1.0 The Term

1.1 Long Term Contracts

As explained in Part I, most UK majors ask for up to four or, perhaps, five albums when signing new artists although the trend is downwards. US record companies, when signing in the US, still tend to ask for six or seven albums. Elsewhere, for example in Germany, France and Scandinavia, less importance is attached to long term contracts. One advantage in following the indie route is that contracts are usually less demanding, particularly in terms of duration. An indie may be prepared to conclude a deal for just one record or with a very limited number of options. Generally, the artist needs the contract to last long enough to ensure that the record company is reasonably committed, but not so long that the record company can stifle the artist’s career, whether artistically, or financially.

1.2 Development Deals

In many cases, the record company will not be prepared to commit immediately to recording an album. Instead, it may ask for one or two singles, with the right to call for sufficient additional material to comprise an album. This type of agreement is often called a development deal. They are generally unsatisfactory for artists. Whilst the company will not be obliged to continue beyond the singles stage it may nevertheless insist upon options for up to, say, five or six albums. Accordingly, the artist is entering into potentially a very long term commitment, despite having only a very limited commitment from the company in return. The other problem with development deals is that the artist may suffer from inordinate delays. In order to explain why these delays may occur we first need to describe how the term of a typical recording agreement is structured.

1.3 Extension Periods

In, for example, a five album deal, the artist will usually be contracted to the company for an initial contract period of one year. This is followed by five further successive option periods of one year each. The record company alone may decide in each case whether to exercise its option and so enter into each subsequent contract period. On the face of it, therefore, if all the options are exercised, the contract continues for six years. This might sometimes be referred to as a six year deal but would usually (and more accurately) be referred to as a six album deal. The reason this description is more accurate is because of the “extension” provisions. Each contract period will run for twelve months or, if longer, until a set period following delivery or, more usually, release of the album recorded during that contract period. In the first contract period, recording of the album usually does not begin until the agreement has been signed. The recording process is often lengthy. Once the completed album has been delivered to the record company, there will be a further delay before it is released. The majors often have crowded release schedules. Moreover, marketing and promotion campaigns have become more sophisticated. Accordingly, lead-in times, i.e. the period between delivery and release, have become longer. It may be sensible to avoid the release of an album during August (when everybody is away on holiday) or during November and December (when there is a deluge of releases competing for the Christmas market). Generally, there may be a delay of perhaps three to six months after delivery before the album is released. The contract may provide for a further period of extension following release which may be as much as a further six months. This gives the record company time to evaluate the success of the album, before deciding whether or not to exercise the option for the next period. The problem may be worse in later option periods because recording will not begin until after the option has been exercised. Only then will money be made available for recording. The artist may still have outstanding touring commitments in relation to the promotion of the previous album, before he or she begins writing and recording the next album. For all of these reasons, a typical “album cycle” might be two years. In the case of a five album deal this might therefore take, say, ten years to fulfil.

1.4 Delays

A development deal may be structured on the basis that during the first contract period only one single is to be delivered. The record company may have an option to enter into a further contract period during which perhaps the artist must deliver a second single. Only then might the record company be obliged to decide whether or not to commit to a third period during which the first album would be recorded. The artist might record two singles only to find that the record company does not wish to continue. In the meantime, as a result of the extension provisions there might have been a delay of perhaps a year or two. This is why, for the artist, development deals are generally to be avoided if possible. A preferable alternative is to persuade the record company to finance some high quality demonstration recordings without the benefit of a formal contract. If both sides are pleased with the result then a record deal (with a proper commitment on both sides) may be negotiated. The record company is exposed to some degree because the artist may try to use the demos to “windup” the deal by seeking interest from other companies. However, a pragmatic company may be prepared to adopt this approach with the confidence of knowing that it is far ahead of its competitors in terms of building a relationship with the artist.

1.5 How Many Options?

The artist should restrict the company to as few options as possible. There may be a temptation to attach more significance to other aspects of the recording agreement, perhaps the advances and royalties. In fact, the difference between a four album and a five album a deal may be very significant. In the majority of recording contracts the option for the second album is not exercised. Even when it is exercised the option for the third album may not be exercised. As a general rule, if a third album is delivered this demonstrates that the artist has achieved some real success. The artist should by then be a recognised talent with a secure sales base. In some cases, a first album will be so successful that the artist will more or less immediately achieve significant wealth and status. However, although an artist about to record his or her fourth album may be perceived as successful, and though he or she may have benefited from a number of substantial advances, nevertheless (for reasons explained in Part III), his or her royalty income might not yet have begun to flow.

He or she may wish to flex his or her muscles at around this stage and attempt to re-negotiate his or her deal. We deal with the issue of renegotiation of recording contracts in more detail in Part IV. At the point at which a record company requires an artist to deliver a fourth album, the artist will find it more difficult to secure significant improvements if the record company can call for a maximum of five or more albums. The task of re-negotiation would be far easier if the deal were for only four albums.

In summary, if a record deal is not going to survive beyond the first few albums then it does not matter whether the maximum number of albums allowed for is five, ten or any other number. However, if a contract survives beyond three albums (at which point the stakes are higher all round) then every extra album for the company wins the company perhaps two more years before it may have to give the artist improved terms.