Independent Record Labels: The Essential Steps to Successful Entrepreneurialism (3)
© 2001 Music Business Journal
The Following then is a summary overview of some of the key elements to be considered by those who wish to pursue the setting up of their own independent record label:
(Continued from previous article)
Other contractual considerations include key clauses such as - exclusivity, territories covered, release commitments, the term, options, advances, royalty rates, deductions, termination provisions, accounting procedures and the need for independent legal advice.
Very small labels are not expected to pay their artists advances - or even royalties. Instead, it is common for developing labels to agree a 'profit sharing deal' with their artists. In this way, any profits generated after the recoupment of costs can be split 50/50 between the label and the artist. Note that such an agreement requires a strict definition of recoupable costs. Those labels which do pay royalties usually pay around 15-20% of dealer price (wholesale price) after the recoupment of agreed costs, and the taking into consideration of any agreed deductions (e.g. for product packaging).
The record label is the party which should have the contract drafted and presented to the artist(i.e. formally make the offer). All legal agreements should be produced by a lawyer who is experienced in the music and entertainment industries. This is a burdensome cost, however some lawyers may agree to undertake this task for a small fee - or even gratis - in the expectation of a future flow of business from the label at a later stage as it becomes more established.
It is important to note that the artist should have separate legal advice also. Suffice to say that the label should include this in the contract, making it clear that the artist then accepts the need for such a provision and is responsible enough to act accordingly in his own best interests.
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