THE CONTRACT: THE BEST TOOL IN THE MUSIC INDUSTRY
For this series of blogs we consulted the firm Salmeron y Nava P.I., specialists in Copyright and Industrial Property, which are the most important aspects to read and consider before signing a contract, in addition to the different types of agreements that are handled in this business of the music industry.
Before continuing, I want to clarify that this text is only a general recommendation, which does not indicate specific procedures and does not replace the function or commentary of an expert in legal matters, so do not omit to seek professional advice and consult the laws in force in your country.
The articles described here correspond to the Mexican legislation in force.
In many occasions the artist is not completely favored within a negotiation or contract, but it does not mean that this document is the bad guy of the story and as I mentioned before, it is not about demonizing but to provide you with the necessary information.
Activities ranging from registration of works of authorship, distribution, even to the sale of merchandise, require an agreement if we are involving third parties in our work, preferably ALWAYS a written agreement, especially because the Federal Copyright Law does not provide for verbal contracts and stipulates that: The acts, agreements and contracts by which patrimonial rights and licenses of use are transferred, must invariably be celebrated, in writing, otherwise they will be null and void by operation of law.
In general, these are the most important points to read, review, negotiate and consider in a contract.
PURPOSE OF THE CONTRACT
All agreements or contracts are established for a reason or service, the objective of the contract is what is the purpose of this agreement, why are we signing, what are we signing for, what are we signing for? The objective defines what are the activities and results that are being negotiated, in labels it could be the recording of certain record material, in distributors to place the music in certain digital stores, in press agencies or representation the positioning and growth of the artist, in short. In every contract it must always be clear what the purpose of the contract is.
TERM.
The term is the time in which an agreement lasts, that is to say, for how long rights and obligations are contracted.
It must be taken into account that the term varies according to the type of contract signed, and may also be subject to automatic renewal or extension.
Although there are civil and commercial contracts that may have very exaggerated durations, in the area of Copyright there is a minimum and maximum term.
Article 33: In the absence of express stipulation, any transfer of economic rights is considered for a term of 5 years. Exceptionally, it may only be agreed for more than 15 years when the nature of the work or the magnitude of the investment required so justifies.
EXCLUSIVITY
One of the clauses that could generate the most conflict due to its omission is exclusivity. Exclusivity prevents or limits one of the two parties from performing a similar action with an additional entity during the term of the contract. Mostly this clause puts the artists at a disadvantage, since it ranges from not allowing them to collaborate, to preventing them from seeking additional options that strengthen or add to their project, these parties being the only ones authorized to exploit the rights assigned by the musician.
TERRITORY
The terms of a contract are not enforceable in all countries, regardless of where it is signed. Territory is any place where all agreements or provisions of the contract can be legally enforced.
GRANT OF RIGHTS
The grant of rights is another important point, which should be read carefully, and is that in any type of license: recording, distribution, performance or synchronization, this grant allows the use of a copyrighted work in different ways. Let us remember that exclusive rights can be licensed and exploited separately, as long as it has not been reached by the exclusivity clause.
It is important to emphasize that the license of grant of rights does not imply or mean the transfer of ownership of the moral rights of the author.
MASTERS AND COPYRIGHT
Although there is now much greater awareness about retaining rights in music, for most artists this issue generally goes unnoticed, leading them to assign, to a greater or lesser extent, the economic rights to their music.
The ownership of the master refers to the person who owns the original recordings of a work and that is the recording that is made publicly available in digital stores, it can be either the artist or the record label. It is not linked to copyrights.
When an artist comes to a label with pre-recorded material, the label can acquire the property, thus having the rights by copyright, which is a form of intellectual property, which protects any type of creative work, in this case the recording, whoever has this property has complete control over the work.
TERMINATION OF THE CONTRACT
The initiation of an agreement or contract is the purpose of the contract and will have more or less stipulations, depending on what activity we are negotiating. Termination of the contract is binding on that party; omission or failure to meet these objectives may be grounds for early termination of the contract.
Many factors may be involved here, such as penalties to one of the parties, whether monetary or for inactivity, repair of damages, and even this clause may not exist.
Article 59: The following are causes for termination, without liability for the author or the holder of the economic right:
That the publisher has not initiated the disclosure of the work within the term indicated in the contract.
If the publisher fails to fulfill his obligation to disseminate the work at any time without just cause; and
If the work covered by the contract has not produced economic benefits to the parties within a term of three years, in which case the publisher shall not be liable either.
ROYALTIES
Every service entails a payment or commission, royalties are the payment for the services stipulated in a contract and will be deducted from the artist's income, for that reason it is important to always define the calculation of these, that is to say, if they are taken before or after expenses.
The royalties can be negotiable for both parts and will depend on the moment in which the artist's career is and what services are being provided.
IN ADVANCE
This part, in particular, is my favorite because it is very interesting to analyze how it works to designate an advance and the recovery of the same.
The issue of advances corresponds mostly to contracts that are entered into with record labels and some cases of digital aggregation; the amounts are set based on who the artist in question is and what the purpose of the agreement is. I will start by saying that the advance has two aspects:
Salary: This is money that is advanced covering personal expenses and which you can freely dispose of for the duration of a contract or agreement.
Production: It is the money that is advanced to him by only concept of the musical production; study, musicians, recording, master, licenses if they are needed, etcetera.
But, as its name says, it is money that the artist will have to return with the percentage of royalties that he/she has negotiated, in other words, the artist will not receive what corresponds to him/her in royalties, until his/her advance is paid off.
In any case that the sales forecast is not met, there are a couple of options to cover the advance: cover the debt with old catalog or extend the agreement to take future royalties, it is not necessary that the artist agrees.
RECORDING COMMITMENT
This is one of the clearest examples of the objectives of a contract and establishes the recording of a certain number of albums over the term of the contract. Keep in mind that one of the possible points within a contract is creative control or collaboration, so these albums may include very specific specifications, such as: length, frequency, number of songs, collaborations, covers or minimum revenue volume.
CREATIVE CONTROL
One of the most controversial clauses is the creative difference between artists and record labels.
This point is delicate from the outset, and it is that it is possible to totally or partially cede decisions that directly or indirectly affect the artist's material, such as promotions, approvals to final versions of a song or release dates. In this part it should be specified if the artist has the last word on his work in terms of production and marketing.
INTELLECTUAL PROPERTY / IMAGE OR TRADEMARK RIGHTS
It is frequent that agreements established with record labels request in their favor the use of the artist's image and name for alternate businesses and that obviously are remunerated, the bigger the entity is, the more rights or licenses they will request.
This clause could derive in a separate contract, called 360 CONTRACT, which is nothing more than the handling and integral management of the artist in recording activities, publishing, merchandising, marketing, booking, community management, sponsorships, etc. everything that generates an income and from which a percentage can be charged.
Although these aspects are not included in the legal framework, they have the power to compromise or not any of the parties, however if we know them, we can enter into a negotiation that benefits all parties involved.
As artists it is possible to register your trademarks if you want to sell merchandise with your image or to make a process of reservation of rights before the INDAUTOR to protect your name.
After the experience of our director, Indiefy's position is very clear, always support the independent artist, that's why with us you will always be the owner of your work, you will have tools such as free digital distribution and advice on your contracts. Contact us if you are interested in more information.
In the last part of this article we will detail which are those activities that require a contract, so your goal is long friendships, clear accounts, don't miss it.
See you in the future!
