2.0 The Deal Memorandum

2.1 Driving the Deal

How does the producer overcome any preliminary confusion over his deal? He needs to know with certainty what he is to be paid, when he will be paid and by whom. In order to overcome any inertia, some strong minded character has to get a grip of the deal and then needs to show some tenacity in driving that deal through. It is difficult and probably inappropriate for the producer to attempt to do this. The artist will usually be of no use. The artist’s manager may go through the motions but he has no authority to make any commitment on behalf of the record company. The record company cannot be relied upon. The person to drive the deal is either the producer’s manager (if he has one) or his lawyer.

2.2 Paying the Lawyer

If the task falls to the producer’s lawyer then some thought should be given at the outset to the question of who pays the lawyer’s fees. The record company will not contribute towards them. The producer will be liable for them in the first instance but there should perhaps be an arrangement of some kind between the producer and his manager as to who bears the costs. Arrangements between producers and their managers vary considerably. Often, the manager will charge 20% commission but will provide a complete service in the sense that the manager will not only secure the work and negotiate the principal terms but will also drive the deal through with minimal or even no involvement on the part of any outside lawyer. Other managers charge 20% but rely heavily upon a lawyer’s input and agree to bear the legal fees out of the 20% commission. Others charge 10% (which is rare) or 15% but expect the producer to bear any legal fees. What is fair and reasonable in a particular case will depend entirely upon the nature of the relationship and the value to the producer of the particular services provided. However, it would generally be unfair for a manager to charge a producer 20% commission but rely heavily upon the producer’s lawyer to drive through the deal on the basis that the producer has to bear the legal fees in addition to the commission. For a lawyer time is money and if the lawyer is charged with the responsibility for negotiating the principal terms and/or of then “driving” the deal (rather than simply dealing at a gentlemanly pace with the paperwork) a lot of time will be needed and this will be expensive.

2.3 Distribution of the Deal Memo

At the first available opportunity the person charged with responsibility for the deal should issue a deal memorandum. At this stage, the lines of communication will still be tangled and it is, therefore, important that everybody should be provided with a copy of the deal memorandum. A copy should be sent to the artist’s manager (possibly to the artist himself) certainly to the artist’s lawyer, to the head of business affairs at the record company, to the A&R person responsible and probably to the managing director of the record company for good measure. The trick is to secure agreement to the deal memorandum as quickly as possible so that based upon this the producer may commence work in the studio without undue risk. If, as is usual, the producer cannot be persuaded to hold back until there is clear agreement on all material terms before he starts work then all the more reason to keep up the pressure to secure agreement to the principal terms of the deal before work progresses too far.

2.4 Contents of the Deal Memo

For this reason, the memo should not be bogged down with detail but it should cover all of the material terms together with those aspects of the deal which often prove controversial. It should, therefore, deal with the following points (the significance of which where necessary is more fully explained below):

2.4.1 The contract must be with the record company itself.

2.4.2 The number of tracks to be recorded.

2.4.3 The advance per track (or the overall advance for the entire project).

2.4.4 When the advances will be paid.

2.4.5 The rate of royalty together with any escalations in this rate and whether the royalty is to be calculated at that rate by reference to the dealer or retail price.

2.4.6 For clarification purposes, the royalty rate is to apply worldwide (if indeed this is the case) rather than be subject to the same pro rata territorial reductions suffered by the artist (likewise, format reductions).

2.4.7 The royalty is to be paid subject only to recoupment of the advance and is not to be subject to recoupment of any recording costs nor deferred pending such recoupment.

2.4.8 The recording budget should be specified but it should be made clear that the producer will have no responsibility for any excess costs unless those costs have been incurred by reason of wilful neglect or default on the part of the producer.

2.4.9 The producer will require “A”/”B” side protection.

2.4.10 The royalty is not to be reduced by the amount of any royalty payable to any other producer or mixer engaged in relation to the recordings in question.

2.4.11 The credit requirements.