Year in Review: Recording Contracts

Two thousand and eight saw the further emergence of recording contracts, commonly referred to as 360 deals, which enable labels to derive income from all aspects of an artists career rather than just recording sales.[1] These contracts cover recordings, merchandising, content licensing, sponsorship, touring, DVD, and literary rights.[2]

Under the new emerging standard terms artists are give $3-4 per album for recording sales rather than $1-1.50 which was the typical royalty rate.[3] Of course in an environment where sales are diminishing these new arrangements more generally benefit the label rather than the artist. That said however, some have commented that by consolidating their arrangements artists are saving money by attracting fewer overheads.[4]

It appears that artists are less inclined towards signing major record contracts and this trend includes fewer artists willing to upstream from an independent label to a major label which is commonly achieved through a joint venture arrangement.[5]

There were also further examples of traditional recording contracts being unfair to artists. The band 30 Seconds to Mars were sued by EMI for $30 million for failing to deliver their next album on time.[6] The band claimed that as the contract was for a period of nine years and statutory limitations on contracts in California hold that any contract longer than seven years is void, that they should be released from the contract.[7] The band also noted that they had sold more than 2 million records in the time they had been signed to EMI and not only had they never received any royalties, EMI claims that they are still owed $1.4 million by the band.[8]

In another example, the artist Lyle Lovett was reported to have received no royalties from the sale of 4.6 million albums.[9]

[1] Digital Music News, Live Nation Mega-Deals Keep Getting Bigger... (21 October 2008) <http://www.digitalmusicnews.com/stories/102008equity> at 22 October 2008; Digital Music News, And Another One: Live Nation Ropes Nickelback Mega-Deal (7 July 2008) <http://www.digitalmusicnews.com/stories_old/070708nickelback> at 9 July 2008; Digital Music News, More Rattling on Shakira, Live Nation Mega-Deal... (3 July 2008) <http://www.digitalmusicnews.com/stories/070108shakira> at 4 July 2008; Digital Music News, Stumbling Towards 360: An Industry Licks Its Early Wounds (25 June 2008) <http://www.digitalmusicnews.com/stories/062508three> at 27 June 2008
[2] Digital Music News, Why 360 Degrees Still Spells 360 Questions... (20 August 2008) <http://www.digitalmusicnews.com/stories/081908three> at 22 August 2008
[3] Digital Music News, In 360-Degrees We Trust: Evolving Deal Points Emerge (10 April 2008) <http://www.digitalmusicnews.com/stories/040908three> at 13 April 2008
[4] Digital Music News, 360 + Change: Labels Pushing Harder on Broader Deals (10 February 2008) <http://www.digitalmusicnews.com/stories/021008change> at 19 February 2008
[5] Digital Music News, Upstreaming Disrupted:Why Major Label Survival Depends on Transformed Deals (18 March 2008) <http://www.digitalmusicnews.com/stories/031708upstream> at 19 March 2008
[6] TechDirt, EMI/Virgin Records Sues Platinum Selling Band For $30 Million... Despite Not Paying Them A Dime In Royalties (21 August 2008) <http://www.techdirt.com/articles/20080820/0204472040.shtml> at 25 August 2008
[7] TechDirt, EMI/Virgin Records Sues Platinum Selling Band For $30 Million... Despite Not Paying Them A Dime In Royalties (21 August 2008) <http://www.techdirt.com/articles/20080820/0204472040.shtml> at 25 August 2008
[8] TechDirt, EMI/Virgin Records Sues Platinum Selling Band For $30 Million... Despite Not Paying Them A Dime In Royalties (21 August 2008) <http://www.techdirt.com/articles/20080820/0204472040.shtml> at 25 August 2008
[9] TechDirt, EMI/Virgin Records Sues Platinum Selling Band For $30 Million... Despite Not Paying Them A Dime In Royalties (21 August 2008) <http://www.techdirt.com/articles/20080820/0204472040.shtml> at 25 August 2008; TechDirt, Lyle Lovett: Albums Sold? 4.6 Million. Money Made From Album Sales? $0 (11 July 2008) <http://www.techdirt.com/articles/20080711/1439371651.shtml> at 15 July 2008