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Music Industry
Contracts, business and royalties
Unit 39 GC 3-5

The Management Contract

Someone

else is representing you and your music, and you are

paying them for the privilege.

The

contract will usually include:

Activities
Term

Covered

and Territory

Commission,

Earnings and Cashflow

Activities Covered
These

are the areas of your artistic endeavour which your

manager will represent you.

Usually

this will mean all of your music output, but if you

already have a lucrative deal making music for doorbells for
example by negotiation you may be able to keep this separate.

If

you are an entrepreneur you may already have a business

manager, or if you dabble in acting you may have an agent.
These will be different from your music manager.

Term and Territory

You

will need to determine how long the agreement (of him or

her being your manager) will last.

Options

may be included, whereby if a contract lasts for one

year, for example, the manger may decide to continue or
extend the contract.

You

could include performance clauses, whereby you have the

right to terminate the contract if your manager hasnt bagged
you a recording deal.

Territory

refers to the countries in which your manager

represents you. Most management deals are worldwide.

Commission, Earnings and Cashflow

Commission

for a manger is generally 20% of gross earnings

(total incomes before tax).

Ideally

all income should go to the artists accountant and the

manager should invoice him or her their share.

However

a less desirable, yet common practice, is for all the

moneys to go to the manager who then later apportions them. If
this is the case the contract should stipulate that accounts are
given to the artist regularly.

The Publishing Contract

Music

publishing is the area of the music business which deals

with songs and songwriting, distinct from roles of the performer.

Every

time your song is used somewhere you are owed a royalty.

Mechanical

rights refer to the royalty you are owed from the sale
of recordings. If your song is played on Radio One, for example, a
fee will be payable to you from the PRS (Performing Rights
Society).

Good

publishers will constantly be seeking where your material

could be used (adverts, TV/Film etc).

Your

contract should include a right of audit where you can

examine the publishers books.

Assignment of Copyright, Advances

and Royalties
This

determines the period over which you hand over your songs
to the publisher.

The

contract could include a performance related hurdle, whereby

if the publisher has made appropriate usage of your songs within a
certain time the rights may revert back to you.

Signing

with a publisher means less paperwork and chasing up of

royalties. They also pay non-returnable advances, which are
recouped from songwriting royalties but are written off if you dont
earn enough.

You

might expect to receive around 70% of your materials gross

income. The publisher will keep the rest having collected your
royalties from the dozens of collection societies around the world.

The Recording Contract

Record

companies put forth money to produce, release, and

promote an album. Recording time, manufacturing, packaging,
photos, distribution, marketing, and music videos are just some
of the areas where the label must spend money on an act it has
signed.

It

is estimated that under 5% of signed artists ever return the

initial investment.

Contracts

usually demand exclusivity, If they have stumped up

the cash for the recordings, they will also be regarded as the
legal owner of the recordings.

Royalties from Record Companies

The

artists royalty percentage is usually 10% to 14% of the

retail selling price.

The

record company may take packaging deductions from an

artists sale royalties, this can be as much as 15% for vinyl and
25% for CDs.

The

artist may also pay for up-to 50% for the cost of
promotional videos. Again this money comes form the royalties
from sales.

The

producers are also paid out of your share of the royalties.

Record

companies can exercise an option to drop an artist

between releases. If this happens all debts set out in the
contract as non-returnable are written off.

PRS for Music Performing Rights

Society
This

company licenses and collects royalties for songwriters,

composers and music publishers whenever their work is
broadcast, performed in public, or used online.

Originally

set up for collecting fees from used sheet music.

Royalty

rates vary dependant on where the music is played (for

example, a national radio station will have a higher rate than a
local radio station).

Members

are whole or part copyright holders of the music

(usually the songwriters or music publishers) and are paid in
lump sums each quarter.

PPL Phonographic Performance

Limited
PPL

was founded to collect money for performers and record

companies when their music is played publicly. In 1934 the
record companies EMI and Decca took a coffee shop owner to
court for having recorded music playing. The judge agreed that
permission and licensing was required.

Any

performer (from a member of a choir to the lead guitarist)

can join PPL and may be eligible for royalties.

PPL

collects money for the use of recorded music for its

members, whereas PRS collects money for the use of lyrics
and songwriting for its members. Its very common to musicians
to be members of both.

Quick Quiz 1-4

1.

Name 2 things that should be covered in a managing contract.

2.

How much commission would a manager generally take?

3.

What is meant by mechanical rights?

4.

Name 3 things a record company would spend money on to

promote a newly signed artist?

Quick Quiz 5-8

5.

What is the estimated % of artists who will return the initial

investment given to them by record companies?

6.

How do music producers get paid?

7.

What does PRS do?

8.

When and why did PPL start?