Music Law: Recording Contract

by Harmanjot Kaur

Introduction

You're more likely to have a successful career in the music business if you are savvy about music contracts. Hopefully, this blog will remove some of the mystery and help you to avoid common missteps. If you are using the services of an attorney, you can benefit and save money on attorney fees with a basic understanding of music contract terminology and principals. I've tried to cover most of the agreements that are important to musicians. I focused on agreements that are negotiable, that is, terms can be changed. I start with record contracts because they have so many elements that are common to other music agreements. Please note that throughout the course, I use the terms musician and artist interchangeably.

Why recording contracts are important?

- A record contract enables a record label to sell, license, and distribute an artist's recordings. In return for granting these rights, the artist's music is promoted and the artist is paid a percentage of the sales revenue. For many musicians, a record contract is a symbol of success. Finally, the world will hear their music. But in all the excitement about landing a record contract, artists sometimes don't realize how much risk is involved. They may be giving up rights to an important recording and end up receiving little in return. Record companies, because of their superior bargaining position, typically have much less at risk. For example, it's not uncommon for a record label to make a profit on a recording but with the same time, the artist who made the recording remains in debt to the company. Because the balance of power can be skewed so heavily in favor of the label, an artist may wonder whether it's even worth reviewing a record contract. Why not just sign it and accept the consequences? First, an artist who is serious about his or her career should never blindly sign any document. To do so would be to disrespect the music and may tie up a musician's finest recordings forever or at least for a long, long time. There's just too much at stake in a record deal not to understand the terms. Second, many labels eager for an act will consider making reasonable changes to their agreement, particularly if there's a compromise of some sort. For example, a label may agree to raise the royalty rate when a certain sales quota is reached. How do you approach a record contract? Hopefully you can afford the assistance of an attorney. A lawyer's advice can be very helpful when making an independent record deal and it's essential for the 50-plus page agreements furnished by major labels, that is, a contract with a label owned or distributed by Universal Music Group, Sony Music Entertainment, or Warner Music Group. Even if an attorney is retained, it's in a musician's best interest to be able to read and comprehend the key provisions of a record agreement. Because every record company uses its own agreement, because there's no set format for record contracts, a musician should expect to spend some time identifying and deciphering the key provisions and then prioritizing any proposed changes he or she may want to discuss. Next, I'll review the grant provision, a key provision common to all record deals.

The grant

- An artist possesses something that the label wants, the exclusive rights or copyright to a musical recording. To obtain these rights, the record contract includes a provision referred to as The Grant of Rights, or just The Grant. There are two ways a label can get this transfer of copyright. It can lease the copyright for a period of time, known as a license, or it can purchase ownership of the recording copyright, known as an assignment. Occasionally, a label requires copyright under a principle known as the work made for hire rule, in which the label hires or employs the artist. With a license, an artist retains copyright, but gives up, or rents rights temporarily. With an assignment, the artist transfers title to the copyright, much like the sale of a house. However, these distinctions can be artificial because some licenses last forever, making them similar to assignments, and some assignments are not permanent, the label gives the copyright back to the artist. So when it comes to the grant of rights provision, what matters is not what the arrangement is called, license or assignment, but whether the rights are returned to the artist at some point, known as a reversion. With rare exceptions, the grant is exclusive. During the period of the agreement, the artist cannot record for or release recordings for a second label unless permission is granted by the first label. Also, the musician is usually prohibited from re-recording the same songs for a period of time after the agreement is over, known as a lock out provision. In an ideal world, a musician would seek a grant that is as short as possible, for example, the label would have rights for between three and five years to exploit a recording, after which rights revert to the musician. Similarly, the artist wants as little time as possible before he or she can re-record the songs. The musician also wants a provision that if the label doesn't release certain recordings, the songs on those recordings are not subject to lock out. If the words "in perpetuity" are in the grants section, that means that the label wants the rights forever. If a musician gives up rights in perpetuity, the label will always own the rights, or at least own them for 35 years, in the case of an assignment, after which, copyright law permits the musician to reclaim rights in some circumstances. An additional factor is the area of the world referred to as the Territory, in which the recordings can be exploited. Because of the international nature of music distribution, most labels will seek worldwide rights. If a label has not advanced money to pay for the recording, that is, the musician has already created the recording, or plans to pay for the recording with nonlabel money, the musician should seek a short license, five years or less. After all, the label is taking a relatively small risk here. Next, I'll talk about the term and options provisions.

Term and Options

- How long does a record contract last? That is, how long does a musician have to furnish recordings exclusively to the record label? This period of time is called the term. There is typically an initial term of 12 months to make the first recording, and subsequent one year terms, known as options, to make other recordings. Independent record companies usually seek options for one to three albums. Majors typically seek four to seven. For a musician, it may be tempting to sign a deal providing for many options. After all, it's a multi-album deal. How exciting is that? However, because these are options, the musician is guaranteed only the first album. If the label doesn't want to continue, they don't exercise the option, and drop the musician, and that's it. By doing it this way, the record company lowers its risk, and increases its chance of making a profit. Because there is no guarantee that options will turn into recordings, it benefits the musician to limit options to as few as possible, ideally, to two or three recordings. Realistically, this is difficult to achieve with a major label, and an artist may have better luck seeking a compromise. For example, setting a sales goal that must be achieved before an option can be exercised. Once the term ends, the artist is free to release new recordings with a second label. However, even though the artist is free to release new recordings, the rights to the previous recordings remain with the first label, which continues to pay royalties to the artist. But for how long does the first label own rights to the recordings? That depends on whether the recordings revert to the musician, and when, and that's why it's always in an artist's best interest to fight for timely reversions. Next, I'll talk about advances and royalties.

Advances and royalties

- I'm going to talk about how the artist is paid by the label using a system of advances and royalties. When a record label pays for a recording to be made, it usually does so via a process known as an advance. In that case, the label pays money to the artist that will be used to pay the recording costs. This is similar to a loan except that the musician is not personally liable. The money is paid back from incoming revenue. That is, the artist will not receive a royalty payment until the advance is repaid or recouped from the artist's share of revenue. So, for example, consider the artist who received a 10,000 dollar advance and earns a 12 percent royalty rate. Let's say that sales of the recording generate 50,000 dollars in revenue. According to the contract, the musician has earned 6,000 dollars, 12 percent of 50,000 dollars. However, the musician would not receive any money because the label keeps the 6,000 dollars in royalties to offset, or recoup, the 10,000 dollar advance. You'll notice that in this case, the label has revenue of 50,000 dollars while the musician is still in debt to the label for 4,000 dollars. So, is it better for the musician to seek a low advance in order to earn royalties sooner? Conventional wisdom says no. The more popular approach is that the musician should get as much money as possible in advance because the musician may never see any more checks from the company. Of course, the good news is that the artist does not have to pay the advance back if the album doesn't sell. The label can only recoup the advance in the manner described in the agreement, typically, from incoming revenue. It's sometimes recouped specifically from the album for which the advance was used, but in most agreements, from any recording made under the agreement. Some labels deduct a recording advance from non-recording revenue, for example from merchandise or music publishing revenue. The process of recouping from a source other than the album for which the money was used is sometimes known as cross-collateralization, or cross-recoupment. If possible, it's in a musician's best interest to avoid cross-collateralization, that is, it's always better for an artist to keep each recording discreet, and tie the recoupment only to the recording for which the advance was made. Royalties are based on a percentage of income. They're sometimes referred to as Points. Royalties are commonly determined in one of three ways, a percentage of retail price, a percentage of wholesale price, or a split of profits. Back in the day when music sales were of physical products only, for example, albums, cassettes, CDs, royalty payments were always based on a percentage of the suggested retail list price, or SRLP.Splits of profits. Some record contracts still use this principle. For example, the SRLP for compact discs is usually 16 dollars, so if the musician's royalty rate were 12 percent of SRLP, the musician would earn 1.92 per each compact disc sold. Nowadays, most labels don't bother with the SRLP, and instead base the royalty on the wholesale price, or PPD, published price to dealers. In a third type of deal, commonly used by indie labels, known as profit splitting, or net profit deals, the label deducts direct expenses for making and marketing the album, and splits the rest with the musician. An artist usually doesn't have much choice as to which system is used, but as a general rule, royalty rates will be lower for retail SRLP deals, typically between 10 and 16 percent, and higher for wholesale PPD deals between 14 and 22 percent, or higher. As for profit splitting deals, which are most suitable for licensing existing recordings, the rate may be as high as 50 percent. Some labels may use a system in which royalties are tiered. For example, one set of royalties for physical products and another reduced royalty for digital products. Also keep in mind a final twist that applies primarily to major label deals. Record producers and some mixers are often given two or three royalty points that are subtracted from the artist's royalty. Except for 50/50 profit splitting deals, it's usually a good idea for the artist to seek a higher royalty rate than what's offered. Regardless of the bargaining dynamic, it doesn't hurt to ask. Next, I'll discuss deductions.

Deductions

- You've heard the expression:

"There's no such thing as a free lunch."

In the music business, that is literally true. Artists are often surprised to find that the cost for the complimentary sandwiches and beverages provided at a record company reception, later mysteriously appear as an expense on the artist's royalty statement. Welcome to the world of deductions, sums that are subtracted from the artist's paycheck. These deductions are always expressed in the record contract, usually in the Payments or Royalties section. As you're probably aware, royalties are calculated by multiplying the artist's percentage or points against the incoming revenue. Deductions may be subtracted from the incoming revenue before the royalties are calculated, or in most cases, they're deducted from the royalties after they're calculated. The timing makes a difference. Deducting it before calculation is always better for the artist. For example, consider an artist with a 12% royalty, whose record generates $100,000 in revenue. The record label claims $10,000 in deductions. If the label deducts the $10,000 before the royalty is calculated, the artist receives 12% of $90,000, or $10,800. But if the label calculates the royalty 12% of $100,000, or $12,000, and then deducts the $10,000, the artist would receive only $2,000. What gets deducted? Some labels doing retail or wholesale deals may claim a packaging deduction to pay for the materials required for physical products such as CDs and vinyl. When such a deduction is made, it can sometimes run as high as 20% of a recording's list price revenue. For example, if the SRLP for a compact disc was $16, then 20%, $3.20, would be deducted from each CD sold before royalties are calculated. As a result, a 12% royalty artist would receive $1.53 per CD, instead of $1.92. Like deductions for independent promotion and marketing costs, the artist is being required to cover what are really the label's costs. In other words, the artist is being asked to pay for the company's expenses, historically classified as its "overhead". If packaging deductions are included, it's in the musician's best interests to keep this sum as low as possible, and always have it deducted before royalty calculation. Another form of deduction is the reserve, in which a percentage of sales revenue, between 10 and 30 percent, is deducted to deal with the potential of returns by record stores. The label holds this reserve for a period of time, sometimes as long as four accounting periods, and then eventually it pays it to the artist. If a reserve is included, an artist should seek the lowest possible reserve, and a provision that clearly guarantees timely repayment. There should be no reserves for digital products. Also en vogue for awhile, though becoming less common, are record contract deductions for new technology, supposedly, the digital equivalent to packaging fees, and piracy fees, the cost of fighting infringements. Again, these fees are another way of passing the label's overhead costs to the artist. If these sums are included, they should always be deducted before royalty calculation. All labels deduct a certain percentage to account for promos and free goods, which are free copies distributed to radio stations or reviewers, or that are given to distributors in stores as promotion. Certain sums are typically deducted from the artist's royalties after they are calculated. These include record company advances, tour support, and a portion of video production costs, typically 50%. In summary, when it comes to deductions, less is more. That is, the fewer the deductions, the more the artist earns. As for timing of the deduction, it is always better to make a deduction before a royalty is calculated, rather than after. Next, I'll discuss controlled compositions, original songs that are included on a recording.

Controlled composition

- Under copyright law, the record company must pay the song owner, what is known as a mechanical royalty. As of 2014, it was 9.1 cents each time a song is physically duplicated and distributed. So if there are 10 songs on an album, the label must pay the song owners 91 cents per album. If the label sells 1,000 copies of that album, copyright law requires that the label pay the song owners a $910 payment. This payment is separate from the payment of record royalties and is made to the song owner. A controlled composition clause lets the record company pay less than the law requires for physically reproducing songs on a cd or a vinyl. Typically, a controlled composition clause allows the record company to pay 75% of the statutory mechanical royalty rate, sometimes referred to as the 3/4 rate three quarters rule, for controlled compositions. A controlled composition is any song used on a recording that the artist controls, that is the artist wrote it, owns it, or co-owns it. So if the clause were included in the contract, the label would pay the song owner approximately 6.8 cents per song or 68 cents for a 10 song album. If the label sells 1,000 copies, the song owner receives $680. In other words, the artist/song owner loses $230 per 1,000 copies with a controlled composition clause. In addition, it is not uncommon for a record label to use the controlled composition clause to limit the total payment from mechanical royalties. For example, refusing to pay for more than 10 songs. In other words, the record company will pay only 10 times 75% of the statutory rate per album, even if an artist includes 12 songs. If an artist has any leverage negotiating a controlled composition provision, the artist should try to avoid these limits. Ideally, the label should pay for all songs. In some cases, an artist may record a song owned by another songwriter, a cover. If the artist cannot get the other song owner to agree to a 75 percent rate, the artist will have to pay for the difference, that is, the label will only pay 75 percent of the legal royalty rate for a cover, and the artist must pay the remaining percent. Ideally, the artist should try to avoid having to make such payments. Speaking of an ideal world, the contract should state that the mechanicals are paid on all recordings manufactured and distributed as the law requires and not be limited to music sold and not returned as the controlled composition clause may state. Finally, the mechanical royalty rate periodically changes and the contract should provide for such adjustments. Controlled compositions are subject to another quirk. In 1995, Congress passed legislation that prohibited the use of a controlled composition clause for digital download delivery of sound recordings released under a post 1995 contract. In other words, if an artist entered into an agreement after 1995, the artist can't get less than what is required in mechanical royalties for digital downloads. Although there are a few exceptions to this law, the general rule is that controlled composition clauses should not be used for digital downloads. Next, I'll discuss creative control and commercial standards in record contracts.

Creative control

- Creative control refers to the right of final approval over recording video or other artistic endeavor. Indie labels are more open to granting creative control to artists, that is, giving artists final approval of the choice and sound of the final recordings, as well as the album art and packaging. Major labels rarely cede creative control. Majors believe they know what's best in the marketplace, and, therefore, they want final say on everything they sell. Even artists who negotiate creative control clauses have limited powers, because the only way to enforce such a provision, should a dispute arise, is to sue the record company. These lawsuits are expensive to initiate, difficult to win, and usually tie up an artist's recording career. Artists concerned about creative control should talk to other musicians signed by the record company and find out how the company treats them. In addition, an artist should take the initiative to control as much as possible, for example, overseeing any mastering and furnishing camera-ready artwork, if possible. There are some issues of creative control that an artist may be able to negotiate favorably, especially with Indie labels. For example, an Indie label may grant final approval over compositions, studios, producers, mixers, videos, and artwork. Even for major labels, it's not unusual to include a contract provision allowing an artist to have final approval over the producer, remixer, or the director of a video. A major label artist may also try to get approval over which songs are recorded, what order they are presented on the album, and whether the label can license the music for advertising campaigns. Creative control is also an issue in the delivery provision, sometimes known as acceptance, that typically states that when the artist submits recordings, they must be "commercially acceptable," a vague, discretionary standard that allows the label to basically reject anything it doesn't like or consider marketable. When a label rejects a recording, it may choose to require the artist to remix or re-record the recording at the artist's expense. Alternatively, rejection may be a way for the label to run out the clock and terminate the agreement because the artist didn't deliver a "commercially acceptable" recording on time. Of course, having discretionary power doesn't mean that the label will use it. Obviously, if a label signs an artist, they are familiar with the artist's music and are prepared for the style and content of their recordings. In addition, labels often consult during the recording process, to make sure things are on course. Still, if possible, a musician who has the power should seek to lower the standard from "commercially acceptable" to "technically satisfactory." The latter is a much lower bar to achieve, because it only requires that the recording meet current audio recording standards. Another section of the record contract related to artist's control is the provision granting the label's right to use and exploit the artist's name, likeness, and persona. That's necessary in order for the label to market the artist's recordings, but the label should only use the artist's name and likeness in connection with selling the artist's music and should not have the right to grant those same name and likeness rights to a third party, for example, to enter into endorsement deals or deals in which the artist's name is licensed. In the event that the label insists on such rights, the artist should seek a high percentage of the income, 50 to 80 percent, because after all, this is income tied to the artist's popularity and for which there is little upfront expense. In the next section, I'll discuss leaving member and side artist provisions.

Leaving members

- What happens when a label signs a duo or a group and members later leave the group or the group breaks up? The record contract deals with this possibilty in the leaving member provision, a clause that permits the label to poach any leaving member from the group under the same terms as the original deal. In other words, when members leave, or groups disband, the label can choose whom it will keep under contract. Of greater concern to the members who are retained, is whether they will be saddled with the debts of the group. For example, if a group breaks up and the label claims the lead singer as a leaving member, the lead singer's income can be withheld by the label until the groups debts are paid off. If at all possible, leaving members should not be linked to the financial obligations of the group. Such provisions should also give pause to a group member thinking seriously about embarking on a solo career. A side-artist provision, also known as the a side man clause, permits an artist to play on other people's recordings, provided that the label approves and certain criteria are met. Usually, the label requires that the performance be credited in a certain way and that the performance not be of a song that the artist has already recorded. Also, the artist shouldn't be the star of the performance. As expected, major label contracts are more restrictive than indie label deals, in regard to these issues. Some artists form strong bonds with certain record company executives or owners. Because the record business is a game of musical chairs, the executive who believes strongly in a musician's future, may disappear before the ink is dried on the record contract. To avoid being stranded at a label without any supporting executives, a key person provision is sometimes inserted in the contract. This provision states that if the favored executive, a key person, leaves the company, the artist is free to terminate. These provisions are rare and indie labels are more likely to grant such a provision than a major label. Next, I'll discuss co-publishing provisions.

Copublishing

- A co-publishing provision allows the record label to own a piece of the artist's songwriting revenue. Songwriting revenue is distinct from recording revenue. For example, the song owner gets separate payments when radio stations play a song, when a song is used in a commercial, when a song is used on TV or in movies, or even when the song is used on a ring tone. When a recording artist also writes the songs, the label may want to obtain some of that revenue. In order to make that happen, the label uses a co-publishing provision. Note that these deals, though still popular, are becoming less prevalent. A little background about song ownership is necessary here. The artist who writes the song is the initial owner of that song. Because of an antiquated system used by the music business, songwriters must create or affiliate with a music publisher, an entity that supposedly represents the songwriter's interests, although in many cases it is simply a shell company receiving income on behalf of the songwriter. A co-publishing provision requires that the artist enter into a separate agreement with the label's publishing company, and as a result, the label's publishing company will then keep 15 to 25 percent of the songwriting income. As you can imagine, any artist with sufficient bargaining power should avoid co-publishing with a label, because the artist is giving up a potentially lucrative, long-lasting source of income. An artist who takes the co-publishing agreement should seek as much money upfront as possible, the co-publishing advance. The artist should also avoid, if possible, cross-collateralizing the publishing advance with record company revenue. That is, ideally, publishing income shouldn't be used to pay back the record contract advance. Similarly, recording revenue shouldn't be used to pay off the publishing advance. Ideally, the arrangement should be limited to the songs released by the record company. That is, if the record company hasn't released the song, it cannot claim co-publishing rights. In addition, the publisher should only be entitled to income generated by the artist's version of the song, not from cover versions. Finally, it would be best for the artist if the publishing relationship ended when the record contract terminates, or at least within five years after it terminates. In an earlier segment, I discussed controlled compositions and mechanical royalties. Mechanical royalties are payments fixed by law that the label must make to the song owner. With the controlled composition provision, the artist is pressured to take 25 percent less for mechanical royalties. With the co-publishing deal, the artist gives up another 25 percent, a maneuver sometimes referred to as double dipping. Therefore, when an artist signs a co-publishing agreement with a label, it's in the artist's best interest to also avoid a controlled composition provision in the recording agreement. Next, I'll discuss marketing provisions.

Marketing provisions

- The main reason most artists sign with a label is for the Marketing muscle. Oddly, the label's marketing obligations are hard to locate in most recording agreements. Aside from an assurance that it will use reasonable efforts or some some similarly vague statement to manufacture, distribute and market the recordings, the label rarely provides any straight-forward marketing guarantees, financial or otherwise. At best, a label may supply advances for videos or tour support. For example, a record contract may include a guaranteed advance for one video for each album, the costs of which are often 50 percent recoupable. Although videos are enormously popular, YouTube is the number one source for music listening. Historically, they have not earned money, though this may be changing as video hosting sites monetize plays. Until there is substantial video revenue, an artist will have to pay back the advance from record sales. Even when a video is sold directly to consumers, the record contract is likely to provide for a reduced royalty rate, that is, a royalty rate lower than the record royalty for video sales. For that reason, and due to the high cost of professionally made videos, savvy independent artists take a low budget route, often partnering with creative video making friends. Another source of marketing by the label is Tour Support, money intended to keep the artist afloat while touring. Most new artists lose money while on tour. Major label artists typically get tour support all of which is usually deducted from royalties. It's unusual for indie labels to pay tour support although independents are often willing to help touring efforts by booking bands on a tour, supplying wholesale CD's for sale while touring, or coordinating promotional efforts with the touring artist. There is one situation, known as the 360 Deal, in which a label will commit specific sums to marketing. In a 360 Deal, or Multiple Rights deal, the label agrees to make firm marketing commitments in return for a percentage of some combination of the artists income, including endorsements, acting, book sales, publishing, merchandise, ringtones and touring. The elements that are most often in play, are publishing, merchandise and touring income. The results is that record label functions like a manager, all be it, a manager with a big bank roll. Cross-collateralizing all these sources of income, and generally taking a cut before any deductions. In some 360 Deals, the artist may even retain all rights and in a reversal of the typical deal, pay the label it's share instead of vice-versa. A 360 arrangement works fine when it propels the artist into branded super stardom as it did in the case of Lady Gaga, but for every Gaga, there are dozens of artists whose 360 Deals ended in a sea of red ink. 360 arrangements appear to be confined to major labels with financial clout but in coming years, it is likely that independents, particularly those in the rap, hip-hop genre will seek similar deals. Such arrangements involve risks, because the odds are stacked heavily against the artist. Consider merchandise revenue. While on tour an important source of artists income, with the 360 deal, 60 to 70 percent of merchandise income, goes to the label, the venue and the manager. Although it will rarely be in an artists best interest to sign away so much to a record label, many new artists intent on doing whatever it takes to make it, will probably continue to accept these 360 Deals. Next, I'll discuss warranties and indemnity.

Warranties and indemnity

- Most record deals include both a warranty and an indemnity provision. A warranty is a contractual promise. Basically, the artist is warranting that he or she is the copyright holder and can deliver a lawsuit free recording. In other words warranties place the burden on the artist to be sure that the work doesn't infringe, and that clearances and permissions have been granted from graphic artists, performers, producers, and anyone else who contributed something creative. It is in the artist's best interest to read and understand each warranty, and to feel confident or as confident as possible that the promise can be made. One type of warranty that may pose a problem for some artists has to do with samples: digital snip its of recorded sound, lifted from someone else's recording. The sampling warranty always requires clearance, and often requires that the artist list every sample used. I discuss sampling in a separate segment. The companion to a warranty provision is an indemnity provision, also known as a hold harmless clause. An artist who agrees to indemnify the label is agreeing to pay for any damages, including the label's attorney fees, that arise from legal claims surrounding the recording. For example, if a session musician sues the record company over rights to a performance, the recording artist would have to pay to defend the label from the session musician's lawsuit among other expenses. As you can see, warranties and indemnity provisions work together, enabling the label to shift risks to the artist. Using warranties the label obtains promises. Using indemnity the label spells out the punishment for breaking those promises. In some ways, these provisions may be redundant. For example, a label can recover damages for breach warranties without indemnity. But the combination provides the broadest shield for the label. It also creates unlimited liability for the artist. To avoid the potential for personal financial disaster, it's in the artist best interest to limit recovery for indemnification. One way is to strive for indemnity obligations to be deducted solely from future earnings from the recordings, not from the artist personally. In addition, it's important to limit indemnity to third party claims, in other words the artist will only pay for damages, when someone other than a party to the agreement has a dispute, for example a session musician, or graphic artist. Indemnity provisions that require the musician to indemnify for claims, brought directly by the label, should be avoided. Next I'll discuss contracts for a single recording.

One-offs

- What about a recording agreement for a single recording, sometimes called a one-off? For example, a company simply wants to sell a vinyl-only, re-release of an artist's existing recording. Such agreements are simple, often just a few pages, and they usually don't include provisions about options, co-publishing, leaving members, or many of the common deductions or royalty calculations discussed in multi-album deals. They will, however, likely include a warranty provision and perhaps an indemnity as well. I discussed those in the previous segment. Note that an artist may have more bargaining power in making an agreement for one recording than for signing a multi-album deal. An artist entering into a one-off agreement, in which the label is not paid to make the recording, should always seek a license, not an assignment. If you're unsure of the difference, check our earlier segment on the grant. The license should be limited to a number of years, possibly two to five, and rights to the recording should revert back to the artist after that. The license may also be limited as to media, vinyl, USB, et cetera, or territory, for example, North America only. It may be exclusive as to the rights granted or non-exclusive, meaning that the artist can license similar rights to another label. Depending on the arrangement, the label may seek digital rights as well. Keep in mind that digital rights pose several issues in one-offs. For example, in the case of reissues, the artist may have already granted digital rights for the recording. In addition, although digital rights may revert back to the artist, the process of removing digital copies from the iTunes Store and other digital distribution outlets may prove troublesome. Ideally, it is in an artist's best interest to retain all or most digital rights. As a compromise, an artist may want to grant limited digital rights, for example, an agreed upon number of download cards. It's also in an artist's best interest to seek an advance. Though advances for one-offs are usually low, that is, under 5000 dollars, the royalty system used for one-offs is often a profit-splitting arrangement, in which the label and artist split revenues after the label has deducted its expenses. Sometimes it's a wholesale or PPD royalty system. Occasionally it's based on suggested retail list price, SRLP. I discuss all of these arrangements in the segment on advances and royalties. Of course, there is the most important question to consider. Do you really need the label for a one-off release? This question can be asked of any record deal, but it has particular resonance for one-offs, where the label is usually making a short-term commitment. With digital distribution and CD and vinyl manufacturing in reach of any artist, via companies such as CD Baby and TuneCore, an artist should verify that the label has a successful track record and business history before proceeding. A brand new label with no history or track record may not be the best place to drop your recording, especially considering how easy it is for an artist to distribute music to most digital and online retailers. This concludes the chapter on record contracts. If you're wondering about the group of provisions at the end of the record contract, sometimes titled as miscellaneous provisions, and affectionately known as boilerplate, please check another blogs on music law for the same.