Entire law school classes are taught, and entire books are written, on legal battles related to the music business (see, for instance, They Fought The Law: Rock Music Goes To Court, by Stan Soocher). Most of these problems focus on contract disputes. That’s why, next to your attorney, the most important business tool available to you as a record label owner is the written contract. In fact, you can’t make money, sell records, or even exist as a label without contracts. The copyright and trademark laws are clear: whoever creates the vocal and musical sounds on the master recording (e.g., artist, producer, side artist, etc.), owns those sounds. Likewise, graphic artists who create the artwork for your records own that art as soon as it is created. Unless you obtain your rights in writing, any agreements you make with recording artists, producers, side artists, graphic artists, etc. are not valid or enforceable in a court of law.
As a result, you could lose your rights to the recordings made—and paid for—by your label, including the right to sell them.The only way your record label can obtain the rights to use and sell the recorded performances on the master recordings, or the artwork you have chosen for the CD cover, is for the label and the artist(s) to enter into a written contract, or agreement, that grants those rights to your label. (Note: the terms “contract” and “agreement” are interchangeable in the music industry.) Without this written contract, the master recordings will continue to be owned by the artist, producer, and any side artists who created them. And the graphic artwork will continue to be owned by the graphic artist.
This is only one of many issues to be addressed in the contracts you sign with musical and graphic artists, but it is probably the most important. For any successful record company, written contracts are a fact of life. Over time, your label will have contracts with recording artists, of course, and probably with producers, graphic artists, distributors, and others. So make sure you obtain the necessary contracts (described in the following chapter), study them, and use them. This is a great way to establish good business practice from the start.
This blog entry is an excerpt from the book titled Music Business Made Simple:Start An Independent Record Label that can be purchased at this link: Music Business Made Simple.
MusicContracts.com provides all the necessary contracts for an independent record label at this link: Record Label Contracts.