As an artiste, you have hustled and chasedthe dream. Finally some record label, or an investor shows up promising you the ride of a lifetime, and checks so fat, that you could see money falling out of it. But before you sign on the dotted line, make sure you actually understand what you’re signing so that your dreams of fame and fortune don’t turn into a nightmare. Here are five things every Nigerian artist should consider before signing their first recording contract.
1. Watch out for contracts with an initial term lasting more than one year
Typically, the initial length of a recording contract is one year. This one year term is generally followed by several option periods, where the record label is free to renew your contract for additional time periods if they like the work you’re producing. By limiting the length of your contract to one year, not including option periods, you prevent a record label from effectively controlling your life and creative work for an unreasonable amount of time. In Nigeria, record labels offer more than a year deal. Due to very limited sources of income, they offer a minimum of two years, with option periods to extend them. You never know where your career will take you, and it’s important to keep your options open. We have had countless cases of unscrupulous record labels using five- and even 10-year terms, locking their artists into long-term contracts that destroy their artists’ creative lives and financial futures. Before signing that contract, make sure the record label isn’t locking you into a lengthy contract with no escape.
2. Get a release commitment
This is very important to protect the artiste, and prevent stagnancy. Without a release commitment from the record label, you’ll have no guarantees that the label Will actually do the work to get your album produced, packaged, and distributed, and also pump the necessary finance, as stated in the contract, into your career. A typical release commitment is a promise from the record label that it will release at least one album during your initial contract term. If you record the necessary tracks for a record and the label fails to release the record, you should then be allowed to walk away from the contract. In addition, you should think about negotiating a minimum marketing spend as a part of your release commitment. This gives the record label some “skin in the game”, forcing them to actually spend money to market your creativity, making your hard work pay off.
3. Make sure your percentage rate is reasonable
Due to the ever-changing nature of the music industry, record labels have been making quite a few changes to figure out how to stay in business. As we all know by now, record sales are almost non-existent in Nigeria, so labels have been “forced” to find additional ways to make (and take) more from artists in order to have a shot at making a profit. The trend in recording contracts is the 360 deal, in which any income that an artist may earn while under contract – not just record sales – can be collected by the label. Anything but a 360 deal of some type for a new artist today is extremely rare, because the only somewhat reliable revenue components for artists today in Nigeria are performance fees (show money) and digital sales – and the label needs to get some piece of that just to cover costs and make the gamble safer. Although profit sharing rates differ wildly based upon an artist’s notoriety and past success, there’s a general ballpark number for revenue rates that every artist should know. For new artists with little-to-no notoriety, a revenue Rate of 30 to 35 percent is typical. Up-and- coming artists generally see between 20 and 30 percent revenue rates, while seasoned professionals can bring in as much as 50 percent in revenue. Don’t let a record label convince you that a 10 or 15 percent royalty rate is the industry standard. Some record labels prey upon unsuspecting artists by offering relatively large upfront signing bonuses, giving their artists an initial feeling of success. But in return, the contract gives the artist a paltry revenue rate, ensuring that the label – not the artist – will reap all the long-term rewards of artistic success.
4. Watch out for hidden Royalty deductions
Even if your revenue rate is reasonable, keep your eyes peeled for hidden deductions. Before paying you even one cent in revenue, the record label is typically allowed to recoup much of its expenses through so-called “deductions.” Standard deductions include recording costs, video production costs, the cost of creating CD and DVD packaging, and other similar costs. But some record labels sneak in abhorrent and enormous deductions that all but guarantee you’ll never receive a check. Watch out for deductions based upon the record label’s general costs of doing business, like the deduction of record label owners’ salaries and benefits. You should also keep your eyes peeled for deductions that give the label a blank check, like unlimited deductions for travel, hotel stays, cars, meals and entertainment, and other costs that a devious record label could use to rack up a lavish deduction at your expense.
5. Make sure you can audit the record label on revenue payments
Artists often ask how they can ensure the record label is being honest with them about the total number of albums or tracks sold, and the total amount of money gotten from performances. Without honest communication and detailed record keeping, the relationship between artist and label can quickly turn contentious. Rintown, Skales, and Debbie Rise have had this issues. An audit provision is the best way to prevent this type of communication breakdown before it happens. The typical audit provision gives the artist the ability to hire a third party auditor to go through the record label’s books and records and make sure they’re paying the artist what he or she is entitled to under the contract. Typically, the artist must pay for this type of audit. However, many audit clauses require that the record label pay for the audit if a large discrepancy is found. Before signing a record deal, it’s always a good idea to hire qualified legal counsel to review the record label’s proposed contract. But with the above tips in mind, you can now at least look at the contract and know whether the label is trying to squeeze every last penny out of your artistic abilities while hanging you out to dry.