In this article, we’ll discuss the music producer contract in the context of the indie music business rather than standard producer agreements used by major labels.
This is the fourth installment of an 11-part series on music industry agreements by attorney and legal author Steve Gordon, author of The Future of the Music Business (Hal Leonard 4th Ed 2015). Steve’s earlier installments covered contracts for synchronization licensing, management contracts, and production contracts (from hell). And for extra credit, you may want to check out Gordon’s scintillating look at the dangers of direct publishing deals.
A producer who works on a major label project will generally have an experienced music attorney who will negotiate these deals on their behalf. Often, the upfront money that a small label or an indie artist can offer, if any at all, will not allow a producer to hire a lawyer.
This installment of the series is intended for producers in that situation as well as for indie artists and small labels.
Major Label Producer Deals vs. Indie Music Producer Deals.
To begin this installment of the series, it’s useful to outline the differences in the agreements that major labels use for producers and the contracts that a producer may encounter in the indie world. A major label deal with a producer will generally include a producer fee ranging from several thousand dollars to much more for a producer with a track record of making hits.
The producer would also usually receive a royalty of 3% to 5%, calculated in the same manner as the artist’s royalty. For instance, if the artist’s royalty is a percentage of the suggested retail price of a record, the producer’s royalty will be as well. Like the artist’s royalty (which typically ranges from 12% to 18%), the producer’s royalty will be subject to multiple deductions, such as packaging costs and a reduced royalty for foreign sales. The producer’s royalty will be deducted from the artist’s royalty, in effect making the artist pay for the producer’s royalty.
Unlike the artist, the producer usually receives his royalty from the first record sold after recoupment of recording costs. This means that once gross income exceeds production costs, the producer is paid for all prior records sales – the artist is not.
When an artist or small label hires a producer, the upfront fees are usually significantly less. Also, since the label and the artist may be the same entity, it does not make sense in many cases to base the producer’s royalty on the artist’s royalty. In that case, the producer’s royalty, if any, may be based on net receipts or “profits.” (See the second and third contracts in this installment.)
Many artists, particularly in hip hop and R&B but also in pop music, work with drum, digital or other percussive “beats” as core elements of their recordings. Often, an artist or indie label will search for the right beat on which to base a song. Although some beats are sampled, others are purchased or licensed from a producer who creates beats with digital drum machines or other studio equipment.
Some producers of beats, such as the Neptunes (Pharrell Williams and Chad Hugo), make more elaborate beats than just drum sounds. A Neptunes production has drum machine sounds, but also usually employs synthesizer riffs, sampling keyboard and other percussive sounds.
The Neptunes created some of the biggest hip hop, R&B and pop hits of the late 1990s and 2000s. So, acquiring a beat from them or Pharrell could be very expensive. However, many new or emerging producers will offer their beats at a low fee or maybe even waive an upfront fee in exchange for a royalty payable if the artist makes money from the song.
In the studio, a producer is ultimately responsible for the final sound of a recording. However, often, an artist will buy a beat or license it and finish the production themselves or with another producer.
Two Copyrights: ‘Sound Recordings’ and ‘Musical Works’
As we discussed in the prior installment on ‘sync’ licenses, copyright law protects ‘musical works’ including songs and any accompanying words as well as orchestral works, librettos, and other musical compositions. But copyright law also protects ‘sound recordings,’ that is, recordings of musical compositions. A beat is usually both a sound recording and a musical composition because the recording of a beat contains a separately copyrightable musical work.
For many years, producers generally did not create new music. They just recorded and tried to enhance songs created by a songwriter who may have been the artist. However, that has changed. Often in pop, R&B, and especially hip hop, producers are creating new music by providing beats or even complete music floors over which an artist sings or a rapper ‘spits.’ In that case, the producer is creating two copyrights: the sound recording and a part of the musical composition.
This is why producers sometimes enter into deals with music publishers (see the next installment of this series on music publishing agreements).
Often, a producer will sell a beat outright. In that case, the buyer will have the exclusive right to use the beat. But other times, a producer will give a non-exclusive license to use a beat, and reserve the right to use the beat for himself or license it to others.
Work for Hire vs. Non-Exclusive License
If the agreement is a sale, it will usually be structured as a ‘work for hire.’ In a work for hire agreement, the producer loses all rights in their beat, including the copyright and the right to use the beat again for any purpose. If, on the other hand, the grant of rights is a non-exclusive license, the producer keeps the copyright, and retains the right to use it or make other deals.
Here is a typical work for hire clause:
WORKS FOR HIRE: Producer agrees that all of the results and proceeds of his services shall be deemed a “work made for hire” for the Company [or Artist] under the U.S. Copyright. Accordingly, the Producer further acknowledges and agrees that Company is and shall be deemed to be the author and/or exclusive owner of the Beat inclusive of the underlying musical composition and sound recording contained in the Beat. Recordings and Musical Compositions contained therein for all purposes and the exclusive owner throughout the world of all the rights of any kind comprised in the copyright(s) thereof and any renewal or extension rights in connection therewith, and of any and all other rights thereto, and that Company shall have the right to exploit any or all of the Beat in any and all media, now known or hereafter devised, throughout the universe, in perpetuity, in all configurations as Company determines. In connection therewith Producer hereby grants to Company the right as attorney-in-fact to execute, acknowledge, deliver and record in the U.S. Copyright Office or elsewhere any and all such documents pertaining to the Beat if he shall fail to execute same within five (5) days after so requested by Company.
It’s always in the producer’s best interest to retain their copyrights. However, sometimes the work for hire clause will be non-negotiable, and then the producer has to ask himself: ‘does the upfront money compensate for the loss of the right to use the beat?’ Generally, when an artist or indie label hires a producer to create a beat and fully produce one or more tracks, the agreement will be a work for hire, but the producer usually receives an upfront and can negotiate a “back-end” royalty.
The amount of the fee, if any, will depend on a variety of factors including whether the deal is a sale or a license. A sale would generally be more expensive than a non-exclusive license under which the producer keeps the right to reuse the beat. But, the most important factor in determining the fee is the business reputation of the producer. A producer with a track record of some successful tracks can demand fees of several thousand dollars or more, and a producer with a track record of hits can command much higher amounts. But licensing, or even buying a beat, from a talented but unproven producer can be a few hundred bucks or less. If the producer receives a royalty in addition to the fee, the fee will be usually structured as an “advance” which will be recoupable prior to payment of the royalty.
As noted above, a royalty for a music producer hired by an artist or small label may be structured based on net receipts or net ‘profits.’ A traditional royalty for a producer who works with a big label is 3% to 5% based on the artist’s royalty. Net profits should be defined fairly, for instance, as the gross monies received from the sale or license of the tracks minus the producer’s fee and other production costs (see annotations for the last agreement in this installment.)
Even when an agreement is work for hire, it may be possible for the producer to retain the copyright in his contribution to the underlying musical work, as opposed to the sound recording. In that case, the label or artist will require the producer’s permission to use that contribution so that they can exploit the recording.
In exchange for that permission, the producer usually receives a ‘mechanical’ royalty, i.e., a royalty tied to the use of the underlying musical composition contained in the record. Mechanical royalties are set by statute. The current mechanical rate is 9.1 cents per song per copy sold (or for songs over five minutes, 1.75 cents per minute or fraction thereof). Since the producer probably did not create 100% of the song, for instance, where someone else (perhaps the artist) wrote the lyrics, the producer’s percentage ownership or “split” has to be negotiated.
If the producer’s negotiated share is 50%, then he would receive 50% of ‘stat’ (i.e., 9.1 cents) for each sale of the record containing the song. This would be in addition to his producer royalty which is tied to income derived from the record rather than the song.
Finally, the label usually asks the producer to accept a 3⁄4 of the stat rate (that is, 75% of 9.1 cents). This is called the ‘Controlled Composition’ clause. There is really no justification for it. All the major labels have used it for many years to reduce their pay out to artists who write their own material and to producers who contribute to the creation of songs. The only argument to justify this reduction is that it is an inducement for the label to use the song in the record.
Three Producer Agreements: Two Simple Agreements for a Beat and a Net Receipts Deal With an Indie Record Label
Re-printed below are three different music producer deals that a producer working directly with an artist or an indie label may receive. The first license is a simple work for hire deal for the sale of a beat; the second is beat agreement in which the producer receives a royalty in connection with the sale or license of the recording as well as an up-front payment; and the third agreement not only provides a royalty for the recording, but also a royalty in connection with the producer’s contribution to the underlying musical composition.
This simple work for hire agreement for the acquisition of a beat is favorable to the person or company commissioning the beat. Since the agreement is work for hire the producer transfers all his or her rights in the beat to the commissioning party, and that person or company in the beat – both the music and the sound recording.
This agreement is more favorable to the producer as it provides a royalty to the producer and a credit, although it’s still a work for hire and thereby makes the commissioning party (that is, the company or artist) the sole author of the master and the underlying music.
And finally, this agreement is for a series of masters to be fully produced for an indie label. It provides for a royalty for the sale or license of the Recordings just as the prior agreement does. But it also provides for a royalty in connection with regard to the producer’s contribution to the creation of the underlying song. Suppose the Producer created the beat and the artist contributed the lyrics. In this agreement the label would pay the Producer a royalty for use of the song.
The annotations for Paragraph 11 explain how much that royalty would be.
Steve Gordon is an entertainment attorney with over 20 years of experience in the entertainment industry, including 10 years as Director of Business Affairs for Sony Music, attorney at a law firm representing Atlantic and Elektra Records, and in-house music counsel for a Hollywood studio. He is the author of The Future of the Music Business (Hal Leonard 4th Ed 2015).
Gordon gratefully acknowledges the assistance of Ryanne Perio in the preparation of this article. Ryanne is a graduate of Columbia Law School. She is currently an associate at Wilmer, Cutler, Pickering, Hale & Dorr, where she focuses on intellectual property litigation. He would also like to thank Alexandra Howard (Columbia University, BA 2017) and Evan Becker, Esq. for their assistance.
Top image by Erica Zabowski; second image by ‘fr4dd,’ both licensed under Creative Commons Attribution 2.0 Generic (CC by 2.0).
Very good post here !
DMN should do more of this rather than clic bait “journalism”.
Good article! You should consider linking to all the previous parts at the end.
Paul linked to the the prior articles at the very beginning of the piece.
Great article! I always do wfh for the most part but this is handy info to have.
I received my copies earlier this week from the printer. This means the book should hit the warehouse soon and your order fulfilled!
All best, and thanks for buying the book!
Check out http://www.futureofthemusicbusines.com — I’ve already started updating the book
Hi Steve, I’d like to know whether and (if yes) how i can ask to retain credit in a work for hire agreement. eg eg produced by producer x
Also is it possible to work for hire exclusively for a label, such that if a major label picks up/distributes the track in future compensations can be renegotiated. I’d like to use this as a plan b in the event that the song blows up and i already transferred all the rights for a relatively meagre fee.
Great question from ‘producer x’ I too would also like to know the answer.
One way to protect yourself in this scenario is to negotiate directly with the artist you are producing instead of with a label, unless it’s a label you produce for on a regular basis (and assuming we’re talking small, indie). See if they are ok with sharing a bigger chunk of their legal pie, be it songwriting royalties, sync income, or really any future income associated with the work you put in. That way if the song blows up, you stand to benefit proportionally.
Hi Producer X,
“Work-Made-For Hire” means by Copyright Act 1976, that you are requlishing all copyrights as the author of the work you created. Basically you transfer the copyright ownership to another party.
All Producer Agreements in the music industry are Work-Made-For-Hire but are some rare cases that the Record Producer may own a percentage of the Masters if they are signing Artist’s into a demo-deal with a Production Company. There are also some cases that if the Record Producer is also a Songwriter that may compose the oringal music, they usually retian those copyrights that exclude the (underling musical compostion) from the Work-Made-For-Hire clause in the Master Recording. The Controlled Compostion clause is use for that instance if the Producer contributed as a Co-writer on a song. This is especially true for Record Producer / Songwriters such as Timbaland, Scott Storch, Pharrell Williams or Rodney Jerkins that composes the oringal music and arrangment (beat). The Producer essentially grants the Recording Artist a Mechanical License to use his/hers contributed musical compostion embodied on the Masters for reproduction. Under a record label, the Mechanical royality rate is generally set at a reduced rate of 75% of the staturary rate.
What you are reffering to if you enter into a Producer Agreement with a Record Company as a joint venture with a Recording Artist secured a Recording Contract with the label. So if you produced a Master for an Artist an the Artist releases the master under a recording agreement, the Artist/label may hire you as an “indepenent contractor” to work on the Artist first album until the assigment is completed. You basically sign a Producer Declaration and a Letter of Direction so that the label can pay you for future royalitys and advances.
Almost all Producers recieve appropriate credit for their work reqardless if it’s Work-Made-For-Hire. Rock Producers that generally doesn’t compose the oringal music get their appropriate production credits.
Steve, what would be best for a producer who want to keep his rights and get paid off them for the next 50+ years
how can i get royalty’s of a track i produced a year ago? its on youtube and livemixtapes and othe music downlaod sites. i never got paid for the beat and i was wondering how can i get paid . i really didnt know anythink about copy righting at the time so i hope it is not too late to get at least some kind of payment of my beat…
You need to register with BMI or ASCAP. They track it for you automatically with a Unique number given to you when you sign up.
how can i get royalty’s of a track i produced a year ago? its on youtube and livemixtapes and other music download sites. i never got paid for the beat and i was wondering how can i get paid . i really didn’t know anything about copy righting at the time so i hope it is not too late to get at least some kind of payment of my beat…
1) You will not get paid if he is not getting paid.
2) Its never too late to get paid for what is urs.
You have to join groups like Canadas “socan” to collect whats urs, The State has an equivelent check it out. But like i said unless the song is massive and has millions of streams on the Artists channel, He is probably not getting paid. If he is then contact him and discuss a royalty fee, Put it on a contract and make him sign it. If he refuses remind him u have copyright, (if u dont then u fuckd),
Learn from ur mistakes and make sure they receive standard contracts when DL or purchasing ur track,
I have a couple of questions.
I noticed in the last contract it says producer will get paid 5% of net profits. It also says producer will get 50% of stat. Is this per sale of that particular song?
Say I produce a 5 song ep for an artist. He pays me upfront for the work and I still retain rights to the music and he retains rights to the recording. Would I get 5% of all album sales and 50% of 9.1 cents for each song?
Since it’s 5 songs, I would calculate 9.1 X 5 = 45.5, therefore I would receive 50% of that per copy sold plus the 5%?
So if they sold 1 million copies I would calculate (50% X 3/4 X 45.5 X one million) and I would make $170,625? Then add 5% of 1 million copies at $6 a copy ($6,000,000) which equals $300,000 if there is no expenses. I would earn a total of $470,625. Is that correct? Is this how the royalties are paid or am I calculating it wrong?
Generally in the music industry a Record Producer is paid on points on an ablum that is pro-rated by the number of Masters the Producer has produced and the total royalty bearing number of Masters that exist on the album. Basically the Producer Royality is pro-rated by a fraction, which is a ratio of how many Masters you contributed on an Album when calucated with other Producers on the same album. With the traditional (Suggest Retail Listing Price) model, the Producer’s royality generally comes out of the Artist record royalites under their recording agreement with a record company. As an All-In the Producer may ask 3% of the Artist record royaltes that maybe 15% under the Artist Recording Agreement knocking the Artist down to 12% or 12 Points. The Artist must recoup all recording cost, touring cost, video production cost etc before the Artist recieves any kind of record royality payment under their recording agreement. The Record Producer must also recoup his/her advances before any future record royalties are paid out.
With the Net reciepts model, the 5% of net profits means, you are paid 5% of the net sales of all 5 Masters you produced. There is no need to pro-rate the royality in this case since you contributed to 100% of the 5 song EP opposed to having muliple producers on the same EP.
Mechanical Royalties are paid based on the number duplications or sale rather its a physical copy or perment digital download. With a Record Company, the Mechanical Royalty rate is generally reduced by 25%, meaning you as the Producer / Songwriter is paid 75% of the statuary mechanical royalty rate, hence the Controlled Compostion clause. So if you wrote half a song such sas the (Muisc), your ownership share of the song such as 50% is times by 0.75% of 9.1 equals 0.34125 cents. So if each 5 songs combined sold a total number of 500,000 copies, you are entitled to a royalty payment of $ 17,0625. If this same Controlled Compostion clause was used with non-record label involved, then you are free to be enittled to 100% of the statuary rate, meaning you can retain 100% of the 9.1 cents times by the ownership of the song you contributed. So instead of 75% 9.1 cents, its 50% times 9.1 cents that equals to 0.045 cents. So if 500,000 copies were sold, that 0.045 cents is times by 500,000 that shall equal to $22,500 in Mechanical royalty payments. If wrote the entire song, (Music) and (Lyrics), then you own 100% of the 9.1 cents times 500,000 that shall equal to $45,500 in Mechanical royality payments. Hope this makes sense.
” A beat is usually both a sound recording and a musical composition because the recording of a beat contains a separately copyrightable musical work.”
what part of the musical work of a “beat” is copyrightable? if I create a beat that is a 4 bar loop of quarter notes playing dog barks and is written out in musical notation the 4 bars of quarter notes is copyrightable?
hi, if a label is using my beat for one of their artists and I want to make sure am getting paid royalties if d song is used for something else like tv, film, games etc, what contract among the 3 is best or what should I make sure I dont agree to. thanks.
VERY good post.
What about a song I wrote and created the vocal harmony for, but later found a beat to match. I purchased a license allowing me to monetize.
However, does the beatmaker own half of the song since he provided the music? I guess my question is because the song is not BASED on the beat, it only incorporates it. But I want to do things legally.
Thanks for this awesome resource! I noticed that there was a section skipped on the last Producer Contract. Was that an error or is that where the recipe to your secret sauce is hidden? lol
Thanks again Steve!
That was a typo. By the way, since writing this article, I published a book titled The 11 Contracts that Every Artist, Songwriter and Producer Should Know. You can find the book in Amazon.
Maybe but, I still see people passing around information like this (today) and in reality, items like this haven’t really existed for 30+ years.
But who writes about how things usually get done, in reality?
No one (because then they can’t elevate their stature and treat all others beneath them as customers).
Drum beats are not copyrighted because it can’t be copyrighted I make my beats with a drum machine here is a link that can clear some of your doubts
Hi Steve – the second (and third) contracts aren’t showing up on this article anymore. I was so excited to see them and then poof, they’re not there. Your articles have been great!