How much do record labels pay artists

Artist contract and artist exclusive contract are among the most important contracts in music law. Both types of contract regulate the legal relationship between a performing artist and a record company or label. In the past, the necessity of an artist contract resulted primarily from the fact that performing artists could fall back on the sales channels of record companies for profitable marketing of their artistic performance.

However, digitization has meanwhile developed numerous new distribution channels for music. While sales of physical sound carriers have been declining for years, the market share of digital offerings has risen continuously. Artists are therefore no longer dependent on traditional sales channels in order to be economically successful, but can also market their performances directly on the Internet via streaming services.

At the same time, the majority of established musicians continue to work with labels, as media marketing involves a financial and organizational effort and time that should not be underestimated. The Artist contract therefore continues to play a major role in the music business.

The following article on the artist contract by lawyer David Geßner, LL.M. and lawyer Daniel Gast, explains the most important contents of a Artist contract and shows differences and similarities to other common contracts in the field of music contract law.

What does the artist contract regulate?

A precise definition of the scope and purpose of the Artist contract should always take place at the beginning within the scope of the subject matter of the contract. This is particularly necessary with a view to Section 31 (5) UrhG and the doctrine of transfer of purpose contained therein. According to the doctrine of transfer of purpose, copyright rights of use are only transferred to the extent that the parties have based the purpose of the contract. It is used if there is no express contractual provision or there are uncertainties about the scope of the granting of rights. It is therefore advisable to determine the purpose of the contract as precisely as possible and to define the key elements of the contract in the interests of a uniform understanding. In this context, many artist contracts also contain (exclusive) production details and stipulate a certain number of recordings or albums to be delivered.

Essential obligations and content of the contract for an artist contract

While the performing artist undertakes to provide the musical performance (production) specified in the artist contract during the contract period and to transfer the exploitation and usage rights required for the evaluation of this service to the label, the label undertakes, among other things, to pay the artist a fee pay and produce and market the artistic performance at their own expense. The main difference between artist contracts and artist exclusive contracts lies - as the name suggests - in a personal exclusive relationship between the performing artist and the label (more on this later).

Which performance obligations of the artist does the artist contract regulate?

The exact scope of the artist's services is usually decided in consultation with the label. For example, the contract with the artist can only concern a single recording or cover several albums. The Artist contract can also stipulate a specific repertoire selection or an obligation on the part of the artist to submit a list of those works of which recordings of his performances have already been made. This is to ensure that no exclusive rights of third parties are violated when the work is re-recorded.

In addition, many contain Artist contracts certain requirements regarding the quality and readiness for acceptance of the recordings to be delivered. However, specifications relating to the artistic design can only be regulated abstractly to a limited extent. They are therefore mostly limited to a general obligation to provide services in the interests of the best possible evaluation. If necessary, the artist can reserve the right to record the finished recording again if it does not correspond to his artistic ideas. In many cases, however, the decision-making power over the artistic and technical recording quality rests with the label alone.

Transfer of rights by the artist

The main performance obligations of the artist include the obligation to transfer the usage and exploitation rights to which he is entitled to the recording as well as the ancillary copyrights from §§ 73 ff. UrhG. Naturally, the label is interested in acquiring these rights in full and exclusively. The transfer of rights is therefore usually carried out exclusively and without restriction in terms of time, location and content. Furthermore, labels can be granted the transferable right to exploit or have exploited the contract recordings in any way. This includes the option of licensing the work to third parties. The types of use not yet known at the time the contract is concluded are also regularly included in the transfer of rights.

Only those rights - compensation and / or participation claims of the artist - which are exercised by the collecting societies are excluded from the transfer of rights. If the production is based on pre-existing musical works, the label must obtain the corresponding rights for the mechanical reproduction of the contractual recordings from the responsible collecting society (GEMA), as the artist does not regularly have these rights.

Reservations of consent in the artist contract

In the interests of the artist, certain rights are usually granted subject to the artist's reservation of consent in the context of artist contracts. For example, some contracts provide for an approval requirement if the work is to be subsequently redesigned or processed in any other way according to § 23 UrhG. In practice, the right to compile the contract recordings for so-called "best-of" couplings or to license them to third parties for such compilations is often agreed as subject to approval. The same applies to the right to synchronize the contract recordings with other artists and in a different language, to film them, to shorten them or to combine them in connection with recordings, services and works of other artists in other image and / or sound carriers.

Artist's guarantee of rights

Almost every Artist contract includes a guarantee by the artist that he is solely and unreservedly authorized to dispose of the contractual rights and that he has not transferred or granted the contractual rights to third parties. Furthermore, the artist is regularly obliged to exempt the label from all claims by third parties that are asserted against the label in this context.

Other obligations of the artist in artist contracts

The artist's contract often imposes the obligation on the artist to make video material available to the producer for the purpose of advertising the production for the production of audio and video carriers. This concerns z. B. Live recordings of concerts or rehearsals, promotional videos, interviews or other documentation. Obligations should be clearly and unambiguously regulated by the contract in order to avoid problems of interpretation later.

Personal rights of the artist

The general personal rights of the artist must be taken into account when drafting the contract. Above all, the name and image rights of the artist can play a role, especially for advertising use or domain registrations. From the artist's point of view, in the event of a contract dissolution or termination, it should be regulated that the artist is entitled to take over an internet domain set up by the label.

Exclusive bond with the artist

At the Artist exclusive contract In contrast to the artist contract, there is usually a multi-year personal exclusive relationship between the artist and the label. The artist undertakes to be exclusively available to the label for recordings or to have sound / image recordings made exclusively by the label and to grant third parties exploitation rights. He is also not allowed to evaluate the recordings himself.

The so-called title exclusivity must be distinguished from this. In doing so, the artist undertakes, within a specified period of time - usually 5 years - from the delivery of the contractual recordings, not to record or exploit them in whole or in part, or to have them recorded or exploited. This is to protect the label from the artist re-recording the contract with another label after the end of the contract.

Exceptions to the exclusive relationship can be agreed in individual cases - mostly with regard to live performances by the artists on the radio. However, such exceptional situations usually have to be coordinated with the label beforehand.

Compensation obligation of the label

The main performance obligations of the label under the artist contract include, above all, the payment of the agreed remuneration to the artist. In practice, a share of the proceeds from the artist has established itself as remuneration. This means that he receives a percentage of the revenues generated by the label with the production. The license rates are usually set on the basis of a standard evaluation and can be designed differently depending on the level of awareness of the artist, since the marketing success is regularly dependent on it. If the label is responsible for the distribution itself, the retail price (HAP) is decisive. If, on the other hand, a sales partner is involved, he or she can also participate in the sales generated by the trade. This has a direct diminishing effect on the artist's license participation. The following also applies: The cheaper an album is sold on the market, the lower the percentage of the artist's license participation.

Advance payments and credits

A prepayment for the expected license revenue is regularly agreed between the contracting parties. This advance payment is usually not repayable, even if the label does not achieve the forecast revenue from the marketing of the sound carrier. The financial risk remains with the label. However, as a rule, advances can be offset against claims of the artist to which he is entitled from the evaluation of the contractual recording against the label according to the contractual provisions. In some cases, contracts also provide for so-called cross-billing. The advance payment can be offset against all claims of the artist against the label, i. H. also with those that do not come from the contractual production, but from other albums realized with the label. This possibility of cross-subsidization should be discussed in detail during the contract negotiations.

In addition to the obligation to pay the remuneration, the label is regularly obliged to bear all costs in connection with the marketing of a recording that is the subject of the contract. Allocating the costs of increased marketing expenses to the artist is rather unusual. At least in this case the artist should have the right to forego special advertising measures and instead to demand a higher license from the marketing of the album.

Contract duration and option rights

The duration of artist (exclusive) contracts varies depending on the subject matter of the contract. However, a long-term commitment is not uncommon as both parties can be interested. Since the duration of the transfer of rights is unlimited in time, it is independent of the agreed contract period. The label is therefore allowed to evaluate the contract recordings without restriction. However, the artist is also entitled to participate in the proceeds generated by evaluating the recordings for an unlimited period of time.

In the event of a successful collaboration, many labels unilaterally reserve the right to extend the contract for a further contract year by exercising a single or multiple option right. The written form is regularly intended for this. If the option is not exercised, the artist is free to enter into a contractual relationship with another label.

Termination of the artist contract

The right of both contracting parties to terminate the contract without notice for an important reason cannot be waived in principle. The legal regulations are decisive. The terminating party must regularly issue a written warning beforehand and request that the reason for termination be eliminated within a reasonable period of time. It should be threatened that the contract will be terminated without notice in the event of a renewed breach of duty.

Your lawyers for music law from Berlin

As Specialist lawyers for copyright and media law and lawyers for music law, we specialize in music contract law. We have already drawn up, negotiated or checked numerous music contracts, especially artist contracts. Tell us about your case and your specific project as an artist or label. As specialist lawyers, we have the necessary experience in drafting contracts. We are happy to support you in contract negotiations with your contractual partner. Contact us. We represent you nationwide.

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