The Contract from Hell That You Should Never Sign (And How to Make It Fair)



The following is part of a series by music industry attorney Steve Gordon that focuses on every type of artist contract imaginable.  Part 1 of this installment will focus on production companies and their contracts with artists. Part 2 will tackle deals between artists and indie labels.

Production Companies Are Not Labels!

Production companies usually consist of one or two individuals with limited resources who would like to make a few demos for an artist in order to shop her to a real record company.  Unfortunately, more than occasionally, such a company will present an agreement that locks the artist into a long term deal, makes the company the artist’s music publisher, and takes a substantial cut of all the income that the artist may make in the entire entertainment business, as well as other horrors.

The first agreement we will examine in this installment is typical of a contract offered to an artist by a production company masquerading as a “label.”  Be warned: This agreement is a terrible deal for artists.  It presents all the negative terms typically contained in an exclusive recording agreement offered by a major label including multiple options for additional albums that could extend the duration of the agreement indefinitely and 360 provisions designed to give the company a significant portion of the artist’s income from any of her activities in the entertainment business.  (See discussion of 360 deals below, and How to Avoid Getting Completely Screwed by a 360 Degree Deal available at ).

But the first agreement offers none of the benefits that a major label deal contains, such as a recording budget and advance.

There are many differences between a production company and a real label, but they have at least the following in common: Both production companies and labels own or have access to recording studios and equipment, and they both have producers on payroll or relationships with indie producers who they can call on to make professional recordings.

A real label, however, has the following additional assets:

• Staffers and/or freelancers who provide both traditional marketing and publicity as well as online social networking support;

• Staffers and/or freelancers that continually pitch records to terrestrial radio – still a crucial element in breaking a new artist especially in pop, R&B, hip hop, rock, and country;

• A video department to produce, oversee and pay for the production of promo videos and electronic press kits (EPKs);

• Relationships with popular TV shows such as Saturday Night Live, The Tonight Show and Last Call to help the artist garner invaluable exposure;

• Relationships with leading digital services to promote an artist – for instance, by continually lobbying iTunes to feature the artist on its home page;

• Relationships with music supervisors and ad agencies to secure placements in TV shows, movies and ad campaigns;

• Distribution channels through all the big-box chains, such as Walmart, Best Buy and Target to sell physical copies of records;

• The ability to coordinate digital distribution to hundreds of digital music services throughout the world;

• The money necessary to pay staffers and freelancers to do the all the work above; and

• Perhaps most importantly, the financial capacity to pay the artist an advance on top of production costs so she can quit her day gig.

First Agreement: Production Company Posing As Label

This form agreement came from an actual production company that presented an agreement that only a real label should offer. As we just discussed, a production company has almost none of the resources of a true record label. The production company should have offered a “shopping deal” under which they would have a limited time to find a suitable label deal for the artist. Instead, this agreement includes provisions that are completely unfair and unjustifiable. Here is an overview of the key provisions and why they should be changed:


The term of this agreement is an initial period of 15 months followed by options for the“delivery” of four additional albums. Since delivery depends on when the company decides to record each album, the contract could continue indefinitely. The artist could hire a lawyer to try to get out of this contract, but at the end of the day, the production company could contend that the contract was valid which could impede the artist from securing another deal.

If a company is merely a production company and not a real label, it should offer a shopping deal under which it has a limited amount of time to produce at least five or six tracks (sometimes referred to as “demos”) that feature the artist’s best work and shop those tracks to real labels to help the artist get to the next level. Generally, a production company has nine months to shop the demos. If the production company cannot secure such a deal, the artist should be free to terminate the agreement.

Album Options

A production company does not have the resources to help the artist as a real label could, and therefore, it should not try to trap an artist in a multiple album deal. On the other hand, if the production company secures a good deal for the artist with a reputable label, they should share with the artist in monies the record label pays to the artist, including advances and royalties for the artist’s exclusive recording services. A fair deal may provide that the company will share in such revenues for the first several albums released by the label.


A reasonable royalty for producing demos and shopping an artist for a deal with a label is 5% to 20%. The percentage should be based on what the label pays the artist, so if the artist’s advance is $100,000 the production company would receive $5,000 to $20,000. And if the artist’s royalty was 15% the production company would get 5% to 20% of that royalty, that is, .75% to 3%.

The lower royalty of 5% would be appropriate for shopping an artist who already has professionally produced recordings and the production company doesn’t have to do anything but shop the artist. The higher royalty of 20% would be appropriate when the production company has to produce all new demos and perhaps even release tracks on social networks and possibly iTunes to get a “buzz” going.

Yet many production companies will try take to advantage of a naive artist and demand 40% or 50% or even more. The production company’s royalty should also be limited to advances and royalties payable by the label for the artist’s exclusive recording services; in a terrible deal for the artist, such as the first one analyzed in this installment, the company will also try to secure a percentage of any income the artist receives in the entertainment business including live performance and publishing.

It is fair, though, that a production company be compensated for expenses if it secures a suitable label deal. But the company’s expenses should be reasonable, documented, and approved by the artist. And the amount should be deductible “off the top.” This means that if the company’s expenses were $10,000 and a label is paying an advance of $100,000 for the artist’s recording services, the $10,000 should be deducted from the $100,000, and the company should receive 20% of $90,000 ($18,000), and the artist should receive 80% of $90,000 ($72,000). If the expenses are not taken off the top, the company would receive 20% of $100,000 and the $10,000, that is, $30,000. The artist would only receive 80% of the balance of $70,000, that is, $56,000.

360 Provisions

Since income from recorded music has drastically declined in the last 15 years, labels have changed their standard deal to share in money from other income streams including merchandise, endorsements, live performances and touring, and even appearances in TV programs or movies. Because labels wish to share in all of the artist’s income streams, these deals are known as “360.” A major label that can provide the marketing muscle to make an artist a household name arguably deserves to share in those income streams, but a production company has not earned that. However, if the production company actually does something to help the artist make money from other activities than record sales, there is nothing wrong in rewarding them for that success. For instance, if the company finds a good paying gig playing at a private event, the company may deserve a percentage of the fee payable to the artist.

Also, if the major record label demands 360 payments from various artist’s income streams, the production company and artist may be able to negotiate separate advances against all those income streams. For example, if the record company wanted a percentage of the artist’s touring revenue, the production company and the artist could demand a significant advance payment from the record company in exchange for that royalty. In that case, both the production company and the artist would benefit from the advance.


And now, the agreement that you should NEVER sign.

(a separate copy of this agreement (that you can take home) is available here


Second Agreement: A Fair Shopping Agreement

Unlike the first contract, this agreement is an example of a shopping deal that is fair to both sides. The second contract provides a 20% royalty to the production company but it also provides significant protections for the artist. Unlike the first contract, the second contract

(i) gives the artist the right to approve the choice of the “Distributor” (that is, the label), participate in the negotiation of the deal, and approve all the terms of that deal;

(ii) limits the Term to nine months unless the Company find a suitable deal; and

(iii) limits the company’s royalty to income flowing from the label, and not from any other income that the Artist may earn in the entertainment business.



23 Responses

  1. JTVDigital

    Thanks, very interesting. Indeed there are tons of “production companies” offering that kind of “deals”. It reminds of a story when I was once consulted by an artist/producer we work with about a deal coming from this kind of production companies. When I asked the company how they were accounting royalties, what was the schedule for payment, etc (since there was only a small one-off at the deal signature then it wasn’t clear what was happening afterwards) they said they did not have the time and resources to account the sales / royalties. It would have been hilarious if it wasn’t true…

    • Spoken X Digital Media Group

      The term real label come in all situations of circumstances. You don’t have to have all those elements mentioned above to be a so called real asset driving revenue publishing entity. At the end of the day it’s not about the clout with different distribution networks; the copyrights owned at the back of the bus pay the same royalty fee. As far as a production company goes, if an artist sign his or her ownership/ publishing.sound recording/electronic transmission/100 % performance rights /dpd=digital permanent downloads as well as sync opportunity rights over then in fact that production company becomes the most authentic principal element you ever seen inside the realm of federal copyright enforcement

  2. Anonymous

    Isn’t this all just common knowledge?

    and spoken x digital, what are you talking about? Not all copyrights pay the same in royalties, wow, no wonder the music Industry is such a dump, filled with nothing but scammers and liars and thiefs and bullies and wannabe gangstas and just hardly any professionalism or honesty or ethics or anything… even the supposed legit and responsible companies can’t act and operate right, its just a total joke…

    how do all these snakey criminals with garbage contracts keep getting away with it all the time? Why don’t people just shut them down and lock them up already?


    • Dan Gigante

      It’s not all so bleak. I made a platform where artists can receive donations from their fanbase on a one-time, or recurring basis. No fees, and you keep 100% of donations. Take a look, if you’re interested –

  3. Heiko Schmidt

    I believe you are still in the 20th century. The question you should ask is: Who is taking which financial risk and how this can become a profitable business model.
    When the Jack Pott achievable is so small that even in the best case scenario you barely make money, why should someone spend their time and effort into this. “Shopping Deal” is so much old fashioned and last century, who would still do this, more important, who can live from that ?
    Record Label or Production company – both models aren’t working anymore as revenues for recorded music and copyrights are not covering the marketing and handling costs. Every new artist is competing against 900 million people who are making music now and 20 million new records produced and released every year.
    And consumer aren’t buying into talent anymore, they are buying into public profile of a person. To raise this profile and then monetize it is the job.
    So I leave it as a question here: Who is actually bringing what exactly to the table to create money in what type of business ?

    • Anonymous

      So I leave it as a question here: Who is actually bringing what exactly to the table to create money in what type of business ?

      Which is why i say the music business has so little to do with music, which makes me scratch my head the way they think they own it and the whole landscape and try and have dominion over the whole territory and every last stage…

      The business of music has made music into advertising for other ways to make money… Music is advertising and politics, period! Im sorry to say the old boys and the hipsters and the weirdo musos wanting only band and their idea of real music, are just f’d right up and stand about zero chance of ever creating more then what they have, plus they treat people awful and seemingly have zero business sense, not to mention they are ruining peoples lives ont he steady with their idea of revolution and their little army, straight ruining peoples lives, how its legal is mind boggling…

      The music is now advertising to sell boxes of cheerios and perfumes and fashion items and put bums in seats and leverage deals with those entities who benefit from the music…

      All of that is just fine, there is nothing wrong with it at all, id rather make the music and then deal with that stuff, of course im done with music and certainly the business of it, besides, all the little wars they have going on and their infighting and all their dysfunctional kindergarten preschool playground ridiculousness is just downright pathetic and a waste of energy, time, health, potential, talent and ultimately lives…. ive never had such a unpleasureable stretch of life then ive had since i got into music, just pure downright awful…

      really though so long as people dont bother me i have no problem with any of it, what problem i do have is the way they try and own music and then bully, intimidate and threaten anyone who makes it, and then the others who think labels are evil and want to bring them down, and just basically all the loony tunes crazy cracked head psychos in the music game not to mention the wannabe thugs and all the wannabe gangstas, its really just a pathetic business…

      Same thing happened with another passion and dream of mine, the business of it ruined it for me, killed all the love and passion, sooner or later you just get tired of everyone’s b.s. and have to move on to other endeavors just to regain the love and passion you once had…

      Be careful making music people, i currently see no other way to settle all of it other then blowing my brains out, and im not depressed or suicidal or sulking or anything, im a happy go lucky classy gentlemanly guy that needs to be free from all these problems music has brought upon me as its not healthy or conducive to anything positive in my life…

      thanks for your time…

    • Mike Corcoran

      He makes a good point, Mr. Gordon. Perhaps you only work with the top 1% of artists, where “shopping demos” to the “real record labels” is relevant, or your article seems to belong in 1995. 99% of artists these days are DIY and come out of pocket for everything. If a production company offers to front the expenses to help get an artist’s record made, that production company is probably deserving of something on any future success that might come. What that is, I don’t know. But I’m sure today’s artist isn’t looking to a production company to “shop their demo” to a label, nor are artists showcasing their live songs to A&R executives in hopes of getting signed. That entire process is from a by-gone era.

      • Steve Gordon

        Unfortunately 99% of DIY artists don’t make a good living. Like it not, the labels still make or break commercially successful artists in pop, country, R&B and hip hop. Take a look at the charts and you will see any commercially successful artist is associated with a major or an affiliate. The DIY model fueled by the Internet is a dream that never came true. That fantasy was so year 2000!

        • Mike Corcoran

          I think my point was that your anecdote of getting signed to a record label is outdated. Artists don’t need a production company to record their “demo”, and 99% of them don’t use one. Artists record their EPs on their own. In the 90s, having a production company record your “demo” and shop it to a label was practically the only course of action to take; today, there are plenty of other options.

          You mentioned major labels are signing fewer and fewer artists these days. Would say labels are signing their artists based on “demos” and “a&r showcases”, or are they calling booking agents, checking out festivals, crunching social media numbers and scouring the blogs & internet for new artists? If it’s the latter, you would think these artists already have their “demo” made, already have a home-grown fanbase, and only need a label to be taken to the next level.

          I’d also think the number of hucksters and middlemen have actually decreased since the 90s, since the gatekeepers and barriers to getting a record made have declined dramatically. But I understand, as a contract attorney in the music industry, you’re going to see a disproportionate number of sour deals, and so you may disagree. According to divorce attorneys, 100% of couples that get married, get divorced.

          thanks for your comments – mike

          • Anonymous

            I’d also think the number of hucksters and middlemen have actually decreased since the 90s, since the gatekeepers and barriers to getting a record made have declined dramatically.

            I would contend the level of professionals who acted like middlemen, able to produce an artist for a hefty fee to give them the best chance to shop it to a label, as a known and trusted professional, thus ensuring a much better chance, is what has truly gone down, as the producers fees to develop artists have come way down, thus causing many of them to other areas of the business or elsewhere altogether…

            i would then contend that its the hucksters and shady production companies greasing artists in a hope a small fraction of them catch somewhere thus giving them some back end monies until the artist finds a way out of it…

            The middlemen are always there, when one gets eliminated, another steps in with a cleverly veiled face…

            Its better and cheaper then ever to make a record, and more expensive to market the thing and theres way more competition and noise to compete with as well way more competing entertainment and more things to fight with for peoples attention…

            There is always a balancing act, for music, to make a career out of it, its all gotten a bit worse, but the level of creativity and ability to make it is better then ever, no doubt about that…

          • Anonymous

            sorry, contend that the hucksters and shady production companies have actually gone up, and the ease of access to them and them to artists, has also gone up…

            so in a time of heightened surveillance and no privacy, the true professionals has gone down and the shady hucksters has gone up…

            wtf eh??

    • Steve Gordon

      The “Contract from Hell” is from February 2015, not the 19th century. There are more hustlers out there than ever who will take advantage of an artist’s desperation to cheat them. The point of the article is just be careful, and don’t sign the first thing that is handed to you.

  4. cherry on top

    Your math is seriously messed up, sir. You don’t get it right about “off the top” expenses at all.


    In the last sentence, you are wrong because the artist would net the entire $70k, not $56k. After the production company is paid back its $10k and it takes its 20%, then the artist takes the remainder, which is $70k.

    THere is only a $2k difference between what the artist gets if the $10k is taken off the top vs. what she gets if the expense is charged entirely against the artist. Because the artist still pays for 80% of the expense if the expense comes “off the top”. If you’re looking for a way to make the production company look demonic, this is not the way.

    • cherry on top

      here’s the part I was trying to quote:

      It is fair, though, that a production company be compensated for expenses if it secures a suitable label deal. But the company’s expenses should be reasonable, documented, and approved by the artist. And the amount should be deductible “off the top.” This means that if the company’s expenses were $10,000 and a label is paying an advance of $100,000 for the artist’s recording services, the $10,000 should be deducted from the $100,000, and the company should receive 20% of $90,000 ($18,000), and the artist should receive 80% of $90,000 ($72,000). If the expenses are not taken off the top, the company would receive 20% of $100,000 and the $10,000, that is, $30,000. The artist would only receive 80% of the balance of $70,000, that is, $56,000.

      • Steve Gordon

        In the “Contract from Hell” (first agreement), the production company is only paying 35% net to artist. So if gross royalties were $100,000, the production company’s share would be $65,000 plus $10,000. The artist would receive only $25,000. I don’t have to make the production company “look” demonic, the contract speaks for itself.

        • cherry on top

          I quoted your hypothetical, which is not the “Contract from Hell”. You may want to just correct your mistake. As for the 35% net deal to the artist, I seriously doubt anyone other than perhaps a homeless junkie would sign that one.

          • Steve Gordon


            I don’t know if you work in the music business, but agreements like the “Contract from Hell” are offered much more frequently than the fair agreement typified by the second one in my article. Just last week a very young and very talented client of mine received an agreement that, had she signed it, would have given the production company 40% of her earnings from the entertainment business FOR LIFE. Because the majors including the ones I used to work for, Sony and Atlantic, are signing fewer artists, there are more ruthless middlemen, especially in pop, R&B and Hip Hop who make a lot of promises, but who just want to exploit the artist. That is the unfortunate truth.

            With regard to the math in the Intro, if the production company takes 20% of $100,000 (i.e., $20,000) and $10,000 in expenses, that leaves the Artist with 80% of the balance $70,000 = $56,000. I hope this helps.

          • cherry on top

            There’s the math mistake again:

            “With regard to the math in the Intro, if the production company takes 20% of $100,000 (i.e., $20,000) and $10,000 in expenses, that leaves the Artist with 80% of the balance $70,000 = $56,000.”

            The Artist takes 80% of $90k, which equals $72k, under your hypothetical. To say the artist takes 80% of what is left after the label recoups its expense ($10k) and the label takes its cut at 20%, shows a misunderstanding on your part. If the artist only took $56k, there would be a surplus of $16k left over. Get it right.

            I agree there are a few whack contracts floating around, especially among the bottom feeders, and you do a good service by pointing out some of the red flags. I just correct your math.

          • Steve Gordon

            You are missing the point.
            Unless the contractual language is clear, the production company is free to take maximum advantage, and the Artist will be left with the short end of the stick. At that point the the Artist can argue your position but it will cost her $5000 to $10000 for an audit.
            The Artist needs to have a contract that clearly prevents the company from cheating her.

          • Steve Gordon

            You are right, and I was wrong. Per my hypo there would be $14,000 outstanding after the artist received $56,000 (and the production company took $30,000), and it would be a fraud on the artist if the company did not pay her that amount. But if the production company’s expenses were higher the disparity between “off the top” and not “off the top” would increase. In my hypo the difference would only be $2,000, but if the production company’s expenses were $25,000 the disparity would be $5,000. In any event, thanks for your attention to this detail and for the correction.

  5. TheBigDog

    Brilliant article. Great to warn artists of the danger of these things. Well done.

  6. A D Coop

    What do you think about 2015 Music library agreement contract for a composer? Is it a good or bad contract for the composer?


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