When I first started practicing law over 30 years ago, recording agreements were pretty simple documents. Maybe 10 or 12 pages which basically talked about the advance that the artist would receive, the royalties that they receive. The predominant configuration of recordings, the sale of recordings at that time, consisted of vinyl records and cassettes. 10 or 12 pages. Well, it's changed a lot. The recording agreements have evolved over the years. And I'm gonna show you a copy of the last agreement that I negotiated earlier this year. And as you can see, it's much different from the agreements from years ago. Here's a copy of the agreement. 70 pages. I always bring this into class and I drop it on the podium for emphasis, just to let students know this is a pretty thick, very serious document. Now why, do you say, why 70 pages? Why 70 pages? Well, what happened is for each technological advancement in the music industry, these contracts have gotten longer and longer and longer. Why? Because there's more pages added, more provisions added to cover the rights and obligations that result from these new technological advancements. For instance, when I first started practicing in 1980, CDs hadn't even entered the marketplace, but within a couple of years they did. You had four or five pages added to deal with CDs and the rights and obligations related to the CD becoming a new configuration in the music industry. Also in the early 80s you had another technological advancement, cable TV, and a new cable channel, Music Television, MTV. So record companies had to start producing music videos. Another five or six pages were added to account for that. And on and on it went. As we got into the 90s you had the development, in the latter part of the 90s, of the digital age. And paragraph by paragraph, technological advancement by advancement, you had additional pages added to these contracts. Very, very important. Why? Because the purpose of an exclusive recording agreement is to establish and document the asset value of the company. What do I mean by that? What are assets? Assets are things of value. And what do exclusive recording artists contracts do? Well, they convey rights and obligations on both of the parties. So we're gonna talk about two of the things that I think create value for a record company and for an artist in an exclusive recording artist agreement. First is what I call the most valuable asset in the music industry, which is the copyright. Now we're gonna deal with copyright in the next lesson to a great degree, so I'm not gonna dwell on it too seriously this time. But in speaking about the exclusive recording artist agreement, it's important to note that record companies want the rights to the copyrights in the sound recordings. There's various types of copyrights under the law, and we're gonna deal with two or three in this course that really relate to the music industry as it currently stands today. Record companies are concerned about the sound recording copyright. What is the sound recording copyright? What is a sound recording? That is a recording of a composition, and a composition is another copyright that we're going to deal with in the next lesson. But the sound recording is the fixation of sounds that make up the recording of a composition. What do I mean by that? Well, you'll have a basic song that an artist will record. An arranger will get involved, a producer will get involved. Other musicians might come in. You might have a rhythm section come in. You might have strings come in or you might use a synthesized strings. You're gonna have an arrangement. You're gonna have someone coach the vocalist on the interpretation of the song. That's basically what the producer does. All of these people are involved in producing this sound recording, the fixation of sounds that make up the version of the composition. Record companies want to own the rights to the copyrights in the sound recording. Now what is a copyright? Well, a copyright is a piece of intellectual property. It's just like owning real estate. Of course, it isn't real at all because it's in the air. You can't put your finger on it. It's called intellectual property. It's the creation of the mind and talent as well. So an artist that performs on a recording, for instance, I performed with the group Cameo, and the inflections of my voice and my creative work in the studio is something that the record company wants the rights to. And under the exclusive recording artist agreement, that's exactly what happens. The artist and everyone involved in the process of creating the sounds that are fixed on that sound recording need to be transferred to the record company because the record company wants to own those rights in the sound recording. Why do they wanna own the rights in the sound recording? What's the value of owning that sound recording copyright? Well, the copyright can last for life plus 70 years. There's some other rights that we'll talk about in the next lesson regarding copyright. So if I record and produce my own song in my home studio and I'm ready to release it, and I wanna release it through my company, John Kellogg Music, Then I'm gonna transfer my copyright interest to my company, John Kellogg Music, and they will own that copyright for my life plus 70 years. Subject to some limitations which we'll talk about next week. But after that life plus 70 year period, then that copyright falls into what is called public domain, which means that anybody can use that copyright and they don't have to get permission from anyone. With a copyright, that gives you like a monopoly on that intellectual property. Nobody else can use that property. Nobody else can use that sound recording without getting your permission during the life of copyright. So why do companies want to own sound recordings? Why do they wanna have that right? And you need to know this as well. Record companies don't require you to assign your interest in copyright over to them for nothing. No, this is the reason why you have an agreement. The record company is saying assign that copyright interest over to us and in exchange for you assigning the copyright interest over to us, we are gonna pay you royalties for you assigning that interest. Record companies want to own those sound recordings because over the life of copyright, those sound recordings can be used in a number of ways. I'm just gonna give you a couple of ways. One, they can be sold. Those sound recordings can be sold in different types of configurations. Digital downloads. They can be sold in CDs. They can also be used in other ways. They can be used for streaming purposes. So the record company is in position, by owning that copyright, to negotiate with the people that want to use those recordings. For instance, streaming services, Spotify, iRadio and others, they have to get the permission from the owners of the sound recordings to stream those sound recordings. And here's another use that's becoming even more and more important in the music industry today, and that is the right to synchronize those sound recordings to a video image. That's called the synchronization right. And what do I mean by synchronize? That means in time sequence taking a recording and putting it in maybe a commercial, a movie, the background in a movie or a TV show or a video on the Internet. Very, very important right. Why? Because the people that want to use and sign these synchronization licenses so that they can use the sound recordings in these various mediums usually have to pay a fee. And it's a very, very important revenue source for record companies. So the transfer of copyright interest is one of the things, one of the things of value in having a recording agreement. It establishes the right in the record company, and that could be your own record company as an artist. Why, as an artist, should you have your own record company? Because at some point you might want to do a deal with a major label, an Internet distributor. You might wanna license your recordings to other people. And at that point you want to establish those ownership interests in an entity that's working for you. Why? Because in the American system of capitalism, businesses like to build value in their assets, and the copyrights are assets that usually grow in value. The more you exploit those copyrights in various mediums, it builds the value more and more. One of the most remarkable companies in the history of the current music industry is Motown Records. Motown's master recordings are very, very valuable, because you'll hear them in commercials all the time. You'll hear them in movies. So the exclusive recording artist agreement, one, transfers the sound recording copyright interest to the company, which is very important. And two, it provides for the artist to render their exclusive recording services for a period of time or a certain product commitment. That could be four to six albums. Why is that important? Well, I release my record on my own through digital distribution. It starts getting a lot of social media, turns into a viral sensation. And let's say a major label approaches me and said, we really like what you do, John, and we'd like to sign you to an agreement. Well, it's important for me to say, well, I have my own company, John Kellogg Music, and I have a contract with my company where I'm gonna record five albums. Now I've recorded the first one and released it and that's the one that generated all the heat and the reason for you wanting to sign me. But I have four more albums under my contract, so let's deal. My company can deal with you on that basis. And it puts you in a much better negotiating position to have that. Now what do I mean by exclusive recording services? Well, that means that I can't record for anyone else, any other company during that period of time. That's very important, very important. And we talk about the evolving nature of recording agreements. I think it's important to talk about the fact that record companies back in the early 80s enforced that provision, the exclusivity provision in contracts pretty severely. I remember back in the early 80s when I first started practicing and I represented the O'Jays. And they had the opportunity to record with Stevie Wonder, and in fact, did record with Stevie Wonder. And at that time Stevie Wonder was at the top of his game, the O'Jays were at the top of their game, and they went into the studio and Stevie recorded a song called All I Do. All I Do, great record, by the way, great, great record. Stevie plays all of the instruments on it, and of course, you know he's a fabulous musician as well as a great, great vocalist and songwriter. And the O'Jays not only provided background vocals for him, but during some point in the recording the O'Jays did what is called in the industry, they stepped out. And by that we mean that they started riffing and they started improvising over certain tracks, to the point that you could recognize that, hey, that's Eddie Levert on that track. Wow, the O'Jays are recording with Stevie Wonder. Two superstars, this is fantastic! Walter Williams, the other lead singer of the O'Jays, did his trademark signature licks throughout the song. It was fantastic. I remember the O'Jays brought the, at that time, cassette tape back with them and we were listening to it. And all of the people in their camp were really excited. This had never been done before, superstars coming together to record tracks. Well, as it turns out, at that time record companies were really concerned about allowing their artists to record on other artists' tracks because they thought that it would cannibalize the sale of their own artists' recordings. To the point that the O'Jays' record company did not agree to allow the step-out vocals of the O'Jays' to be used, and so they had to pull it. They couldn't mix those tracks into it, which to me was the thing that really made the recording special. But the O'Jays were allowed to do the background vocals. And the other background vocalist on that track was Michael Jackson, but he was signed to Motown, or at least Motown had to give him the permission to record with Stevie Wonder. So I think that that shows that there was one time that the exclusivity provisions in contracts were very strictly adhered to. And it's important for you to know that if you sign with a record company, you just can't go record with anyone and everyone without getting the permission of the record company that you're signed with. You are their exclusive recording artist. Now that situation has changed. Once again, these contracts evolve. As you got into the rap genre really gaining significant prominence in the 90s and in the first part of this century and currently, you started to have artists provide guest vocals, step-out vocals, on a number of recordings. And now if you look on the current Billboard charts, you're gonna possibly find in the top ten, maybe five or six of the top ten feature guest artists. And record companies started to loosen their restrictiveness on the exclusivity provisions, and they really started to allow their artists to appear on other artists' recordings. Of course, they demanded a certain royalty, or percentage of a royalty, when their guest artist appear. But also I think it's important to note that record companies found value in their artist being promoted as a result of being guest artists on other recordings. So once again, the transfer of the sound recording copyrights, two, the providing of the exclusive recording services of the artist to the record company, are very important things that build the asset value of the record company.
