It is no secret that the music business has changed dramatically in the digital age. Among the positive changes has been the opening of new opportunities for both independent artists and entrepreneurs alike. 

However, while earnest in their desire to bring success to both themselves and their artists, an increasing number of independent startup “record labels” and “publishing companies” have, in many cases, neglected to learn the basics of music law, or hire experienced counsel to advise them of the same. Accordingly, lawyers are encountering more and more poorly drafted contracts offered by such startups that confuse (or ignore) certain important legal concepts in music law or include unnecessary and/or over-reaching terms. The following are examples of the most common issues that lawyers should look out for.

Master Recording vs. Composition
The first example relates to the misidentification, incorrect use or absence of the two properties that make up what many laypersons refer to as a “song”: the “composition” and the “master recording.” A red flag should be raised when a lawyer reviews an agreement that references “songs,” but does not distinguish between these distinct items of intellectual property. 

Traditionally, the artist’s record label owned (and paid for) the master recording, and the artist’s publisher owned the composition. Nowadays, many independent artists own both properties, largely because the costs relating to recording music is a fraction of what it was prior to computer-based recording. Since each represents a wholly distinct and separate right to receive certain royalties, an experienced lawyer should never allow their client to give away both “for the price of one.” Not to mention the fact that failing to distinguish between the two could give rise to uncertainty of terms (i.e. does “song” mean “composition,” or “master recording” or both?).

Writer’s Share vs. Publisher’s Share
Another example is the distinction between the “writer’s share” and “publisher’s share” of the right to receive public performance royalties, which is among the most confusing concepts for newcomers to music industry practices. Accordingly, these concepts are often misused or absent from agreements offered by startups. A lawyer reviewing an agreement that includes terms relating to public performance royalties, but does not mention or distinguish between these concepts, should exercise caution. While the absence of such terms is not determinative of there being a problem (sometimes the concepts are dealt with implicitly), an assessment should be made to determine whether the absence of the same is due to bad drafting, and could therefore prejudice your client.

License vs. Assignment
The final example is the unnecessary and/or unjustified inclusion of assignment of rights clauses, when other less “extreme” options may suffice. Traditionally, publishing agreements included a full assignment to the publisher of rights in the artist’s compositions (with the exception of the artist’s right to receive the “writer’s share,” as explained above) in exchange for a share of profits and an advance to the artist.

Currently, advances are less commonly offered by startups, and often times the terms of such agreements are for a limited time period. Accordingly, such startups are less justified in requesting an assignment of the artist’s rights, especially given the fact that in many cases, the company could effectively receive the same benefits by way of a publishing administration agreement.