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June/July 2016

by David McLaughlin

The Lawful Truth: Compilation Agreements

by David McLaughlin

The Lawful Truth: Compilation Agreements

Rather than working through a record label, an increasing number of bands and artists these days pay for and consequently own the rights to their own recordings. As a result activities that were once the responsibility of record labels are now areas that bands and artists need to think about a lot more if they are to maximise the value and exposure of their music.

A good example is in respect to compilation albums. Inclusion on a successful compilation can not only provide a good additional source of income, but can also promote an artist’s music and profile well beyond their own album or single releases. If you do ever have the opportunity to include a track on a compilation then there are a number of issues you need to make sure are clearly provided for in an accompanying contract.

One of the first things to be aware of is to make sure that the song being used is properly defined. If there are different mixes or versions of a particular track it needs to be very clear that the party releasing the compilation is getting the right to use only the exact version you/they want.

Properly defining the territory or area of the world that the agreement will apply to is also very important. If you have licensed the rights to distribute your recordings in a particular territory to someone else then you will need to make sure that the compilation is not going to be directly released in that territory. If you are planning on releasing the recording yourself, either as a single or as part of an album, in another such territory in the near future you also obviously want to make sure that your thunder will not be stolen by the release of the compilation.

A compilation agreement should only provide for the use of your track on the album for a specified period of time. There is no reason why someone would need to have the right to use your track for an unlimited period of time.

In respect of any planned future uses of your recording, it’s also really important the agreement in no way provides for the use of your tracks on that compilation to be exclusive. Always make sure you are in no way restrained from making other use of your music as you see fit.

With compilation releases you also need to think very carefully as to what formats you are happy for your track to be included on. For example you might be happy to sign up to having your track included in a limited edition vinyl package, but would you be so happy about the track also being released in other formats, including being made available via streaming for instance? Once again this all comes down to being very clear in the contract as to precisely what your specific track is being licensed for.

As with anything else you do in the music industry ensuring that there are fair payment terms is a vital part to a compilation agreement. As discussed here in the last Lawful Truth column, there are many different aspects to consider when it comes to payment terms, however with compilation agreements there are a few unique elements.

For example, you need to pay even more careful attention to the royalty rate you are offered. Royalties on compilation albums are normally expressed in terms of the overall royalty rate payable to all artists. So firstly, you are of course only going to be receiving a portion of this overall royalty rate as your track is only one of many on the compilation. Secondly, exactly how much of this royalty rate you end up receiving will depend on exactly how many other tracks are on the compilation. So, for example, an okay royalty rate but a large number of tracks on the compilation will mean that the final return to you is not as wonderful as you may have first thought.

In respect of payment terms another issue that you may come across if the compilation is being released overseas is payment being made to you in a foreign currency. It pays to get a very clear understanding of exactly how any royalties due to you will be paid, and if you need to take any action (such as registering with the local taxation authority) to ensure any withholding or similar tax you may be charged is kept to the bare minimum.

When it comes to payment terms, other more standard terms you want to make sure are covered include exactly when payments will be made to you, and the amount of any advance payable. It also pays to make sure the agreement does not provide for any amounts to be deductable from your royalties for any costs relating to the production or marketing of the compilation.

As a final issue, do make sure you are comfortable with the general use that will be made of your track in relation to the compilation. For example any advertising or marketing of the compilation that will specifically include your track should be clearly defined.

David McLaughlin is a specialist music lawyer with Auckland law firm McLaughlin Law. He can be contacted by email at david@mclaughlinlaw.co.nz or on 09 282 4599.

Disclaimer: This article is intended to provide a general outline of the law on the subject matter. Further professional advice should be sought before any action is taken in relation to the matters described in the article.