumer expectation have all increased, so too has the formalisation of music contracts for video games.

Setting the proper moods for given scenes in any video game is an essential element to its success. In creating these moods, game developers have become more choosy about what music they use. Often, new music will be written and performed for synchronisation to the game, or (and this happening more and more) masters owned by labels used for the synch.

Currently, the process for securing music for video games is similar to securing music for film and television. It is a synchronisation license. Where pre-existing music is licensed for use in the game, the artist needs to make sure he is being properly remunerated by the label – i.e. 50% of income. The type of game being developed will dictate which type of music will be used. Usually, licensed music is used in sports, racing and fighting games, while original music composed specifically for a particular game is used on adventure, mystery and fantasy games.

Where your pre-existing (recorded) music is used on a video game, I would suggest that you provide in the contract that this is not described as ‘ancillary income’, but is dealt with as its own category, since the licensing fees paid to the label can be huge. Be sure not to allow the label to negotiate low royalties for you on this type of licensing.

Group provisions

Record companies generally insist on signing bands “jointly and severally”. This means that, instead of the group being signed to the contract as a single entity, each member of the band is signed individually. Thus, each member is personally bound to the label, and if the band splits, the company will generally control any solo projects that the individual members may undertake. (One very well-known example of this was that of Robbie Williams leaving Take That and remaining with EMI).

The so-called “leaving member” provisions of recording agreements with groups have now become very involved and can be highly complicated, because, like marriages, many groups end up in divorce. These group provisions generally seek to protect the record company, so you should do everything you can to make sure that this clause protects you as well.

Obviously, the record company cannot prevent groups divorcing. (To have a clause preventing group break-ups would be contra bonos mores and void, since it is unlikely that public policy would approve of forcing individuals to work together when they hold acrimony towards each other). What the label can do however, is to provide in the agreement that the record company will be entitled, for example, to any solo recordings the member may make following his departure from the group. Also, an individual member of a group may want to record a solo album whilst still a member of a group and, again, his record company will, at least, try to have the right to exploit any such solo album which he may make.

The group provisions will also address other subjects such as:

1. New members joining the group. What will their royalty share be, and will they share in royalties from recordings done with their predecessors? Will the Record Company have the right to terminate the Agreement in respect of the group and carry on just with the person who has left? Or can it carry on with the remaining members, with or without a replacement? Or both?

2. The advances and royalties payable to departing members and solo members. Will new members receive the same royalties as the old ones? Will they be entitled to a share of royalties on recordings subject to the agreement but completed prior to them joining?

3. Whether the departing/solo member’s royalties can be used to recoup (“cross-collateralise”) the group’s debit advance? (Very bad news for the leaving member). Will the remaining members’ royalties be used to cross-collateralise the leaving member’s new projects? (Very bad news for the remaining members). Indeed, will the leaving member continue to receive recording royalties at all?

4. Probably most importantly, who owns the rights to the group’s name? If it a four-man group and two leave, does the name stay or go? This (or a separate artist partnership) contract needs to provide for this scenario. One of the reasons why Chris Squire, the bass player from Yes, is in such a commanding position today, is the that he owns the trademark “Yes”, and no matter which members stay or leave, the band revolves around him, since the name is his.

All these questions need to be negotiated and settled at the time you enter into the recording agreement. While it is hard to talk about group divorce at the time when you are signing your first record deal and starting your careers, it is something that has to be done. Too many artists have lost significant later in their careers as a result of their failure to do so.

Probably the most famous case on “leaving member” provisions is Zang Tumb Tuum Records (ZTT) v Holly Johnson. When Holly Johnson wanted to leave Frankie Goes to Hollywood, the label issued summons, claiming his recording contract was still enforceable, and he was bound by a “leaving member” clause to enter into a new recording and publishing agreement with it. The court found that the case was against public policy, not because it provided that Johnson had to sign to them, but because of the combination of this and many other onerous clauses.