The Importance of Legal Representation in Record Deals: A Case Study and Lessons for Artists

When Asake signed with YBNL, his decision to bypass legal representation out of trust for Olamide was a testament to his faith in his boss’s intentions. However, fast-forward three years, and the dynamics of the relationship appear strained. Asake’s silence on social media, the deletion of his posts, and his absence from major events—including those organized by YBNL—have sparked rumors of a split. Unfortunately, without proper legal counsel, the contractual terms he agreed to may now pose significant challenges to his departure.

This situation highlights an often-overlooked truth in the music industry: contracts are the foundation of an artist’s career. Trust is valuable, but contracts are binding, and their implications often extend beyond the surface. Every artist, no matter their level of trust in their label, needs an experienced entertainment lawyer to safeguard their interests. Below, we explore critical clauses every artist should consider when negotiating a record deal, along with practical compromises labels might accept.

1. Ownership and Control of Masters (Master Rights)

What It Means:

Master rights refer to the ownership of the original recordings of an artist’s music. Whoever owns the masters controls how the music is distributed, monetized, and licensed.

Why It Matters:

Ownership of masters is one of the most contentious aspects of artist-label relationships. Artists like Taylor Swift have highlighted how the lack of control over masters can limit creative and financial freedom.

Artist’s Demand:

Negotiate to retain full ownership of your masters or agree to a reversion clause, where ownership returns to you after a set period.

Label’s Compromise:

Labels often invest heavily in production and marketing, so they may require master ownership during the contract’s term. A reasonable compromise is to agree on a fixed buyout fee or a reversion clause after 5–10 years.

2. Term and Options (Contract Duration)

What It Means:

The term specifies how long an artist is obligated to the label. This can be based on years or the number of albums delivered. Labels often include options to extend the contract unilaterally.

Why It Matters:

A long-term contract with limited flexibility can stifle an artist’s growth and prevent them from exploring better opportunities.

Artist’s Demand:

Request a short initial term with limited or no options for extension. For example, agree to a two-album deal rather than a five-album contract.

Label’s Compromise:

Labels might accept an initial term of two albums with an option to extend based on performance metrics, such as album sales or streaming numbers.

3. Creative Control

What It Means:

Creative control dictates how much authority an artist has over their music, branding, and artistic direction.

Why It Matters:

Without creative control, an artist may feel stifled or forced to produce music that doesn’t align with their vision.

Artist’s Demand:

Negotiate for full creative control or, at the very least, a veto power over significant decisions regarding your music and image.

Label’s Compromise:

Labels may insist on approval rights for major decisions. A fair compromise is shared control, where both parties must mutually agree on creative aspects.

4. Royalty Rates and Escalation

What It Means:

Royalty rates determine the percentage of revenue an artist earns from music sales, streams, and other uses.

Why It Matters:

Low royalty rates can leave artists underpaid despite commercial success.

Artist’s Demand:

Push for a royalty rate of at least 20–25% and a mechanism for escalation (increased royalties) as milestones are achieved.

Label’s Compromise:

Labels may start with a standard rate of 12–15% but agree to an escalation clause after specific sales or streaming benchmarks.

5. 360 Deal (Revenue Sharing)

What It Means:

A 360 deal allows labels to take a percentage of an artist’s earnings from all revenue streams, including touring, merchandise, endorsements, and acting.

Why It Matters:

While 360 deals provide labels with additional revenue streams, they can significantly reduce an artist’s income.

Artist’s Demand:

Negotiate to limit the label’s share of non-music revenues, such as endorsements and merchandise, to 10–20%.

Label’s Compromise:

Labels often justify 360 deals by arguing they invest in building the artist’s brand. A fair compromise is to allow revenue sharing only on activities directly facilitated by the label.

6. Sunset Clause

What It Means:

A sunset clause ensures that an artist continues to receive royalties even after leaving the label, albeit at a reduced rate.

Why It Matters:

Without a sunset clause, artists may lose out on earnings from music created during their contract.

Artist’s Demand:

Request a sunset clause with clear terms for royalties after leaving the label, such as a 50% reduction.

Label’s Compromise:

Labels may agree to reduced royalties for a limited period, such as 5–10 years post-contract.

7. Marketing and Promotion Commitment

What It Means:

This clause defines the label’s responsibility for promoting the artist’s music.

Why It Matters:

A lack of marketing support can leave even the most talented artists struggling to gain traction.

Artist’s Demand:

Negotiate for a minimum marketing budget or specific promotional activities to be guaranteed in the contract.

Label’s Compromise:

Labels may agree to a flexible marketing budget tied to projected revenues or artist milestones.

8. Touring and Merchandise Rights

What It Means:

These rights dictate who controls touring schedules and merchandise sales.

Why It Matters:

Touring and merchandise are significant income sources for artists. Losing control over these can limit financial independence.

Artist’s Demand:

Retain full control of touring and merchandise rights or limit the label’s share to a reasonable percentage (10–15%).

Label’s Compromise:

Labels may agree to co-manage these rights and take a smaller share if they are not directly involved in organizing tours.

9. Audit Rights

What It Means:

Audit rights allow artists to review the label’s financial records to ensure accurate royalty payments.

Why It Matters:

Without audit rights, artists have no way to verify if they are being paid fairly.

Artist’s Demand:

Request the right to audit financial records annually, at the label’s expense.

Label’s Compromise:

Labels might agree to audits but limit their frequency to once every 2–3 years and require the artist to bear the cost if no discrepancies are found.

10. Exit Clause

What It Means:

An exit clause outlines the conditions under which an artist or label can terminate the contract.

Why It Matters:

Without a fair exit clause, artists may feel trapped in an unfavorable deal.

Artist’s Demand:

Negotiate for a straightforward exit clause, such as the ability to terminate after a fixed term or if specific benchmarks aren’t met.

Label’s Compromise:

Labels may require repayment of unrecouped advances or a buyout fee as a condition for termination.

Conclusion

The music industry is fraught with stories of artists regretting contracts they signed in haste or without proper legal counsel. Asake’s rumored struggles with YBNL underscore the importance of understanding and negotiating contract terms. Trust in a label or its executives is not enough; the fine print of a contract can have lifelong implications.

Artists should remember:

Knowledge is power. An informed artist is less likely to fall victim to unfavorable terms.

Seek professional advice. A competent entertainment lawyer is an invaluable ally.

Be patient. Never rush into signing a deal out of excitement.

By adhering to these principles and negotiating key clauses effectively, artists can build sustainable careers without compromising their creative and financial freedom.