Contract red flags: what to watch before you sign
Most of what costs an artist in a deal isn't the headline royalty rate – it's the fine print around ownership, options, recoupment and how 'net' is defined. Here are the terms to watch and what fair looks like. This is general education, not legal advice: always have a qualified music lawyer review a contract before signing.
A note before the list
This is general education to help you ask better questions, not legal advice. Every deal is different, and a qualified, independent music lawyer should review any contract before your artist signs it. The single most reliable rule: never sign on the spot, and never trust a verbal promise that isn’t written into the deal – if it’s not in the contract, it doesn’t exist.
Master ownership and reversion
Who ends up owning the recordings, and do they ever come back. A red flag is masters assigned in perpetuity – the artist never owns them, however big they get. Fairer deals include reversion: the masters return to the artist after a set period, or once the advance is recouped, or if the label stops actively releasing the music. Watch too for a label asking for publishing it doesn’t need – a label doesn’t need your songs to distribute your recordings.
Term, options and exclusivity
Record deals run on one-sided options – the label decides whether to keep the artist for another album, not the other way around. The red flag is an option chain with no overall time limit, locking the artist in for years. Push for a long-stop so the total can’t run past a few years regardless of how options play out, and for each option to bring a better advance and rate.
Recoupment and cross-collateralization
How much comes out of the artist’s royalties before they’re paid, and whether losses on one project can be recouped from another. Uncapped recoupable costs and broad cross-collateralization can keep an artist unpaid even on a hit. Cap the recoupable categories, and try to keep projects siloed.
The royalty definitions that gut the rate
A high royalty percentage means little if the base it applies to is shrunk first. Read the definitions: “net receipts” (gross minus deductions) versus gross, packaging deductions, free-goods allowances, reduced rates for foreign sales or clubs, and whether it’s an “all-in” rate the producer is paid out of. The percentage is the headline; the definitions are where the money goes. Also check for a controlled composition clause, which cuts the mechanicals on the artist’s own songs.
Audit rights and the key-man clause
Two protections artists often forget to ask for. An audit right lets the artist inspect the label’s books to check they’re being paid correctly – underpayments turn up more often than you’d hope. A fair clause includes a reasonable objection window and shifts the audit cost to the label if it finds an underpayment over a set threshold. A key-man clause lets the artist renegotiate or leave if the person who signed and championed them leaves the label – without it, they can be stuck somewhere that no longer cares.
The rule under all of it
“Standard” means “what the label usually asks for,” not “what’s fair to you.” Almost everything is negotiable until it’s signed. Read the terms, know your numbers, and get a music lawyer to review before anyone signs anything.
Common questions
- What are the biggest red flags in a record contract?
- Masters assigned forever with no reversion, one-sided options with no time limit, broad cross-collateralization, a royalty rate gutted by deductions and 'net receipts' definitions, no audit rights, and verbal promises that aren't in writing. 'Standard' isn't the same as fair.
- What is a key-man clause?
- A clause that lets the artist exit or renegotiate if the specific person who championed them – the A&R or exec who signed them – leaves the company. Without it, the artist can end up stuck at a label that no longer prioritizes them.
- Do I really need a lawyer to read a music contract?
- Yes. A qualified, independent music lawyer should review any deal before signing. This guide helps you spot what to ask about, but it is general education, not legal advice – and you should never sign on the spot.