A music contract is a printed document that outlines, categorizes, explains, defines, and administrates the company relationship between an artist or group, and a record label. The music contract is called an executory agreement because it is yet to be performed or acted upon. To better grasp this type of relationship between an artist and label, it is essential to comprehend what it is that a record company does. A record company is an venture whose business activities usually include some or all of the following things:
I. Reporting to the Internal Revenue Service all royalties, contractor fees, salaries, commissions, interests, rents, pensions, insurance programs, direct sales of products for resale, and other compensations paid out to all artists and employees of that particular company.
II. Public Relations or PR work for the artists that have signed music contracts with their business.
III. Publishing or sub-publishing of records and works.
IV. Promotion, Publicity, Manufacturing and/or Distribution of albums and other materials.
V. Producing and/or Releasing commercial recordings of signed bands and artists.
VI. Scouting and signing talent with music contracts.
VII. Obtaining Rights to materials through the use of music contracts. These are including but not limited to songs, videos and master records.
VIII. Securing licenses of every kind.
IX. Distributing royalties obtained through the release of records, profits from touring and sale of merchandise all defined by the signed music contract of individual groups or artists.
Record labels come in all shapes and sizes and exist mainly to make a profit, as any business. With that in mind, labels search for talent they are sure will succeed in the music industry and they secure this talent by way of music contracts or recording contracts.
Signing an artist is risky and an expensive business so record companies want to be absolutely sure they have the best and most unique talent out there. Remember, every right a record company has pertaining to your work comes directly from the content of the music contract you sign. Always keep this in mind.
Now that you have a better idea of what a record label is and does, you can consider yourself closer to being ready to sign a music contract of your own. A music contract contains many clauses and covers a wide range of agreements. Just be sure you know full and well what you are doing before you sign any legal document!