Mika Karhumaa

Here is the article on the transferred rights and contract types that I promised. Without further ado, let’s cut to the chase. And start with reality!

Oftentimes the artist has no choice but to transfer some of their original rights in pursuit of their business goals. In the implementation and organization of their business, the artist management (whether or not outsourced) is the responsible player when granting these rights, or licensing them.

This article is about assigning, granting or transferring the rights – depending on the term we want to use. And how this concerns to the artist’s private life, decision-making power and economic conditions. Each transfer of rights restricts the artist’s position to some extent. A minimum requirement when exercising these rights should be its counterweight, a royalty. Copyright is the most important trading good in this industry.

The artist management’s mission is to create and develop the artist’s business so that it serves the needs and the goals of the artist. The artist’s merchandise is their presence, the performances both live and recorded, and of course the music that lies under their performances. All of these activities are associated with respective copyright dimension. This usually means that the artist’s explicit consent is required.

Because success cannot be predicted very well, one must be careful when it comes to assignment of rights. The content, strength, duration or the scope of these granted rights is of importance in assessing the motives and commitment of each transaction and/or the partner that the artist is willing to have. To counterbalance the transfer of rights, it would be good to have a margin, something in return. The transfer of rights, thus, must never be free of charge. The artist’s business plan and current popularity is the thing that tells you what rights are relevant and which one of them should be excluded. The main rule could be that no rights should be granted in vain, just as an option without the implementation.

The rights to be transferred are either fixed term, indefinite or permanent. The most intense giveaway relates to the in perpetuity occasions. The music publisher’s right can be identical to that of the author (song-writer) – their right to the copyright will last the entire lifespan of copyright. However, the publisher’s right isn’t original as it is with the author, but a derivative. It will be born by the correctly signed music publishing contract. This agreement transfers to the music publisher significant rights – originally belonged to the authors themselves. The contract does not restrict the artist only for the duration of the agreement, but also in fact. In order to be justified, the artist has to make sure that the publisher plays their part. Otherwise the music publishing agreement is difficult to justify. The music publishing agreement grants the publisher to as much as 50 percent of the copyright-related revenue of the songs. It should also be noted that the termination of the music publishing contract does not always end the rights of the publisher to those songs that have been included as a part of the contract during the term of the agreement. Even if the active part of the parties’ agreement is terminated, the relevant rights of the publisher will remain in force.

A similar permanent right can be associated with the recording agreements. In these contexts, the permanent rights relate to the phonograms and other recorded material that the artist has recorded to the company –  during the term of the contract. The record company obtain, under the terms of the agreement, the status of the financial producer which entitles to the producer`s right to the legitimate period of protection. The record company usually receives the decision-making power over the phonogram as well as the music publisher gets to the catalog they administer through the music publishing agreement.

This, for example, affects the artist’s position through the possible non-competition clause of the agreement. In general, the artist cannot record any songs to other labels during the term of the recording contract. The protection period is, according to established practice, five years. So, nothing prevents the artist from recording the same songs, as long as five years have expired since the end of the contract. Such a ban aims at the company to obtain a motivation for their investment – or at least it should. Hence, the main rule is that you shouldn’t grant these rights wider than necessary.

We are dealing with two fundamental concepts, a composition and its recording. These two concepts must never be confused with each other. This is also the point where we get to the point of this article. The term of the music publishing contract is not a synonymous for the terminology of the recording contract. Yet these two things are closely related.  In where the music publishing agreement concerns the song, the recording contract is in connection with its recorded performance. The object of protection is therefore different to the same thing. For those artists, who also perform the music they have made, this division is extremely important.

The artist may also use fixed-term grants in order to implement their business plan. Honestly, this is something that’s embraced among the modern artists. The artist doesn’t forfeit their rights more than necessary.

For example, the booking agreement gives the agency a right to convey performances to the extent specified in the contract. As has already been mentioned, the transfer of rights is often long-term, geographically broad and exclusive. As we can see, the artist has to deal with the contracts in several interconnected business areas at the same time. This is an uncertain situation that causes headache while networking with contracts. The artist’s business areas are closely tied together. If some of the sub-areas do not function properly, it has effects on the other the areas of activity. It is therefore advisable to have various exits for this opportunity. The artist is certainly not happy with the situation where the performances would be and streaming takes place, but no continuance for some reason. If the artist cannot match the current demand or demand isn’t in anyone’s agenda, the artist will not want to adhere to the contract that, through exclusivity, prevents their forward in other occasions. Each agreement should have an exit, if the parties intensify so that the co-operation is no longer possible, or cooperation simply does not work. This is a manifest of why each transfer of rights should be conditional, if only possible.

When designing the artist’s business plan, the risk management is extremely important. Where the business plan focuses on the maintenance and improvement of the artist’s economic conditions, the agreements should address the possibility that things will not go as planned. Therefore, mixed-type contracts should be avoided. It is not uncommon to be enthusiastic in the negotiation phase. The artist’s interest groups (record companies, music publishers, booking agencies, external financiers, merchandising holders etc.) may have a willingness to participate in the artist’s business in the areas outside their heartland of competence. In an ideal situation, everything would remain in the hands of a competent, committed and trusted group, and there would be no disagreement between people over time. But this is rarely the case. It requires no more than one key player to change the organization, industry, or retirement and the operation gets a whole new direction.

In the middle of all this it is easy to forget what this is all about. Due to the copyright dimension and its relation to the business plan, it is about the transferring the rights and the consideration paid to meaningfulness of it. Each business area needs to be organized separately, even if the same operators take care of them. Every business area must also considerate as a separate unit. They must not be dependent on each other if something goes wrong. This way you can easily get rid off the vain parts and leave the functional parts just to be.

The contract-type boundaries will come out well in the following example. The parties end up with a wide-reaching collaboration that tangents more than one artist’s business areas. In such a situation, the parties will almost certainly have to resort to the types of the contract that the industry is familiar with. If some of those agreements resemble a recording contract, it may automatically hint an impression of the exclusive right is present in all of these agreements. If this isn’t the case, it requires reservations.

When you grant the rights originally belonging to you, do not grant them more broadly than the relevant business plan requires. Never give up rights unconditionally. If the promised performance of the counter party falls short, you must have a chance to react. With the utmost care you should be with the music publishing contracts, as they can be eternal. Each song that is considered to be a part of the agreement under the music publishing agreement will give publisher a status that entitles them to administrate the songs and to receive up to 50 percent of the copyrighted turnover.

No matter how enthusiastic you are about your new partner, do not mix the plans and agreements with each other. The terminology that goes beyond that scope should be critically addressed. To avoid an imagination that could infer that the rights would be extended more broadly than the original purpose. The same applies to the options. To be justified, its realization should be in some way realistic. If the artist accepts an option that goes beyond the resources and willingness of the partner, their whole career may be at risk.

Mixed-type contracts can also pose problems – even with a functioning relationships. The management agreement between the parties may work flawlessly, but the prospective cooperation in production precipitates. If the agreement is principally in the exclusive domain, the productive parts may also be considered as exclusive. In such an imbalance, the management party hardly hesitates to withdraw from the production side of the plot, but if the disputes for some reason will arise, the contract and its contents will certainly have to interpret. Although some of the examples in this article are far-fetched, it is sensitive to keep contracts apart – even for your own peace of mind. When the obsolete parts of any cooperation are easily removed, it is easier to plan the future.

The purpose of this article is not to comment on how the artist should organize their background organization and business. The purpose of this article is to demonstrate the significance of copyright. It is as important to understand that they are not identical in all areas of activity. The artist’s business plan tends to live and transfer. A joint business plan and related agreements should safeguard the position of all the involved so that it is able to focus on the essentials. If the parties have chosen a cooperating model in which, for example, the other party to the contract carries out both the artist management and the actual booking, each task has to be the subject to a different contract. If the management decides to abandon the booking, or booking the management, this part can be terminated and continue with what the remaining cooperation is going to be. If the artist’s record company and the music publisher are the same, these issues should not be agreed upon in one agreement only. If such a crazy situation has happened, a special attention must be paid to the publishing rights. Particular attention must be paid to the artist’s ability to change the record company or even to terminate the agreement. If the publishing rights are tied to the recording agreement, the publishing part of the agreement should also be terminated to that extent. Consequently, only those songs that are recorded by the artist during the term is then included in the publisher’s domain. All the new songs cannot then be included in the catalog.

The main rule is that if the rights are to be transferred, they should be granted as narrowly as possible. These rights can always be expanded in the future, if there comes a reason to do so. However, the artist is the party who needs proof that there is an economic justification for each transfer of rights. The other half of the artist’s freedom is the exits. Although the music industry contracts are often long-lasting and include options, you must be realistic with them. The artist has to be able to get rid of the contracts if the business plans behind them do not correspond to the reality.