Self defence. The first steps in learning how to deal with contracts, lawyers and management.

Success in the music business necessarily involves vast amounts of money. The fine line between great success and total failure can be determined by whether or not the oceans of cash paid into your accounts vanish mysteriously into an offshore bank in the Caribbean.

Of course there are many honest and hard working people in the business, but it's worthwhile to consider the worst case eventuality so you can take as many precautions as possible.

An exceptional example of this are The Eurythmics. Annie Lennox and Dave Stewart gained experience of the business with The Tourists. When they set up The Eurythmics, they reflected on their outstanding debts and went into the new venture with the utmost care. Without knowing just how successful it was to become, they formed a company so that any money coming in would initially be paid direct to them. Dave Stewart then built his own 8-track studio so that he could work without the disturbance of outside pressure.

But not everybody is in a position to do this, and for the 'first time' band, the world of contracts, managers and publishers can be a minefield. Precautions are of the utmost importance. Let's start with the recording contract itself.

The Contract Jungle

Ultimately the legal solution to any dispute needs to be proven in court by evidence that incontrovertibly shows what your entitlements are. A contract can be verbal, even if there are no other parties to witness it, but the difficulty of proving such a deal without witnesses make that sort of contract impractical. Even if you do have witnesses, their memory must be infallible and they must be extremely credible in court. The only way to ensure your rights are completely established is to have written contracts.

These, often many pages long, consist of clauses, sub-clauses and as Groucho Marx once called it, a sanity clause. You may be deemed by friends and family to be insane to want to be in the business but, unless you have been certified of unsound mind or are under 18 years of age, it will be a legally binding document once you have signed it. Incidentally, if you're under 18 a parent or legally appointed guardian will have to sign on your behalf. A contract can be contested in court if it may be considered to be unfair, but it's a difficult, lengthy and expensive process.

To avoid becoming committed to contracts that are unfavourable to you it is essential that you seek good guidance. It's undoubtedly better to employ a lawyer who has extensive experience, specifically within the music industry. They'll have a feel for what constitutes a reasonable deal in relation to the type of band and their situation. It's no mean task to find one who is understanding without being biased. If they've acted for a particular record company, publisher, or manager in the past with whom you are about to enter negotiations they are ethically bound to advise you of the fact. Because such previous contact might influence their opinion they should refuse to accept you as a client. How one discerns any undue influences if they don't tell you is another matter. To find a lawyer with such experience your first job should be to scan the Law List: a comprehensive directory of members of the Law Society, available at local libraries. It details each lawyer's specialities. Most of those with record industry familiarity are based in or near London. Many outside London will have contract law experience without specifically knowing what is reasonable in a music contract. If you have contact with fellow musicians who have had dealings with a good lawyer, seek their advice.

Remember that all contracts and their contents are negotiable, although as a new artist you are obviously not in such a strong position as those with a previously successful track record.

The Management

A manager can be either an asset or a burden. A friend who has good general business experience and is trusted by all the members of a band can prove to be a good manager. Both Paul Weller and Five Star have fathers in the management role. Good business sense and personal character traits such as determination, diplomacy and directness are useful.

There are managers who are already established and handle the affairs of others. The question you should ask is whether you can be expected to have a mutually beneficial relationship with them? If they're attending to other artists' affairs can they devote sufficient energy and conscientiousness to yours? A manager needs to have an objective viewpoint so he can to be able to give useful criticism of a lousy gig or deliver judgement upon an argument within the band. Many record companies will not consider signing a band unless they do have someone who is able to handle the business aspects, sometimes pointing a band in the direction of a person they respect. Whether you'll be compatible with them is debatable. It helps if they like your music!

"Many record companies will not consider signing a band unless they do have someone who is able to handle the business aspects..."

A manager can be expected to be paid a commission of around 15-20% of your income from all work they handle on your behalf. You may decide that some of the activities you can handle yourself, perhaps publishing income. These will need to be specified in great detail in the management contract so that both parties know exactly what they will be entitled to and what their obligations are.

The different sources of income will be items such as record company advance, record sale royalties, profits from tours, T-shirts and so on. Ideally expenses that are deductible before any commission is payable, should be itemised. Typically these might include recording costs, producers' fees, transport, publicity, hotels, office overheads and so on. The Eurythmics have all receipts paid to their bank account, and pay their management from that rather than have the money paid to the management, and receiving payment from them.

If the manager has invested money in equipment and studio time on your behalf before you gained interest from the record companies, it's reasonable that this is repaid when you get the advance payment from the recording contract.

Of course the contract itself needs to have a fixed term. It should also specify that you are entitled to receive prompt written statements of account detailing management expenses and income, and that you or your accountant are entitled to make regular inspections of the books, or at least at 14 days notice. If the arrangement is such that monies are paid to the manager, you should be given royalty statements and receive payments at regular intervals; monthly, quarterly, or half yearly.

A recording contract is equally complex. The glittering advance is always paid to you, or your management, conditionally. This may mean that part or all of it is repayable if you don't sell enough records or don't perform within the terms of the contract. You can be dropped by the company and then be heavily in debt to them having spent most or all of the advance. You may be individually or collectively forbidden to record again until the contract expires. Unless it is expressly stated otherwise, there's no guarantee that anything you record will be released, or perhaps it may reach the shops many years later when you're selling millions of records through another company.

You can see that that an experienced music business lawyer comes into his own here. To negotiate the most favourable deal it helps to know just how far the agreement can be pushed. Suppose you don't get into the Top 50 within 18 months, a release clause can be negotiated, freeing you to seek other industry offers.

Royalties are generally paid on amounts related to the retail price of the records, excluding VAT. These so called 'mechanicals' range from about 10% for unknowns to around 18% for successful artists, reduced by perhaps half for a budget line album. These amounts are calculated on 90% of the retail price, and occasionally less, which is for what the company call 'packaging deductions'. So where luxurious sleeves and inserts are used the companies can claim that they wouldn't be making much profit and that 'it is to your benefit too' omitting from the argument the fact that such packaging often demands a higher retail price anyway. Not all companies pursue this line.

An initial contract may be for one or two years 'with options'. These options include the right for the company to extend the contract period to three or five years and would normally involve improved terms for you. They would be taken up if the company reckoned that you were financially beneficial to them already or will become so soon.

Royalties should still be paid to you after the end of the contract due to the time taken for them to be processed through the administrative chain, which you will hope to extend as far as Australia and the United States! Again, as in the management contract, it needs to be specified that royalties and relative statements should be made on sales on a quarterly or half yearly basis. Any shorter periods than that will be unusual. Also ensure you, or a representative you appoint, are entitled to inspect the books.

"A publisher is generally less demanding of the standard of demos they receive, although obviously you should deliver the best quality you can."

A Publisher's Lot

The principal role of publishers is to administrate receipts from royalty payments earned through record sales, public performance and broadcasting. There was a time when they would be primarily concerned with printed music sheet sales but this now forms a minor part of their activities, especially within the pop music market.

Virtually all record companies have a publishing arm, particularly for records they release. This may well be a subpublishing arrangement with a major publisher who will be receiving a percentage of the income for their efforts in gathering royalties. Publishers are concerned with 'copyright' of the music or song, which is owned by the writers unless assigned to another.

The publishing rights are normally subject to a completely separate agreement and negotiation from the recording rights, and it's considered to be wise to sign to a publisher who is independent of your record company. In the unfortunate event of any dispute with your record company, income from the publishing side will continue to flow, unlike those from from recording sales which may be frozen until the dispute is resolved.

The copyright exists on completion of the writing of the work and it can be a matter of great importance to establish both the date from which copyright can be claimed and the ownership of it. Potentially it is worth a lot of money. Copyright can be proven by people around you confirming when they were first aware of you completing the work but again, as with contracts, it is subject to the memory and credibility of those who would provide the evidence in a dispute.

Copyright can be established more adequately by a cassette copy or music and lyric sheets being enclosed in an envelope and sealed with the 'invisible' type adhesive tape, which reputedly doesn't deteriorate with age. This is then signed across the seals by both the copyright owners and a person of standing in the community such as your bank manager, doctor or solicitor and dated. Should you need to prove copyright ownership it will be significant evidence.

There are two main industry organisations concerned with royalty gathering on a worldwide basis. The Performing Rights Society (PRS) and The Mechanical Copyright Protection Society (MCPS). Both are non-profit making, deducting only their administrative costs from the amounts they receive, before paying the remainder to interested parties.

The PRS is concerned with the royalties due to the copyright owners and collect them from broadcast use and public performance while MCPS collect them from record sales which amounts to 61/4% of the retail price including VAT. A large degree of organisation is needed for this and the PRS charges just over 4% and MCPS between 5 and 8% with larger sums for overseas collections.

Individual writers can become members of both societies, and you may think it's worth considering whether you need a publisher to promote your material if you only think it likely that your band would be interested in recording it. In this event you are the publisher, and by not signing to an established publishing company until your career develops you may be able to negotiate a better deal than you otherwise would.

The need for an established publisher is increased where you imagine that your works are going to be of interest to other recording artists, perhaps on an international scale. Of course it will be a matter of finding a publisher who also believes that there is a market for your material. They would be able to arrange special versions of songs, lyrics in Japanese or Serbo-Croat for example. Perhaps they could negotiate a new musical arrangement of your music for the next Spielburg film?

"Beware of the clause that permits the publisher to assign rights in your material..."

A publisher is generally less demanding of the standard of demos they receive, although obviously you should deliver the best quality you can. Some publishers will not even listen to demos and these seem to be those either solely concerned with a particular record company product or those set up on behalf of individual writers or performers. Others will only consider demos submitted to them on the recommendation of contacts.

Composers already known to a publisher are frequently asked to write a song for a specific performer, and in a particular style, with the demo being recorded in a professional studio replete with session players. A publisher who works on behalf of the writers signed to them will be regularly sending copies of new songs to artists' managers, record companies, production offices, and any other possibly interested outlet. They will also seek recording deals for writers considered worthy, ensuring their songs are well showcased beforehand.

For their efforts publishers work on a percentage of the copyright income. New composers will be offered 70%, with 30% for the publisher. This is a variable field and can be influenced by how attractive they find the material and how well known you are.

If you've consistently written Number 1s for 25 years you could expect a rather more advantageous offer. Not being privy to some of the bigger deals one can only speculate, but an 80/20 split is not that unusual.

Upon the signing of the contract, publishers will offer advances against future royalties, and it appears that the days of a writer being paid a salary as a retainer are over. On overseas sales, deductions will be made for the additional administration costs.

In the legal sense, a publishing contract is similar to a recording contract, and you should give it as much consideration before signing. The number of relatively recent court actions involving Sting and Virgin Publishing, Elton John and Dick James' Organisation and more notoriously, Gilbert O'Sullivan and MAM were tortuous affairs, although they were eventually resolved after months of litigation. Only the lawyers have a guaranteed successful outcome in such cases.

Negotiation is the key word in all contractual arrangements. Some writers manage to include a clause claiming 'reversary rights' in some songs. This permits the writer to claim back the copyright of those songs the publisher does not wish to retain, or those that have failed to interest them after a stipulated period.

Beware of the clause that permits the publisher to assign rights in your material, especially if that means your income may be diminished by the sub-publisher taking their commission before the primary publisher gathers the income from them.

In a feature as short as this, it's not possible to give a complete picture of all of the pitfalls you should anticipate. Hopefully you'll have found it a useful overview of the business side of making music.

The music business is full of predators, and you need your wits to be a survivor. The intention of this feature has not been to discourage you in your endeavours, but people often misquote Charles Darwin when they say 'it's survival of the fittest'. What he actually wrote was 'those best adapted to their environment survive'. If the music industry is your chosen environment and you pay for the services of managers and publishers, you may well wish to remember the phrase 'buyer beware'.