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  • 6.1 Recording Contracts
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A recording contract is a copyright contract. Holders of copyrights and related rights determine the terms and conditions relating to the exploitation of their rights in recording contracts. Traditionally, the parties to a recording contract are the performing artist and a record company. The contract details the conditions for the production and making available to the public of a recording that contains the performing artist's performances. With a recording contract, the performing artist transfers rights provided to him in the Copyright Act to a record company that needs the rights to produce and market recordings. As such, a recording contract is the foundation for cooperation between the performing artist and the record company.


Traditional Recording Contract

A contract that makes the record company responsible for all costs related to the production, publishing and marketing of phonograms, is called a traditional recording contract [1]. With this contract, the performing artist's exclusive rights, such as the right to make the recording of performances subject to his permission and the right to produce copies of the recordings of his performances and make them available to the public, are transferred to the phonogram producer under the terms and conditions of the contract. According to the traditional recording contract, the record company covers all the costs related to the phonogram. Thus, the record company is responsible for the expenses that arise from producing, publishing and marketing the phonogram.

The artist receives compensation proportionate to the sales of the phonogram that, in some cases, increases with the sales volume of the phonogram. Royalties can be distributed, e.g., as follows:


Distribution of Royalties


Usually royalties are determined in the contract as a proportion of the phonogram's wholesale price, or Published Price to Dealer (PPD), excluding value-added tax [2]. Thus, if the phonogram's PPD is, for example, 12 Euros and the royalties 8%, the artist receives 0.96 Euros for each sold phonogram. In a band of four, this will still be divided by four, leaving each musician with 0.24 Euros per sold phonogram.

The payment of royalties can be made subject to reaching the so-called break even limit. This type of a condition transfers some of the record company's cost risk to the artist, royalties are paid only after the company has been able to cover some of the costs with income from the phonogram's sales. In addition, the contract can contain many other deductions from the royalties. [3]

The duration of a traditional recording contract varies. It is customary, that company undertakes to publish one album-length phonogram, and holds an option that covers, e.g., the next two phonograms.


So-called Master Contracts

If the artist chooses to manage the production of the phonogram on their own but the record is published by a record company, the contract is called a master contract. With the contract, the artist transfers the publishing rights of the master copy of the phonogram to the record company. The record company has to publish only the final phonogram in the agreed format. In that case, the artist will hold the phonogram producer's rights in addition to the performing artist's rights. With the master contract, the artist's bargaining position is better than with the traditional recording contract. On the other hand, the downside for the artist is that his financial risk is bigger than with the traditional contract. [4]

Notes and References

[1] Lotta-Liisa, Lehtinen (2009): Artisti maksaa kiltisti. Turun yliopisto, Turku.

[2] Lotta-Liisa, Lehtinen (2009): Artisti maksaa kiltisti. Turun yliopisto, Turku.

[3] Lotta-Liisa, Lehtinen (2009): Artisti maksaa kiltisti. Turun yliopisto, Turku.

[4] Lotta-Liisa, Lehtinen (2009): Artisti maksaa kiltisti. Turun yliopisto, Turku.