Breaking Down a Hip-Hop Producer Agreement
By Adam Freedman and Alyssa Minnec
DISCLAIMER: This article is intended for informational purposes only, and is not intended to, nor does it create an attorney-client relationship. To be clear, this is an ATTORNEY ADVERTISEMENT, and THE CHOICE OF A LAWYER IS AN IMPORTANT DECISION AND SHOULD NOT BE BASED SOLELY UPON ADVERTISEMENTS. The content provided here is not intended to communicate or imply any future results or success. We strongly recommend that you speak with an attorney regarding the specifics of your case.
For music producers, making songs with artists is the most fulfilling part of the job. However, when it comes to releasing this music, so many producers are left behind when it comes to ironing out the legal details behind a song. We hear from so many producers who do not actually understand how & when they get paid, nor what will happen in case of a bona fide issue, even though all of this information is in the agreements they signed. Therefore, we figured it would help to walk through a typical producer agreement and explain everything in non-legalese.
However, before diving into the agreement itself, there are some main points to think about:
- Is there a producer fee? Is it recoupable?
- What percentage of royalties is the producer entitled to?
- What is the producer’s percentage of the publishing?
- How will the producer be credited?
These initial points are typically negotiated directly with the other side (whether by email or phone), then one of the parties (typically the artist’s team) will draft and send over a producer agreement.
Below is a typical, template producer agreement that’s used by so many attorneys in the music industry:
INTRO (and sections 1–4)
The INTRO sets the date the agreement was entered into, the parties that the agreement is between, their details, any information about their furnishing companies, and all other contact information. It’s important to note if the producer agreement is between the producer and the artist, or the producer and the applicable record label. If a label is involved, this section will usually mention the Artist’s Recording Agreement with the label or distributor. Later on, the producer agreement provides that the producer will get paid at the same times and at the same rate as the artist, but you’ll typically need to request the relevant extracts of the Artist’s Recording Agreement, so you can actually confirm that information.
Description of the Composition/Master and Services (Sections 5 & 6)
Next, Section 5, the “DESCRIPTION OF THE COMPOSITION/MASTER,” will include the number of relevant songs covered by the agreement, as well as their titles.
Then, the SERVICES section will lay out what the producer is expected to do, but it’s usually kept very vague. For example, here, the relevant section states that the producer shall: “perform all services in connection with the Master as are customarily performed by producers in the recording industry.”
However, in hip-hop specifically, not only are the producer’s services usually complete once he or she emails a beat to an artist, but the contracts are also typically only handled after the music is released. Perhaps the artist or label will request the stems, but unless the producer is in the studio with an artist, working on an entire project, we usually request that the other side add language about the company or artist acknowledging the timely and satisfactory delivery of the services in connection with the master. Especially when dealing with the major labels, payment is often contingent on delivery, so you want to make sure that’s included, just so there’s no ambiguity.
ADVANCE (Section 7)
When dealing with record labels, most “PRODUCER FEES” are actually RECOUPABLE ADVANCES, meaning the label must first make back your advance from the royalties you earn from a track before the label pays you another dollar. For example, if a producer receives a $1,000 advance, he or she will not receive dollar $1,001 until the label first recoups the $1,000. However, keep in mind that the label is recouping your advance from your producer royalty ONLY (not from all of the money generated by the song), so it takes a lot longer to recoup than you would expect.
If you’re dealing with an artist or label that can only afford to pay less than your usual rate, one way to make the deal a bit more favorable is to provide that the advance will only be 50% recoupable. That means, in the example above, that the label would only need to make back $500 of the $1,000 advance before the producer receives dollar $1,001.
Also, you’ll want a sentence in this section stating that the fee/advance will be paid “promptly upon the complete execution of the agreement.” There are some labels that will state that the advance will be paid half when the production begins, and the remaining half upon the delivery of the master. This is where payment can become very delayed and hard to chase. Making sure that you receive payment when the agreement is fully executed creates a clear timeline in which the label must pay you. Some labels have their own payment terms, such as paying within a maximum of 15 or 30 days after receiving and processing an invoice. Sometimes, depending on if a song was released without payment or a fully executed agreement, the labels will work with you to make sure you get paid promptly after the agreement is signed and they receive the invoice.
ROYALTIES (Section 7)
Regarding royalties, it’s “industry standard” for producers to receive a royalty of 3–4%, but those numbers are based on producing for a major label artist. Many producers don’t realize that artists on major labels are not only typically receiving a royalty of less than 17–20%, but these artists are also subtracting the producer royalty from their share.
However, in an agreement with an independent artist (and no label involved), the producer should NOT be left with only 3%. The producer should be receiving the same proportion of the Artist royalties- if the artist is receiving 100% of the royalties, the producer should be receiving at least 15–20%. This also means that, when producers are dealing with independent artists, they will receive a greater piece of the total pie.
Additionally, this section typically includes language that the producer will receive royalties at the same times the artist receives them. However, the agreement doesn’t say when that is. Therefore, it is important for producers to ask for the RECORDING AGREEMENT EXTRACTS, the applicable sections of the artist’s recording agreement.
They’re not just going to send you the artist’s entire recording agreement, but they’ll send you a heavily redacted version, which just leaves the sections visible that are applicable to the producer. Typically, the applicable sections you’ll receive are 1) the ROYALTIES section — so you can see how royalties are calculated 2) the ACCOUNTING section — so you can see WHEN royalties are paid, and 3) the CONTROLLED COMPOSITION section, as further described below.
CONTROLLED COMPOSITION (Section 8)
Besides outlining the publishing splits, this section is mainly a technicality. It is saying, basically, that the producer agrees to license his or her share of the publishing for this song to the artist/label, to allow the artist/label to release it, in exchange for the paying the producer his or her share of the publishing royalties.
Without getting too deep into the weeds, the most relevant language of this section regards the payment of mechanical royalties. This paragraph typically provides that the producer will receive mechanical royalties at the same rate as the artist. However, it is not uncommon for labels to sneak language into their recording agreements with artists that provides that they will pay artists mechanical royalties at a reduced rate. Labels will often request to pay mechanical royalties at only 75% of the applicable rate, or labels will provide that they will only pay out mechanical royalties for an album based on, for example, a maximum of 10 songs, no matter how many songs end up included. In the second example, that means if the artist’s album includes 20 songs (as many do these days), the label will only pay out mechanicals at 50% of the applicable rate.
Therefore, to avoid such a situation, we typically request for the applicable paragraph to read: “Producer grants Company and Artist… an irrevocable universe-wide mechanical license under copyright to reproduce and exploit their respective share(s) in the Composition as embodied on the Master at one hundred percent (100%) of the applicable minimum statutory rate, and for the avoidance of doubt, without regard to any mechanical royalty caps.”
Nevertheless, this change might get rejected, as artists and labels will often just try to overreach where they can. Also, as explained above, this is another section where the Recording Agreement Extracts will come in handy, to see how mechanical royalties are being calculated.
OWNERSHIP/GRANT OF RIGHTS (Section 9)
This section explains that, technically speaking, the Master will be classified as a work-for-hire, owned by the label. Even though the producer is giving up his or her ownership rights in the Master, as explained in the Controlled Composition section, the producer maintains his or her publishing rights to the song.
This section also gets into the label’s use of the producer’s name, likeness, and photos. Make sure that in this section, the producer has the right to pre-approve the likeness and photos that the label uses, or lets the producer provide their own photos for the label to use for the advertisement of the master.
We go even further in this section to add that there will not be a breach of this Agreement “provided that upon notice, Company/Artist shall use reasonable efforts to cure any failures.” This means that if the label or Artist uses a photo or likeness of the producer that wasn’t pre-approved, or simply makes a mistake, they will not have breached the agreement if they make an effort to fix the mistake.
“Moral rights” mean that musicians and producers always have a right to be credited for their contributions to a song, as well as allowing producers to object if their work is used in such a way that they might deem offensive. Moral rights entitle a producer to put a stop to any uses of his or her work that may harm his reputation or to prevent being associated with anyone he or she finds objectionable. Waiving these moral rights removes this exact entitlement. Labels generally include language about waiving your moral rights because they do not want to create the possibility that they can be sued because of a distributor or other third party’s inadvertent failure to provide the proper credit.
CREDIT (Section 10)
The CREDIT section is very important, as it is how you will be able to get your name out as a producer and have Artists and other producers become familiar with your work. This section gives you credit for your work on packaging, on streaming platforms, on print ads, etc. Usually, in cases with more than one producer, we make sure to add that the credit will be “on a no less favorable basis as accorded to any other individual rendering similar services with the Master or applicable release.” The “no less favorable basis” means that, for example, if there’s a co-producer on your song, the artist/label can’t specifically include the other producer in the artwork for the single without including you as well.
However, the artist/label will be less likely to agree to this if your song is a collaboration with a big-name producer, as big-name producers are often accorded “featured artist” credits as well, and simply put, you should not expect to be treated the same way.
SAMPLES (Section 11)
The sample section is straightforward. It states that the music that you contributed did not use any material that belongs to any other person that you did not receive prior express permission to use. If you did use a sample, you’ll be responsible for paying any of the clearance costs or potentially reducing your royalty or share of the publishing to accommodate for any samples.
Ultimately, as long as you bring any samples to the attention of the artist/record label as soon as possible, you’ll most likely be able to avoid any issues.
You do want to make sure you’re only agreeing to any reductions in connection with samples you contribute. Just in case the artist or another contributor uses a sample, you should not be obligated to reduce your royalty or to have the costs charged against your royalty account.
REPRESENTATIONS & WARRANTIES (Section 12)
Representations and warranties are promises the parties make to one another, and you’ll typically want to make sure these promises are mutual between the parties. Usually, they start with promises that are pretty basic and general, such as, that each party has the right to enter into the Agreement, perform their obligations, etc.
There will also be language providing that the producer’s contribution isn’t violating the rights of any 3rd parties, including their intellectual property. If the agreement is between the producer and the artist (rather than between producer and record label), then you will want to make sure this promise is mutual, to make sure you are protected just in case the artist actually includes a sample on his or her end.
The following paragraph prohibiting the producer from re-recording the Composition is typical for most artists and labels to include. It means, for example, that the producer can’t get another placement with the same beat, or to remake his or her own beat and get another placement with it. However, to clarify, this language does not restrict the producer from working, in general.
INDEMNIFICATION (Section 13)
The indemnification section is very important to understand, even though there is a 99.9% chance it will never come into play (knock on wood!). Typically, it will state that if the artist/label gets sued because of something that you did, you will have to pay for their legal defense. This is to protect the label just in case it turns out there was an uncleared sample in a song. You will still be ultimately responsible.
You want to make sure this section is mutual, so you’re also protected, just in case you somehow get sued for something that was the artist/label’s fault. The other side may only agree to indemnify you in more limited situations, but you should take whatever you can get. Nevertheless, if the other side is actually a label instead of an artist, there are ultimately even fewer situations that you could get sued for.
MISCELLANEOUS (Section 14)
The Miscellaneous section contains all other important information about the agreement that was not already stated, such as that if there are any modifications to the agreement that they need to be in writing, or that the producer cannot assign their obligations under the agreement to someone else. Another important paragraph in this section regards the fact that parties have 30 days to cure any breach. Here, we usually add in that the artist or label has a reduced number of 15 days to cure any failures to pay amounts of money due to the producer. This gives each party the chance to correct their mistake before the agreement is officially “breached” and helps to prevent litigation. Other information this section contains is about notices. Here, we add exactly where any notices to the producer should be sent, as well as to what email address any notices to the producer should be sent to. The signature lines will follow this section.
In this agreement, SCHEDULE 1 is simply listing the specific song titles covered by the agreement, the publishing splits for each song, as well as how the producer’s credit will read.
ROYALTY PROVISIONS/ACCOUNTING (SCHEDULE 2)
SCHEDULE 2 of this agreement is the “producer royalty provisions,” which explains some more facets about how the producer royalty is calculated.
The first paragraph covers recoupment. Again, without getting too far into the weeds, it states that before the producer even begins recouping his or her producer royalty, he or she will actually have to wait for the artist to recoup his or her costs. The issue is that, a lot of the time, this language will provide that the producer has to stand behind the artist recouping the costs for his or her entire album.
The most important change we make here is so that the producer will only have to stand behind the artist recouping the costs for just the applicable song(s). Otherwise, you could be in a situation where you have to wait for the artist to recoup the costs, for example, of a big-budget music video they shot for the single, which was not yours’!.
We also make the change regarding royalties to read that “Producer’s Royalty shall be not reduced by amounts payable to any third-party producers or mixers who perform additional services with respect to the Master unless such third parties or mixers were engaged by producer.” This basically states that if the label or Artist goes in and hires another producer to edit the work that you created, your royalty will not be lowered. However, you’ll still be responsible for any co-producers, mixers, or other contributors you bring in yourself.
The paragraph about SoundExchange in a producer agreement states that the Artist will sign a letter of direction, instructing SoundExchange to pay the producer their share of money from this platform at the same time and conditions that the Artist is paid. SoundExchange collects royalties for ALL sound recordings played on non-interactive digital radio. We make sure that this section states that if SoundExchange does not directly pay the producer their money, that the label or the Artist will then pay the producer their share themselves. We also add in language to read that if the Artist brings in an additional featured artist, that Artist will obtain and submit a letter of direction, signed by this new featured artist, on behalf of the producer.
The Accounting paragraphs in this section provide when the label or distributor will actually pay producer royalties. Labels generally have their own timeframe established for when they account for and distribute royalties, be it semi-annually or quarterly. This paragraph also gives producer the right to hire an accountant to examine the label or distributor’s books/records, and if there are any issues, these issues must be brought in writing to the label’s attention within a certain amount of time. Usually, the books/records can only be examined once per year.
LETTER OF DIRECTION (EXHIBIT A)
The next section of the agreement is a LETTER OF DIRECTION (or “LOD”) addressed to the label. This is included because, ultimately, labels don’t have a legal obligation to pay anyone else except the artists who are signed to them. This is because the artist is in a record deal with the label, and the label isn’t actually in a contract with any of the other contributors.
Therefore, the LOD is a letter from the artist to the label, asking the label to pay the producer directly, so the artist doesn’t have to worry about it. Nothing against artists, but you don’t want to have to look to an artist to have to provide you with a detailed accounting. Labels already have the infrastructure in place.
Nevertheless, when we hear from producers who haven’t been paid for a placement, even though they have a signed contract, one of the most common reasons for why is because they don’t have a signed letter of direction. Even though you have a contract with the artist, if the label is the one paying, you need an LOD.
SOUNDEXCHANGE LETTER OF DIRECTION (EXHIBIT B)
Exhibit B is another letter of direction, but specifically for SoundExchange. To learn more about what SoundExchange actually is, you can check out our article here. In any case, this letter of direction is included is because song registrations in SoundExchange’s database only have the capability to include “featured artists,” but no other contributors such as producers, background vocalists, instrumentalists, etc.
This form letter of direction can be found on SoundExchange’s website, but it is written from the artist to SoundExchange, directing them to pay a certain percentage of the artist’s royalties, to the producer.
To determine what percentage a producer should expect from SoundExchange, you look to the paragraph in Schedule 2, which states that for certain sources where revenue is determined on a “pro-rata” basis, you take the producer royalty and divide it by the artist’s royalty. As we explained above, in major label situations, producers are typically receiving a 3% royalty, while artists are only receiving between 17–20%. If you divide the producer royalty by the artist royalty, the producer will typically end up receiving between 15–20% of the artist’s SoundExchange royalties.
Do you need help negotiating a producer agreement? Do you have an issue related to one? Contact us and let’s talk about how we can help!