Αnother practice area of KPAG Kosmidis & Partner is advising music labels and artists in the entertainment and music industry. Our advisory services cover not only copyright law and the granting of exploitation rights, but also promotion, distribution, concert management and merchandising.
Negotiating and concluding agreements (formerly the classic “record deals”) requires specific knowledge of the music business, which is characterized by numerous industry‑specific particularities.
Contracts between labels and musicians/bands can vary widely in scope. As a rule, they involve the transfer of the artist’s exploitation rights to the label and the associated commercial use of the resulting products.
Before any commercial exploitation can take place, the exploitation rights must be granted or assigned. Under German law, exploitation rights form part of the author’s copyright. These rights are exclusive and cover works such as musical compositions, entitling the author to reproduce, distribute, and make them available to the public.
Copyright law distinguishes, among other things, performance, broadcasting and recitation rights. When transferring exploitation rights, a distinction is made between primary, secondary and tertiary exploitation. These arise through the remunerated grant or assignment of exploitation rights to third parties. German law also distinguishes between exploitation in tangible (physical) and intangible (non‑physical) form.
Tangible exploitation rights include, in particular, the rights to reproduce, distribute, and exhibit a work. Intangible exploitation rights cover various forms of communication to the public, such as broadcasting rights and the right to communicate a work via image or sound carriers.
Exploitation rights are generally administered by collecting societies. The first-time manufacture of sound carriers (e.g., vinyl records, CDs, DVDs) constitutes primary exploitation. Secondary exploitation occurs, for example, when tracks previously released on a CD are reissued on a “best of” or compilation album. Radio broadcasts of a sound carrier also fall under secondary exploitation.
Tertiary exploitation may arise, for instance, when a track from a sound carrier is played over the radio in a restaurant or other commercial premises.
The same applies to broadcasts on radio and television. Exploitation rights can be granted either on a non-exclusive or exclusive basis, and may apply to primary, secondary, or tertiary exploitation. An exclusive right gives a single licensee the sole authority to use the work within the agreed scope.
When exploitation rights are to be granted or assigned to a music label, additional areas may require regulation, depending on the intended scope of cooperation between the label and the artist. In practice, the following areas are particularly relevant:
Production of the album: This includes planning, budgeting, and organizing studio time, as well as coordinating producers, sound engineers, and post-production services to ensure that the master recordings are delivered in the agreed technical formats and quality.
Promotion and advertising: The agreement may cover public relations for the album across radio, television, and print media (e.g., fanzines, trade magazines), as well as through online platforms such as web portals and webzines. Promotional copies can be provided as physical CDs for review purposes or via secure digital access.
Distribution: A distinction is typically made between physical and digital distribution, with corresponding rights licensed accordingly. Physical distribution—covering formats such as CDs and vinyl records—remains a classic channel, with albums made available through retail outlets, specialist music stores, electronics retailers (e.g., MediaMarkt, Saturn), and online shops (e.g., Amazon). In digital distribution, albums or individual tracks are made available for purchase or streaming via platforms such as iTunes and other comparable services.
Merchandising: This involves the production and sale of band-branded merchandise, including clothing (e.g., T-shirts, hoodies, caps), stickers, mugs, flags, and other promotional items. The rights to these products—and the allocation of revenues—must be clearly defined in the agreement.
Video production: Music videos and visualizers are often produced for distribution on platforms such as YouTube. The label may assume responsibility for creative direction, planning, budgeting, scheduling, and delivery.
Concert management: Live performances are planned and promoted as part of the artist’s marketing and revenue strategy. In today’s music industry, live shows play a central role in boosting sales and expanding fan engagement. The label may handle concert bookings and tour logistics, including negotiating with promoters and tour agents, and concluding the necessary agreements.
Third-party agreements: In areas such as PR, advertising, and merchandising, legal advice is often required when entering into contracts with third-party service providers, including distributors and PR agencies.
Agreement between label and musician/band
When concluding contracts between labels and musicians, the primary focus is typically the transfer of rights for the commercial exploitation of albums and, where applicable, other band-related products.
In most cases, the label is granted the right to exploit the band’s musical compositions and related products for a defined term. A contract might, for instance, be limited to the physical production of CDs, with the band providing the final materials (e.g., master recordings and artwork). Alternatively, it may cover the full range of elements outlined above, including production, promotion, distribution, and merchandising.
In return, the band usually receives a percentage of the revenues generated from sales—commonly referred to as royalties.
KPAG Kosmidis & Partner, status: 02/2015 (All information provided without guarantee.)