What’s The Truth About Exploitative Contracts in the Music Industry?
Written by Carlos José Jijón
Disclaimer: The ideas and suggestions presented in this article are not intended to be legal advice.
For almost a century now, the music industry has had the unfortunate distinction of being known as a place where exploitation of artists is rampant. It is not an exaggeration to say that the fear of being trapped in a disadvantageous arrangement with a record label or a publishing company has shaped the way people think about what it is like to be a musician. Back in 1991, A Tribe Called Quest expressed this sentiment in the lyrics of their song “Check the Rhyme”: “Industry rule number four-thousand-and-eighty/Record company people are shady”.
The issue usually centers around legal contracts. Traditionally designed to favor a record label, these can include all sorts of questionable clauses that can end up harming an artist’s career and livelihood. Some of these lead to payment configurations in which artists receive only a tiny fraction of the money their music produces. Others can force musicians to repay obscure fees or even lose control of their image and compositions. There are also practices like ‘shelving’, where artists are put in a situation where record companies can legally prevent them from releasing their work. Many of the biggest (and most dramatic) stories in music journalism are related to singers and composers trying to get themselves out of “unfair” or “exploitative”recording deals. The examples are too many to count. You can find them all the way back in the 1930s with artists like Robert Johnson and today with names like Taylor Swift, Sky Ferreira, and Megan Thee Stallion.
At the same time, however, these stories tend to be shrouded in great mystery. Contract negotiations are usually confidential and many of these documents have never been made public. And even when they are publicly available, they are long, complex, and filled with highly-specific music industry terminology most regular people have never heard of. That leads to many questions arising. If these deals are so controversial, why do they exist? Are they actually as common as people think? Why don’t we hear the same types of stories in other entertainment industries like film or video games? In an attempt to clarify things, GROOVE MAGAZINE spoke to multiple entertainment lawyers and other professionals familiar with the music business. In the picture they paint, the struggle for fair compensation when negotiating with large companies is difficult and complex, but not in any way hopeless.
Why are these stories so common?
When compared to other areas of entertainment, there are certainly some qualities to the music business that can lead to controversial deals. People in film or television usually work on a project by project basis, whereas musicians often sign multi-record deals where they can be tied to a label for many years, enough time for disagreements to arise. Another, arguably larger issue, is related to unions and guilds. In countries like the US, strong labor unions can set minimum terms that contracts must adhere to, which is quite normal in realms like television, but not very much in the recording industry.
But that isn’t the whole story. For Justin M. Jacobson, Esq., an American entertainment lawyer used to working with record companies and musicians of various kinds, the idea that bad deals are particularly prominent in the music industry is “kind of a misconception”. “The biggest problem that you can have in any entertainment industry – which just happens to happen a lot in the music world – is that if you don’t have proper representation, proper people negotiating and caring and properly focusing on these agreements, then you’re probably not going to sign the best deal”, he says. “I don’t think it’s not true that [when you’re first presented with] an agreement, it’s probably going to favour one party over the other. But if you don’t have representation, you’re not going to know what to look for, what to edit, what to ask for, or even that you can ask for these things. That’s when you get yourself into problems”.
A lack of proper legal representation and a general lack of knowledge of the music business can have disastrous consequences for artists. Frequently, they don’t understand that the money they get from labels after a traditional record deal (the advance) is essentially a loan they need to pay back through their royalties, which can also be true of marketing costs and other fees. According to George Goutzianas, a Greek music producer-turned business consultant with extensive experience dealing with artists in America, Sweden, and the UK, “[musicians] need to avoid signing contracts without legal review, especially with vague terms around ownership, royalties, or exclusivity. This is very, very important”. Getting into a deal without the help of a professional, he says, can lead to nightmare situations where artists are practically helpless. “The worst-case scenario involves losing control of your rights and, as a result, losing money. So, you’re legally locked out and you’re unable to create freely, which is the biggest loss of all”.
An underdiscussed part of the conversation, Jacobson claims, is that many artists don’t prepare themselves properly before negotiating a contract with a record label. “I don’t necessarily want to say that labels are out to get people, because I think that’s not the right answer. I think it’s people that are involved in these contracts not doing the right thing, not doing their due diligence. That’s all it is. They’re being cheap. That’s the truth of it”.
It should be noted that, while it is true that some “bad” recording deals can be explained through a lack of caution on the side of the artist, there are many other factors at play. People coming from marginalized communities have been on the receiving end of a myriad of unfair business practices over the decades. Historically, black artists have found themselves in extremely disadvantageous arrangements that have often ended in financial ruin or total loss of creative freedom. Natasha S. Chee, Esq. is an American entertainment lawyer currently based in California. After years of practicing, she is convinced that artists coming from underrepresented backgrounds can be particularly vulnerable when negotiating with companies. “For people in underrepresented communities [like women or people in the LGBT community], sometimes labels and companies want to mold you into a certain shape. I’ve seen this. I’ve heard this. I think we’ve all heard it.” She mentions how, for example, female singers can be pressured into maintaining an extremely sexualized image against their intentions. “It is not even so overt, but there is discrimination there”.
For Chee, there is a great need for artists of all backgrounds to be protected by professionals, but also for them to understand the best ways to avoid exploitative deals, and there are plenty.
How can artists protect themselves?
Ryan Schmidt, Esq. is an American music lawyer, educator, and online content creator. Before studying law, he was a singer and songwriter who saw himself trapped in a restrictive contract. Today, he claims his mission is to “help creatives protect their art and build sustainable careers”. For him, the best way to get a good deal with a record label or a publishing company is to “do all the things that would make all those deals and opportunities come to you”. “Write the best music”, he says. “Record with the best collaborators, and really focus on fan-building and monetizing your independent music business. Because the more that you can grow that, the better the opportunities”.
According to Schmidt, too many artists put an unhelpful emphasis on reaching out to labels with the hope of getting a recording deal. Instead, he says, creators are probably better off working on their music and their online presence. A young singer with a large following on social media and a devoted fan-base is not only more likely to get a label’s attention, but they are also in a much better position to negotiate a potential deal. George Goutzianas agrees. “If you want to be in a good negotiating position, you need leverage”, he says. “In order to have leverage you need to have the ability to walk away or offer value. Before you sit at the table, you need to develop your brand identity. You need to grow your social media and your physical media [...]. The label needs this momentum. The more you’ve done without them, the more power you have”.
With modern technology and information access, learning about the music business is arguably easier than it has ever been. While it can never substitute the assistance of a professional, Natasha Chee believes that artists should educate themselves as well as they can before entering into a potential deal with a large company. This involves reading about copyright law, learning how to spot behavioral red flags, and properly vetting potential business partners. Companies can be exploitative and predatory, but the same is true of lawyers and managers. “You need to be careful of who’s on your team”, she says. “There’s corruption everywhere”. The way Ryan Schmidt puts it, “at the end of the day it comes down to people. Even if you have the best written contract and the lawyers negotiate every single term you want, that contract isn’t worth the paper it’s written on if the people who have to live up to those promises won’t live up to those promises”.
When it comes to legal representation, the reality is that hiring an entertainment attorney can be very expensive. But artists still have alternatives. “If [artists] are unable to afford music lawyers, labels will generally give an attorney fee budget and say ‘you have X amount of money to cover your attorney. Go out and find an attorney’”, Schmidt explains. Another option is asking a lawyer if they’re willing to work for a percentage of an advance instead of paying out of pocket, which is not uncommon. When discussing this topic, Natasha Chee talks about clients who saved for years to pay for representation because they “knew it was important”.
Despite his complicated past with labels and large music companies, Ryan Schmidt thinks it is not helpful to think of them as harmful actors. “I don’t think we can look at every label as bad or at the music industry as a whole as evil”, he says. “The music industry is a bunch of different people who love music who got into this because of their love of music, whether they’re musicians themselves or just huge fans. You might have some corporate policies of different labels or different digital services providers that might have some negative connotations, but we’re also talking about people. There’s a lot of very good people in the music industry [...] I’m certainly not anti-label. I’m just anti the wrong label and the wrong fit for [artists and their] goals”.
When describing what a “good” deal is like, Justin Jacobson believes that a big part of it comes from negotiations feeling like a partnership, as opposed to being adversarial. “You should always sign something that you feel confident and comfortable with”, he says. “You shouldn’t feel like you’re getting taken advantage of when you’re done. That to me is the sign of a bad deal. If both people walk away saying ‘Oh, that was terrible’, then that just starts the relationship in a horrible way! It should be a fair, great deal that everybody is excited and passionate about. That’s how you want it to start”.