Know Your Legal Jargon Before You Get Into Any Contract

“WARNING: ABSOLUTELY NO BROWN ONES.” This stipulation followed the request for a backstage bowl of M&M’s on a now infamous 1982 tour rider for Van Halen. While it’s easy to laugh off David Lee Roth and Company’s ego-tripping as typical arena rock shenanigans of the day, Roth says that in reality the request had nothing to do with the band considering M&M’s of the brown variety somehow inferior. Instead, the clause was buried in the middle of the band’s 53-page standard music contract to ensure that venue promoters had actually read the contract in its entirety. The band’s massive tour at the time had numerous safety provisions elsewhere in the rider that had to be strictly adhered to, or else the band and venue could’ve faced disastrous results.

Whether or not it’s the only reason the “Hot for Teacher” band banned brown M&M’s from their dressing rooms, their contract highlights how important it is to read and understand every word in your contract. When seemingly strange words like “Indemnity,” “Perpetuity” and “360” deals are scattered throughout the dense legalese, you must know which of these will bring you and your band blessings and which ones may curse you to the end of your contract and after.

Indemnity is a protection against hurt, loss and/or damage, and an Indemnification Clause has become commonplace in recording contracts. Simply put, the clause is a form of risk management for the parties involved. A record company will place such a clause in its contract to protect itself against financial loss that it deems to be the fault of the artist, such as a breach of contract or a lawsuit that charges copyright infringement. In many cases, the Indemnification Clause will be mutual, in which both parties agree to indemnify each other in certain cases.

Perpetuity is more easily defined: it means forever. And it’s one of the most terrifying words you will ever see in a record contract. Record labels might try to sneak this somewhere in the wordiness of a contract to apply to anything from song rights, recording rights or even website domain names. Whatever the case, this is a word that should be avoided at all costs—no artist should give away any rights forever.

Only in the past decade or so has the term 360 deal inched its way into the lexicon of record executives. Also known as multiple rights deals, the 360 in the phrase refers to the additional degrees a record company becomes involved with a band’s affairs. Unlike traditional record deals, the 360 deal gives record companies a cut of everything the band is involved in, including touring and merchandise. In return, labels promise to spend more time building the band as well as the “brand.” A recent example is the Pussycat Dolls brand, which has grown to consist of not just the band, but also a television series, toy dolls and cosmetics. Though 360 deals are often seen as merely a cash grab for the struggling record industry that severely burdens newly signed bands, there have been sporadic success stories. Labels credit the success of Paramore to a 360 deal, and established acts like Jay-Z have seen them as a good thing, recently signing a 360 deal with LiveNation.

Band’s entering this struggling record label climate often have little negotiating power, but the best advice to keep in mind is “the shorter, the better.” Record labels want to keep their artists under contract for as long as possible (sometimes forever), but if an artist signs a one-year deal (360 or not), and has massive success in that year, they can renegotiate their contract on more favorable terms. However, if the artist signed a five-year contract and has the same immense success, they’re still on the record label’s unfavorable original terms with no bargaining power. Read every contract, have a lawyer explain it to you, understand what you are signing, and always watch out for those brown M&M’s.