"Frizzy" by Jonathan Jesion

www.ProfessorCalle.com
MUM 2700
Music Business 1

MUM 2700

Professor: Calle

Office: 8213-2

ecalle@mdc.edu

(305) 237-0593 office

 

RECORD CONTRACTS TEST REVIEW TERMS

Definitions:

1. A&R: artist & repertoire. Makes decisions about artist signings and songs to be recorded. May also assign producers and writers.

 

2. Record: Since the 1960Ős a record is described in contracts as an audio or an audio-visual device.

 

3. Master(s): A CD contains as many masters as it has tracks. In other words, 10 songs on a CD equals 10 masters.  A master can come in different formats:

  1. DAT, CD or DVD containing a final mix ready for duplication.
  2. Two inch 24-track tape, half inch digital 48-track tape, Super-VHS ADAT tape, Tascam DA-88 super 8 tape, raw sound file data on a variety of formats including CD, DVD, hard drive, DVD-ram and DDS-3 tape. These formats will contain the data for digital audio recording formats such as Pro Tools, Digital Performer, Nuendo, Logic, Reason, Cakewalk, Cubase, Radar, Tascam, etc.

 

4. SRLP: Suggested Retail List Price

 

5. Mini-major record company: Does everything but distribution.

 

6. Packaging deductions (amounts for CDs and cassettes): 20% for cassettes and 25% for CDs.

 

7. Independent record company:

Two types:

  1. Truly independent has no attachment to a major.
  2. Semi-independent is distributed by a major.

 

8. What is a point? 1% = ONE PERCENT.

 

9. Recording Advance: Artist or producer is given an amount of money and expected to turn in a completed and satisfactory master. Producer or artist keeps any money not spent on the recording.

 

10. Recording Fund or Budget: Artist or producer is allotted an amount of money and is expected to turn in a completed and satisfactory master. In this case, the record company pays all of the bills from this fund and any money not used does not have to be recouped by the artist.

 

11. Free goods deductions: Typically 15%. These free goods are used for promotion.

 

12. Cross-collateralization: All advances or recoupable monies for any and all albums under one record deal are considered together. In other words, if the first record doesnŐt recoup and you make a second record, the artist must recoup the money advanced for both records before they can begin to earn royalties.

 

13. Reserves: Typically 30% or more. This amount is held in order to account for returns.

 

14. Standard return privilege: In the past, the returns were allowed to be 100% of shipment. Currently, retail stores are allowed to return 20% of the stock. Any amount over 20% is charged a restocking fee.

 

15. Profit & loss: Every artist has a profit and loss sheet detailing the amount of advances issued and amount of money recouped.

 

16. Black position: Black means you are profitable.

 

17. Red position: Red means you are loosing money. The black and red terms come from accounting practices that use black and red ink to denote profit and loss respectively.

 

18. Standard breakage deduction: 10%. A&M records still computes this deduction on contracts even though CDs donŐt break as often as records.

 

19. New artist: Someone who has sold less than 250,000 records.

 

20. Gold album: An album selling 500, 000 or more.

 

22. Platinum album: An album selling one million copies or more.

 

23. Floor: The smallest advance amount stipulated in an artistŐs record contract.

 

24. Ceiling: The largest advance amount stipulated in an artistŐs record contract.

 

25. Controlled composition: Any composition in which the artist has a financial stake. The term control refers to the artistŐs control to make decisions about the mechanical rate of the song because he/she has a financial interest or benefit in the composition.

 

26. Standard controlled composition reduction: This is now standard in record contracts and is a 25% reduction. Therefore, your mechanical royalty is reduced from .08 cents to .06 cents.

 

27. Controlled composition reduction for record club CDs: This is also standard in record contracts and is a 50% reduction. Therefore, your mechanical royalty is reduced from .08 cents to .04 cents.

 

 

28. Prospective escalation –  A bump up in your royalty rate based upon reaching a certain sales quota goal. This escalation happens after the artist has reached this sales figure. There is no change in rate for any units sold prior to achieving the negotiated sales figure.

 

29. Retroactive escalation: If a contract states that the royalty rate retroactively increases with the number of CDs sold, then the artist would paid the higher rate after reaching the stipulated amount and would be paid the higher rate from record #1. In other words, if your contract stipulates a 16 point royalty rate that increases retroactively to 17 points after the sale of 500,000 CDs, the artist would be paid 16 points for all CDs up to 500,000. Upon selling 500,000, the artist would be paid 17 points for all future CDs and one extra point (16 +1) for the CDs from 1 to 499,999. The term retroactive means Ňfrom the beginning.Ó

 

30. All in deal: This refers to a situation where the artistŐs points include the amount for producerŐs points. For example, if your producer receives 3 points and your artist deal is for 16 points, then you are really earning 13 points and the producer is earning the other 3 points.

 

31. Commercially satisfactory recording/master: A master accepted by a record company because they believe it will sell is termed a commercially satisfactory master.

 

32. Options: The record companyŐs way of keeping successful artists by extending their contracts. The number options or additional records is spelled out in the contract and is at the whim of the record company. If you sell, the record company has the right to Ňexercise the optionÓ and make you record another CD. If you donŐt sell, they have the right to Ňnot exercise the option.Ó

 

33. Mechanical royalties: This money is paid to the publisher at the time of pressing. This money is not recoupable and is due when records are printed, not when records are sold. This money is upfront money and, because it is not recoupable, companies invented the controlled composition clause in order to ct down on upfront expenses.

 

34. Maximum statutory mechanical royalty rate for a song up to 5:00 in length: 8 cents.

 

35. Statutory mechanical royalty rate for a song longer than 5 minutes long. Be able to compute the full mechanical royalty owed for a song longer than 5 minutes.

For songs longer than 5:00, the extra mechanical royalty rate is1.55 cents for every minute or fraction thereof.

 

36. Royalty base = SRLP – (20%) packaging deduction

 

37. Recoupable moneys: Moneys the artist needs to earn before they are paid royalties. ItŐs a lot like paying off a loan.