FINDING A BALANCE IN LABEL-ARTIST CONTRACTS by Rotimi Fawole @TexTheLaw

Why aren’t our labels and their artists getting along? Virtually all major labels have had a public spat with an artist, leading many times to the artist attempting to leave without being released from his contract. Expectedly, these matters have got tied up in court, with the artist prevented from working until after the suit has ended. What’s making artists so upset?

In the parallel universe where things work and there is a just reward for artistic creativity, getting a record deal is usually cause for celebration. The artist knows he/she will be paid a lump sum advance by the label, usually in instalments, which the label will try to recoup over the life of the contract, through record sales, touring, etc. In our dimension of the universe, a record deal seldom means more than the artist finding someone willing to pay for styling, studio time and video shoots in exchange for 60-70% of the artist’s net takings. Advances are rare for artists who aren’t yet established; who haven’t, as we say, “blown”, so many new/up-and-coming acts depend entirely on the label for their day-today maintenance.

This arrangement is usually fine until the artist’s first hit. The artist gets a glimpse of his/her potential earning power and, like Adam and Eve after partaking of the forbidden fruit, their eyes open.  A restlessness develops that, if not managed properly, will lead to the sort of confrontations and frustrations that the Nigerian industry has seen of late.

This is not to say that the labels are without blame, however. Most of the contracts in circulation, in addition to there being no advance, have no minimum commitment (financial or otherwise) for the labels. This effectively means there is no legal means of exit for the artist in the event that the label does nothing to promote the artist or unduly delays the release of recorded material.  An artist will be locked in until his/her minimum album requirement, a factor largely under the label’s control, has been discharged. This lack of minimum label commitments is understandable, given that it is the labels that draft the contracts (and will therefore insert the most favourable terms possible) and many artistes are too desperate to even think about getting a professional review before signing the contracts.

Some contracts have a term of X years, with the option to renew for Y additional 1-year periods. For example, a 4-year contract, after which the label is entitled to exercise the option to renew the contract for 2 additional terms of one year. This is potentially a 6-year deal. How does a label keep a Nigerian artist happy for 6 years? Chances are that you’re renewing because the artiste has “blown” by year 3 or 4. The artist’s expectations are likely to have changed with his stature.

But the labels aren’t in it for charity either. At the end of the day, they invest in the artist to reap a profit, like any other businessman. With the dependency on reformed(?) pirates for physical “sales”, digital suffering from the abundance of free music and quality videos costing what they do today, a long contract is probably the best way to hedge against un-recouped investment. And if the vast income spent in years 1 and 2 of a 4-year contract is rewarded with dismal revenues, what’s the incentive to keep spending for years 3 and 4? And why let the artist go after year 4 if your net profit is still a negative sum?

Can a middle ground be found?

The increasing frequency of falling-outs between artists and their labels suggests that a middle ground has  to be found. It may be due to my inherent professional bias, but I think the solution lies in the contracts, drafting them and understanding them. Professionals who draft contracts need to present their principals with pre-emptive solutions to cover the commercial realities they are likely to face, given the industry’s landscape over the past few years. As with any investment, parties need to set parameters for recognising when the investment/partnership/relationship has failed and prescribe how to walk away. In addition to acknowledging that the thrust of a recording/360 contract is not a lifetime of servitude, labels may wish to consider inserting a sliding buyout scale (e.g. un-recouped advances to date + expenses to date + N5m(year 1) or N10m(year 2) or N15m (year 3)) for an artist who wants to walk away even if  the label has met its obligations.

Contracts set out each Party’s expectations of the other, but signing one presumes that each party knows what is reasonable to expect of the other (so it can negotiate) and that each party understands what has been written down (so that it can review). Clearly, the unexposed artist is at the receiving end of this spectrum. Artists who can’t afford lawyers and who can’t get the label to pay for independent advice need to know the right questions to ask. Here are a few suggestions –

• If the contract is for 5 albums, how frequently do you (the label) have to put one out?
• If you don’t release an album within agreed time-frames, what is my remedy? How long can you withhold my music or deny me recording support before I can give you notice and walk away?
• How much of the money you spend on me is a loan (and therefore recoupable) and how much is an expense (your investment)?
• If it’s all recoupable (i.e. a loan, meaning I, the artist, effectively paid for it) how long after recoupment does ownership of the masters revert to me?