A Guide To Contracts For Producers

The role of the producer is changing, and whether you're freelancing for record companies or developing new bands independently, it's vital to put your relationship with label and artist on a solid legal footing.

Record producers in the modern music industry need, more than ever, to keep on top of their business relationships with labels and artists. Being a record producer these days isn't what it used to be. Record company budgets have been slashed, revenues are in decline, and the proliferation of affordable digital audio workstation software has enabled all but the tone–deaf to call themselves producers.

But for those with a little sonic vision and a tasty pair of monitors, it's not all bad news. In times of turmoil and rapid technological change, fresh opportunities arise, allowing those with the right skills the opportunity to make their mark.

Producers today do a whole lot more than mere knob–twiddling. Studio time has to be booked, budgets managed, session players and equipment hired not to mention the visionary, technical and interpersonal skills required to deliver an album on time to expectant A&R. What's more, if the producer doesn't have a manager to share the load, they'll need to do all these things for themselves — in addition to handling the legal and financial side of their day–to–day business!

Most producers these days work on a freelance basis, recording artists and bands for various labels in project studios, high–end facilities, or even specially built studios at home and abroad. Independent producers such as Stuart Price (Madonna/Seal), Nigel Godrich (Radiohead/Paul McCartney/Travis) and Danger Mouse (Martina Topley–Bird/Gnarls Barkley/Gorillaz), together with US counterparts such as John Shanks (Take That/Kelly Clarkson/Alanis Morissette), Nate Hills (Britney Spears), or Ryan Tedder (Leona Lewis/One Republic), have all experienced huge mainstream success working on a range of artist projects, in different musical genres.

Under a production agreement, the producer might assume entire responsibility for A&R and recording tasks, simply handing over the master recordings to the label at the end of the process.More and more record labels outsource the artist development process to trusted producers and smaller independent labels, or simply rely on them to deliver finished product, which can then be marketed and distributed. Consequently, the role of producer as creative and business person has expanded. Whether you produce dance tunes in your bedroom, work with a chart–topping act on a major label, or produce bands in a local studio, you'll need to be familiar with the legal and contractual side of your business, if you're to stay in the game and get paid for your efforts.

Producer Agreements Vs Production Agreements

There are two contracts of particular note for the producer:

• Producer Agreements are entered into by the producer and the record label for the production of an artist's record.
• Production Agreements are increasingly common, yet distinct. By signing a production agreement, an artist enters into a form of recording contract with a production company to make a record, which, if successful, will be sold or licensed to a third–party label for release.

The Producer Agreement

Prior to starting work on a record, the producer should try to finalise a producer agreement. This contract provides the only real means of protection should the record label decide to switch producers halfway through a project, rework your demos, or simply not pay you. In this situation, you'll need written evidence of the parties' agreement.

It is typically the record label that funds the upfront recording costs, with the producer providing a written assignment of ownership in the sound recording copyright(s) to the record label. For the sake of clarity (and anticipated label profit!), the artist is also called upon to do the same in their recording contract.

In addition to the creative and technical side of the job, the producer normally takes on a number of administrative duties, to support the smooth running of the studio sessions. Often, producers will be asked to obtain signed consent and release forms from session musicians — allowing the record label to exploit all performances on the album or single. It's not uncommon for the producer to be required to obtain permission for the use of any uncleared samples as well. The record label should assume responsibility for that, plus any associated cost, and this needs to be clarified at the outset, as sample clearance can greatly increase the total album budget. Nor will the record label accept contractual delivery of any master recording until all samples have been cleared, which in turn will delay payment to the producer!

The producer agreement with the label will state that the producer has to deliver the master recordings to a technically and commercially acceptable standard. This condition, too, might have the effect of delaying payment of fees, or a final tranche of an advance, until the label are satisfied they have a commercial (read 'hit') record on their hands. What may amount to an artistic difference shouldn't prevent the producer from getting paid for their work, and in practice the label A&R person will ask the producer to tweak the album until it satisfies label expectations.

Producers are paid by a combination of fees, advances and royalties, and will usually charge a rate per 'master' recording (usually a song on an album), depending on the status of the producer and artist in question.

How Much?

Supposedly passing comment on rival US producer Scott Storch, Timbaland boasts on the Nelly Furtado track 'Give It To Me':

I get a half a mil' from my beats,

You get a couple gra–an–and

I'm a real producer and you just the piano man

Dollar payments to superstar producers aside, at the higher end of the UK market, producers can earn £2000 to £10,000 per master, and at the lower end, somewhere in the range of £300 to £1000 per track. Top producers will earn considerably more: £20,000 to £80,000 per master is not unheard of, especially where the song is intended for release as a single. Any fee, however, depends greatly on negotiation and individual bargaining power. Some producers are willing to forgo fees and advances altogether, preferring to work instead for a bigger royalty payment further down the line — 20 percent of five million album sales is better than £30k up front!

Alternatively, producers may opt for an 'all–in' budget for an album project, paying themselves, after recording costs, out of the total fund. Where the producer has his own studio, this may well prove more cost–effective. The record label can either make a lump–sum payment to the producer, or pay separate tranches — with final payment on delivery of the master. In this situation, since the producer is responsible for recording costs, he'll need to know how to manage the budget prudently.

The producer, or their lawyer, must also negotiate the all–important royalty rate, providing for an interest in the future success of the record. Producers are, in fact, paid a percentage of the artists' royalty. So, for instance, an artist earning a 17 percent royalty (under their recording contract) might agree to pay the producer a 4 percent royalty. This leaves the artist with only 13 percent. This is more acceptable in the case of a solo artist, but where, for instance, the producer works with a five–piece band, each band member will only earn a 2.6 percent royalty, compared with the producer's 4 percent. Let's not forget that the artist will also be expected to repay the recording costs! When such financial disparities become apparent, it can cause real friction. Where several producers contribute tracks independently to an album, as is common in the pop/urban market, each producer will pocket a pro–rata share of the total allocated royalty. For example, were you to produce three tracks on an 11–track album, you'd be entitled to 0.27 (3/11) x 4 = 1.08 percent royalty.

A successful producer might object to being paid in this way, especially if the artist has secured a lower–than–normal royalty rate in their record deal. In this case, the lawyer acting for the producer should attempt to secure a higher royalty rate independently, with any shortfall made up by the record label.

Protect Yourself

Record companies pay producers their royalties after recoupment of any advances paid to the producer. However, the producer should strongly resist provisions calling on him to repay recording costs — or any portion thereof — prior to receiving any royalties. The usual practice is to delay payment of producer royalties until the label has recouped the recording costs from the artist's royalty account. At this point the record label will pay producer royalties 'retroactively to record one' — ie. from the first record sold.

Aside from production and programming, many producers collaborate with artists on songwriting and on song arrangement. If this is the case, the producer will be a co–writer on the project, and entitled to a share of copyright in any co–written song(s), as well as a share of all publishing revenues. It's important, therefore, that producers agree publishing splits in writing, before the sessions come to an end. Recollections about one another's contributions can become a little hazy after the event!

The record label will expect the producer's interest in all mechanical and synchronisation rights to be assigned to the record company also. This will enable the record company to manufacture and sell the finished record, and to benefit from any secondary exploitation of the recordings such as sync agreements for film, TV or advertising. The producer's agreement, if drafted by the label, might allow the producer a royalty only on record sales. This should be resisted, with the producer arguing for payment on all other secondary exploitation. A sought–after producer should be able to secure a share of anything the artist receives. So, for example, where an artist is paid £15,000 on a sync fee for a car commercial, the producer will be entitled (on the figures above) to 0.24 (4/17) x £15,000 = £3600.

The producer should also seek to include what's known as 'A–side protection' in a producer agreement. This means that where the producer has contributed the A–side, but another producer is responsible for 'B–side' cuts or mixes on a single or EP, the A–side producer will suffer no reduction in their royalty. This, again, depends on the bargaining power of the producers in question, and whether the producer of the B–side is willing to forgo his royalty. Likewise, the producer's royalty should not be reduced where the record label bring in additional producers to mix the record. Mixing and mastering costs, if undertaken separately at the label's request, should be borne by the label.

After all the hard work, it's nice to get paid. So an equally important contract clause to obtain is one entitling the producer to receive regular royalty statements, and to audit the record label's books. In practice audits can be costly, and should only be undertaken where the producer has reason to believe there's been a significant underpayment during an accounting period, but it's an important weapon to keep in your armoury.

Production Agreements

Entrepeneurial producers are increasingly acting as talent scouts, seeking out promising new acts and signing them to production deals, with a view to licensing the resulting recordings to record labels.As mentioned earlier, many producers today take on the role of talent scout, discovering new artists and developing their sound, long before any record company gets involved. Often the producer will work with the artist on songs, assemble a group of musicians around the project, and invest their own time and money to produce demos or even master–quality recordings. In addition to nurturing the artist — often over several years — the producer may organise industry showcases and pitch the artist to record labels, all with the aim of securing a recording contract. The record label benefits, of course, since where a producer's done all the groundwork, all they need do is market the album.

In this scenario, the best way for the producer to protect him– or herself is to set up a production company, and require that the development artist enter into a Production Agreement with the company. The production agreement provides the producer with a greater degree of security than an informal verbal agreement, and can help safeguard the producer's right to future income from his work.

Under a production agreement, the producer actually stands to gain significantly more than the traditional 3–4 percent royalty typical of the producer agreement (above). The Production Company will own — take an assignment of — the master recordings and exclusive rights to the artist's recording services. The production company is now in a position to 'shop' the artist to a major or independent label, or alternatively sign a physical or digital distribution deal.

Greedy producers should note that trying to exert too much control over their artists can be counter-productive, as unfair or unduly restrictive agreements may not be legally enforceable.The problem, where the artist is concerned, is that unless they've already got some sort of track record — unlikely in this scenario — the production agreement will most likely be drafted in favour of the production company. The production company is ostensibly a middle man between artist and label — providing songs, the sound and a producer, as well as industry contacts — and hence can dictate the commercial terms entered into. Unfortunately, artists often fail to take proper legal advice before signing production agreements (although, ironically, this may render the deal unenforceable against the artist in a court of law — over–zealous producers should take note of this latter point, should they attempt to 'fleece' the artist at the outset!). The artist will have to decide whether they can get a record deal under their own steam, or whether they need an arrangement of this type to get them in the door.

On the up side, as far as the artist is concerned, is the fact that the production company normally pays recording, mixing and mastering costs, which, should the artist not play an instrument, could include session musicians and paying for engineers.

The production agreement will encompass either master–quality recordings, or demos. The advantage of finished masters is that they can be licensed to record companies on a territory–by–territory basis — or the artist project sold outright. The producer could turn up at an international trade fair, album in hand, and walk away with a bunch of licensing deals for key international markets.

Producers Profit

Under the production agreement, recording costs are usually subject to recoupment against artist royalties (as they would be in a traditional recording contract), only the royalty tends to work out lower than under a recording agreement. The production company normally splits net profits 50:50 with the artist. So where, for instance, a major record label pays down a 20 percent royalty to the production company, this will entitle both company and artist to a 10 percent royalty. Under a standard recording agreement, by contrast, the 20 percent artist royalty might incur a 4 percent producer royalty reduction, leaving the artist with a more respectable 16 percent. A production agreement thus permits the producer to raise his pay by 6 percent, and also to apply this royalty clause to more revenue streams than would be the case in a standard producer agreement. For example, a production agreement will often cover a share of secondary exploitation rights (sync, audio–visual, interactive, compilation albums and so on), as well as publishing rights, where the production company is associated with a publisher.

If the artist didn't receive an advance on signing, then they'll need sufficient resources to cover their living expenses while the record's being made and a deal pursued. Even where a deal is signed, it may be many months before the artist sees any income. In some situations, production companies accept advances from major record labels, pocket the money, and then recoup it from the artist's account! If you're an artist, or you act for one, pay close attention to the wording of the contract.

Furthermore, any recording costs should only be recouped from an artist's share of earnings if there are sufficient funds generated from sales. Understandably, the production company will try to pass on as much of the financial risk to the artist as possible, whereas the artist and their lawyer will need to resist all unreasonable demands.

One significant advantage of the production–company arrangement, as far as the producer is concerned, is that more than one artist can be signed to a production deal with the same company. The artist, however, is tied to an exclusive contract, and takes a huge gamble on the reputation and talents of one producer. If the production company strings the artist along or fails to secure the promised record deal, the artist's only comeback will be where they've retained a right of termination on failure to meet any agreed targets.

Brass In Pocket

After all the hard work and patience, the producer will want some money in his pocket. He should reserve the right to receive payment from, and be directly accounted to by the record label his artist signs to. Accordingly, the production company should pay their artist within 30 days of receiving royalties from the record label, provided any agreed recording costs and advances have been recouped. Record labels usually account twice a year, and in the same way that the producer will reserve a right to audit the record label's books, so the artist will seek a corresponding right to challenge royalty statements against the production company in the case of underpayment.

Last but not least, where the artist has signed a production agreement, and the production company has entered into a recording contract with a label, the label will expect the artist to sign an 'inducement letter'. This has the effect of cementing a direct contractual relationship between artist and record label, whereby the artist promises to adhere to the terms of the agreement between the production company and the label. It also ties the artist into an exclusive contract with the record company, regardless of the production company's future involvement.

In this article we've only been able to cover some of the issues arising out of producer and production agreements. Music business contracts are long and complex, and it's essential that both producer and artist seek independent legal advice prior to signing any such agreement.

Richard Salmon is an entertainment lawyer, and lectures in media and IP law at London Metropolitan University.