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|Monday, 14 December 2015 09:15|
Copyright©2015 By Bobby Borg
EXCERPTED FOR BUSINESS BASICS FOR MUSICIANS
While the proliferation of home recording tools has enabled many talented artists/producers to record quality masters right out of their own bedrooms, there are still just as many talented songwriters/performers like you who need help from an experienced record producer.
An experienced record producer not only understands the technical and creative aspects of bringing a recording to life, they also understand—should you ever advance your career to signing with a record company—how to manage budgets, deal with union forms, and get guest permissions to use other artists. In short, they are expert project managers and know how to deliver a commercially viable record on time, on budget, and at the desired level of quality.
While the role of a record producer is typically understood by most artists, the business aspects are more confusing. Thus, what follows is a brief rundown of when a producer may first get involved in your career, how the deals are negotiated, and the producer’s fee structure.
When and How A Producer May First Get Involved
A record producer’s involvement in your career may begin at a number of different junctures and be handled in a number of different ways. The most common scenarios include: the barter system deal, the on-spec deal, the do-it-yourself deal, the production deal, and the record label deal.
A Barter System Arrangement
When artists are just starting out and have little or no money to pay for a recording studio and record producer, their first involvement with a producer might exist under a barter system arrangement with a local producer.
A barter system deal is a straight-forward arrangement where the goods or services of the artist are “exchanged” (i.e., used as currency) for the goods and services of the producer. Just be sure that the terms of the arrangement are clear and there are no misunderstandings about additional ownership of songs, recordings, and/or hourly fees owed.
The On-Spec Agreement
Another scenario for artists at the beginning of their careers is the on-spec deal.
The on-spec deal is a situation in which the artist makes contact with a local producer/studio owner (perhaps one who is a friend, fan, or close relative of the band), and arranges to record at no cost under the terms of an informal agreement. Such an agreement may state that if the band gets a recording agreement, they will pay the producer a predetermined flat fee for services rendered and consider him or her as a candidate to record the final product for the label. If the artist never gets signed to a recording agreement, it never owes the producer any money.
Another agreement could state that the artist gives up ownership in the master recordings or shares in certain songs for a specific term. This way, when the artist makes money down the line, the record producer also gets paid. [Warning: just be sure to understand the terms of any agreement before signing and to speak with an attorney or consultant if unsure about anything.]
The Do-It-Yourself/Work For Hire Approach
Moving on, when a young artist is resourceful enough (or lucky enough) to have the funds necessary to pay a producer at their full going rate, there involvement with a producer might exist under a do-it-yourself/work made for hire approach.
In this scenario, the artist makes contact with the producer/studio owner via referrals from other local indie artists or adverts in local music magazines. After discussing recording philosophies, listening to recorded tracks, and examining the facilities, the artist hires the producer for a flat fee to record tracks and even to mix and master the recording.
Just be clear that the producer is hired by you via a contract that explicitly states that he or she is to perform a job for a fee, and that he or she does not retain any rights in the sound recording nor own any shares in your compositions. Speak with an attorney if needed. Okay?
The Production Company Deal
Moving on in our discussion about when a producer’s involvement may begin, let’s take a look at production deals. These are situations that exist when talented young artists can show that they have the potential to be a worthy business investment (i.e., they have exceptional looks, songwriting or performing skills, and a unique sound).
In a typical production company deal, the production company discovers, grooms, and records the artist, and then enters into a recording agreement with a label on the artist’s behalf. The production company receives a royalty rate for sales from the label, which it typically splits with the artist 50/50. The production company also typically receives a recording advance, and if anything is left over after it covers its recording expenses, it will typically be split 50/50 as well.
The Record Label Deal
Finally, when artists can prove that they are self sufficient (i.e., they can record and distribute their own albums, build a strong fanbase, and make sales), they might be offered a record label deal to help take their career to the next level.
In a typical label deal, the artist is obligated by contract to hire an experienced record producer to help guide him or her through the recording process and to deliver a product that has the commercial sales potential to meet the company’s expectations. The artist receives an advance, typically known as the “recording fund,” from which all recording costs (including the producer) must be paid. Additionally, the artist receives an artist royalty rate (typically structured as an “all-in” royalty) from which the producer gets a percentage share.
Since the record label deal is still held as a coveted accomplishment for young artists who dream of world-wide success, and since the business issues can be far more involved than at any other level discussed, I’ll expand upon the record label deal scenario for the rest of this article
THE RECORD PRODUCER’S COMPENSATION STRUCTURE
In a record label scenario, artists are signed by a record label and responsible for hiring, and negotiating, a deal with a seasoned record producer. The producer receives an advance, a record royalty, master license fees, and even a share of the copyright in the songs. Read on…
As previously stated, record label contracts are typically structured as recording funds. To clarify, this means that out of the advances that you negotiate as an artist in your recording agreement, all recording costs (including a producer’s advance) must be considered in the producers agreement and paid at the start of the project.
To illustrate, if you’re a rock band signed to a major label recording deal with a very healthy fund of $200,000, $150,000 may be budgeted toward the recording cost budget, and the other $50,000 may be used as your advance.
Of that $150,000, a rock producer (at the top-level) can require an advance of as much as $50,000 for recording a full-length album (Thus you’re left with $100,000 to record your album).
<SIDE BAR> POP AND HIP HOP PRODUCERS IN THE GREEN: Attorney Dina LaPolt says that hip-hop and pop artists (even newer artists) may be able to negotiate for recording advances and recording costs that total as much as $500,000 to $1 million per album. Why? There are typically several producers on hip-hop and pop albums (sometimes as many as twenty) and they all want to get paid. Top-level hip-hop or pop producers, who are often considered as important as the artist, can get as much as $50,000 (just for one track) and more. </SIDE BAR >
Record producer’s also receive a record royalty in a record label deal scenario. Most royalty provisions in recording contracts are structured as an “all-in royalty.” This means that out of the artist royalty rate you negotiate with your record company, the producer’s royalty must also be considered.
To illustrate, if the record company offers you an artist royalty rate of 16 percent, and the desired producer for a project requires a producer royalty of 4 percent (a typical amount for a mid-level producer), you’re now left with a net royalty rate of 12 percent (16 – 4 = 12).
So how much is the net rate worth? To simplify things for our discussion below, let’s say one dollar ($1.00).
When the Record Producer Gets His/Her Royalty
Record producers get paid their royalty typically after the recoupment of all recording costs at the artist’s net rate. So, for the sake of simplicity, if the recording budget for an album is a high $150,000, and 150,000 one-dollar bills get thrown into a pot, the producer will start getting paid.
In contrast, an artist might not get paid until as much as 400,000 one-dollar bills get thrown into the pot. Why? Because artists must recoup so much more than the record producer has to, including the entire recording fund and all other monies deemed as an advance—touring monies, video monies, and radio promotion monies.
Yup! Producers get a better deal. And no, you can’t produce your own records and get paid in the same way that producers do. But nice try.
How the Producer Gets Paid: Record-One Royalties
Also significant to our discussion about producer’s deals and royalties is “how” the record producer gets paid his/her royalty. Using our above example, after 150,000 records are sold and 150,000 one-dollar bills are thrown into a big pot to “recoup” (pay back) the costs of recording your album, the producer starts getting paid a royalty back to the very first record sold, a system called “record-one royalties.”
This means that the producer gets a 4 percent royalty on sales for all 150,000 units (less the advance monies that he or she already received) and then continues to get paid for every unit that’s sold after that.
Regardless of how the producer gets paid, once again it is a far better system than it is for the artist: you only get paid for sales from the point after recoupment. In other words, if it takes up to 400,000 units sold for you to recoup the advances paid by the record company, you would get paid a royalty only after the 400,000th record sold (i.e., 400,001, 400,002, 400,003, etc).
Who Pays the Producer?— The Artist Does!
You already know that once the recording costs are recouped, the producer is entitled to getting paid a royalty back to the very first record sold. And now comes the good part. Guess who is responsible for paying the producer? That’s right, “you are?” But don’t panic just yet!
What typically happens, with the help of an attorney (you’ve definitely hired at this stage of the game), is that the record company will agree to pay the producer’s royalties on your behalf. How nice of them!
But note that every penny paid to the producer by the record company is charged back to the amount of money you must recoup before you ever get paid a royalty. If you haven’t figured it out yet, this means that the more records you sell and the more the producer collects, the deeper in debt you can become.
The good news, though, is that if the gods of rock (or pop, rap, or whatever) are on your side and you go on to sell shitloads of recordings (vinyl, downloads, streams, or whatever), eventually everything will mathematically balance out and you’ll start getting paid.
I’d show you how this works in a diagram below, but I figured I’d spare you the headache. (You can learn more about this stuff in my book Business Basic For Musicians.)
Moving on to another form of compensation to the producer, let’s briefly discuss master monies.
In the record label deal scenario, the label is typically the owner in the copyright of the master recording. Nonetheless, since the master embodies the artists’ performance, it is customary for the artist to receive a 50 percent split of any monies that the record label may receive from the exploitation of the masters in other areas such as film and TV.
Of that 50 percent, the producer will receive a prorated split based on the same ratio he or she gets in royalties to the all-in rate. So if the producer gets 1/4th of your rate, he will get 1/4th of the 50 percent (i.e., 12.5 percent).
Music Publishing: When Should the Producer Get a Share?
Finally, for the last item to discuss regarding the producer’s compensation structure, let’s tackle the difficult issue of your songs and whether the producer gets a share.
Under copyright law, a music or lyric “contribution” to a song, no matter how big or small that contribution may be, could entitle the contributor to a “pro rata” (equal) share of ownership, unless there is a written agreement between the parties that stipulates otherwise. Bottom line: Before any artist/band goes into the studio with a producer, they should have a sit-down with the producer and discuss matters of music publishing, to the point of putting something in writing. The issue really comes down to how involved you want the producer to be in the songwriting process. Is he or she going to sit down with you for several weeks and pen a batch of songs with you one-on-one? Or is he or she just going to make minor changes? Read on.
When Writing Songs One-on-One From Scratch? Yes
When a producer contributes significantly in the songwriting process, then he or she should get a percentage of the publishing.
To illustrate, Alanis Morrisette joined forces with producer Glen Ballard to co-write songs. The collaboration not only helped Morrisette to land a major recording deal but also allowed her album Jagged Little Pill to sell over 30 million copies worldwide. In this instance, the record producer is clearly involved in the songwriting process and entitled to a share. I’m certain that there was a clear understanding about business matters before the two writers joined writers to pen the album.
When Making Slight Modifications? No!
When a producer simply does what a producer is supposed to do (i.e., make minor modifications), then he or she may not share in the publishing.
Says producer Arif Mardin: “All producers will make modifications to the arrangements of your songs by adding or dropping four bars here and there, rewriting a pre-chorus, etc., but they’re hired and offered a handsome advance and royalty of future sales to do so and should not ask for publishing. I suggest all artists/writers should be leery of producers that are overly insistent on taking a piece of the [music] publishing or getting involved in the songwriting process. Your music publishing income can be the very money you live on long after your career is over.”
Producer Robert Shahnazarian Jr. says: “I’ll always make sure to discuss publishing matters with any band for which I work before going into the recording studio. I want the artist to feel free to create music around me, without being afraid that this will somehow involve me in the songwriting and entitle me to a share. This is simply for the best of all parties involved. Artists must get educated about the biz: Read books like Business Basics For Musicians and take classes at local programs like UCLA or online platforms like Berklee College of Music. After all, Music is art, but making money from it is a serious business.”
Bobby Borg Is a former major label, indie, and DIY recording/Touring artist with over 25 years experience in music. He is also a music business educator at Musicians Institute and UCLA and the founder of Bobby Borg Consulting where he works with rising music professionals globally. Borg is the author of several best selling music business books including The Musicians Handbook and Music Marketing For The DIY Musician. Borg’s latest book, Business Basics For Musicians: The Complete Handbook From Start To Success (Published by Hal Leonard) is available for a limited time special offer: get the book, CD, and DVD for only $21.99 (a $70 Value). Visit www.bobbyborg.com/store now.
Short Interview with Bobby Borg about the Producer Deals
1. Is it mandatory for a producer to be musically trained, for instance in a music school?
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