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32 Cards in this Set
- Front
- Back
The Law of Contract
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- mutual promise
- Offer, Acceptance, Consideration* |
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Definition of Contract
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“A contract is an agreement which the law in regards at conferring rights and imposing personal obligations, which it will protect and enforce, on the parties to the agreement”
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Contract: The OFFER
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- written or verbal
- express or implied - intention (not a deal, just talks) - invitations to treat (eg. applying for a job, you may accept an invite, but doesn't mean you get the job) - communication of offer - time period for offer - acceptance, rejection or lapse |
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Contract: ACCEPTANCE
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- by word, by signature, by deed, by fax, by e-mail
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Contract: CONSIDERATION
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• A promise not enforceable unless made for valuable consideration
• Consists of: a promise to do or not to do, or something done or not done at request of promise, express or implied → eg when you’re an exclusive recording artist you are promising not to record for someone else |
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Contract: Undue Influence
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• Includes any influence by which the exercise of free and deliberate judgement is excluded
• Independent Legal Advice → imbalance in the negotiation of two sides (ex. signing a contract without a lawyer) |
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Contracts with MINORS
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• Minor can void an existing contract either during minority or a reasonable amount of time after attaining majority
• You cant hold contract with a minor if they want out of a deal |
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Major Deal Concepts: RECOUPMENT
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• recoupment - certain costs (ex. advance) that record company is going to recoup/get back.
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Major Deal Concepts: RETURNS and RESERVES
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RETURNS: Records are sold on a 100% return privilege. This means that, if a retailer orders one hundred records from RCA but can’t sell them, it can bundle them up, ship them back to RCA, and get credit for (or a refund of) the price it paid.
RESERVES: Because records are sold on a 100% return basis, the companies don’t know, particularly with a new artist, whether the records will sell or be returned by the retailer at a later date. Because the records may come back, the companies keep a portion of the royalties that would otherwise be payable to the artist until they know whether the sales to the retailer are final. This holdback is called a reserve against returns. |
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Major Deal Concepts: CROSS-COLLATERALIZATION
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Included in every record deal today, cross-collateralization means that the advances and recoupment from multiple albums. For example, if an artist's first album does not sell well enough to pay back the advance, the label can use money made by later albums to pay back the advance from the first album.
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Major Deal Concepts: DEDUCTIONS
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?
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Major Deal Concepts: FREE GOODS AND PROMO COPIES
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?
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Major Deal Concepts: SRLP and PPD
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- SRLP is the “suggested retail list price”, which is the approx. price charged by the retailer.
- PPD is the “published price to dealers”, which is the approx. price that distributors charge their dealers, or the “wholesale price”. So – PPD is lower, SRLP higher. |
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Major Deal Concepts: Royalties and Royalty Base Price
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Royalties are % of PPD
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Major Deal Points
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Grant of Rights - Exclusivity
Term Royalties Advances Recording Commitment Release Commitment |
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Major Deal Points: Grant of Rights
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Exclusivity (for all recording activities)
All configurations, including those not yet invented Territory Reversions Ownership - Work for hire (US) |
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Major Deal Points: Term
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Initial Period
Option Periods Contract period expires after ## months from delivery or release |
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Major Deal Points: Royalties
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A percentage of ‘something’
Royalty calculated on Royalty Base Price RBP is usually PPD less deductions (if any) Deductions MAY include: - Packaging deduction - Net sales (free goods reduction) - Sales discounts - CD deduction - Reserves OR 50% of NET PROFITS (the indie way!) OR the 50/50 deal... - Costs: $200,000 - Revenue: $210,000 - Profit: $10,000 - Artist share: $5,000 |
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Royalty formula
simplified... |
A percentage of the wholesale price.
$9.99 X 18% = $1.78 |
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Other Royalties
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Club sales
Escalations Premiums Military sales TV advertised sales Mid-price and budget (the double hit) |
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Advances
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A prepayment of royalties
Non-returnable, recoupable from royalties Cross-collateralization Recording Funds and Advance Funds Other charges deemed Advances: Independent promotion Tour Support Recording Costs Equipment Anything else you agree to |
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Recording Fund
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LP1 $75,000 (MIN)
LP2 $100,000 (MIN), $200,000 (MAX) LP3 $125,000 (MIN), $250,000 (MAX) LP4 $150,000 (MIN), $300,000 (MAX) Based on formula: 66.6% of royalties from previous album(s) sales (12 mo.), less reasonable reserves. May include artist advance. |
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Recording Commitment
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What does the record company really commit to?
1 + (2 to 8) albums Albums that don’t count Guarantees beyond one album - 2 firm - Video guarantee - 1 per album - Singles step deal |
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Release Commitment
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Release Commitment:
Home territory within 6 months or termination - restraint of trade issue Foreign Territories - Reversion Major Territories Minor Territories - ROW |
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Accounting
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Twice yearly within 60 to 90 days
Reasonable reserves Time to object Audit clause - what happens if there’s a mistake? (there’s always a mistake) Pipeline money |
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Creative & Marketing Control
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Two types:
Creative - Songs, studio, producer, video director, artwork, photos, bios etc. Marketing - Coupling, compilations, master uses (TV and film), commercials, premiums, mid-price and budget, marketing plans, single |
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Music Videos
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- One video per album is the norm
- Costs are 50% recoupable from record royalties AND 100% recoupable from video royalties (double dipping concern) - Creative control |
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Mechanical Royalties
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- The other copyright on a master is attached to the composition
- Publishers or the songwriter own this copyright - Record co.s must pay for the reproduction of compositions contained in master recordings - They don’t like to do this - CMRRA |
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Re-recording restriction
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Re-recording Restriction...
The longer of: 5 years from delivery of a Master or, 3 years from the expiration/termination of the Term |
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If there's a Leaving Member...
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Company has the option to:
★Terminate the agreement ★Continue with the leaving member and drop the band ★Drop the leaving member and continue with the band ★Approve replacement members ★Continue with Leaving Member and the band ★Key member clause pre-negotiated |
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Sideman Clause
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Allows artist to ‘guest’ on another artist’s album provided:
★No solo or ‘step out’ featured performance ★Record company gets credit on the album ★Record company agrees to reciprocate ★Artist’s name no larger than any other performer ★No stickering of artist’s name on CD |
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Other Types of Deals
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License deals
Master Purchase 50/50 joint venture-type deals Singles step deals Demo deals Production deals (artist and label) P&D deals Sugar Daddy/Mommy deals |