Five Surprising, Sneaky or Shocking Contract Clauses Bands Should Look Out For, With Nonexister’s Marco Neeser

Here are five surprising, sneaky or shocking contract clauses bands should look out for, with Nonexister's Marco Neeser, who has studied law and earned a PhD for his doctoral thesis about artist contracts in the music industry on an international level.

That's right, you can obtain absolutely free legal advice right here at Loudwire, courtesy of the man responsible for the electronics and songwriting in the Swiss industrial rock act.

But first...

What You Should Know About Nonexister

From: Zurich, Switzerland

First Release: "Your Pain Up Me Veins" (2023 single)

New Album: Demons (Out March 15, 2024)

Nonexister are an industrial rock group who debuted last year with a handful of singles. It's all leading up to the release of their first record, Demons, an 11-track affair that deviates quite heavily from what most are hearing in the current industrial scene.

Rather than being fueled by pounding march tempos and distorted guitar chugs, Nonexister take some of the more ethereal elements of icons such as Nine Inch Nails. There's an overarching uncomfortable and gloomy vibe to their music, with traces of goth rock more closely aligned with Fields of the Nephilim than, say, the hit-making era of Sisters of Mercy.

The music on Demons is layered, invoking an episodic quality that sounds incredibly fresh and inspired.

Watch the music video for "Where Does Your Mind Go" below.

Nonexister, "Where Does Your Mind Go" Music Video

Get your copy of 'Demons' at this location and follow Nonexister on Instagram and Facebook.

Five Surprising, Sneaky or Shocking Contract Clauses Bands Should Look Out For

by Nonexister's Marco Neeser

Below, Nesser offers some crucial pointers in navigating your music career from the legal perspective.

Contracts can get tricky and, if you're not careful, it can wind up costing a lot of money in some unexpected ways, negatively impacted your band's trajectory. After all, bands are a business.

1. You may give away the rights to your music for MUCH longer than you’d expect

• Why it’s shocking/surprising/sneaky

Sometimes musicians give away their rights for so long that even the children of their children's children are still affected. Harmless-sounding clauses can have nasty consequences.

• The Clause

In a publishing contract, a musician gives the publisher the copyrights for their compositions. The publisher often offers the artist an up-front monetary advance for future royalties as an incentive to sign the contract. In return, the composer hopes that the publisher will help to promote, distribute, and collect income from the work and thus create added value.

• Example

So how long does the publisher have these rights? I know of cases where composers were deceived because, for example, the contract mentions a three-year duration and they assume that this also means the duration of the rights. However, this is often not the case.

The duration of the contract is the period when the composer is exclusively tied to the publisher, i.e. the period when he must contribute new music exclusively to that particular publisher. After the exclusivity term ends, the composer can sign with another publisher for new compositions, but the ones delivered under the expired contract remain tied to that earlier publishing contract for longer than you might suspect.

There is sometimes an unsuspicious sentence regarding the rights period, stating that the rights period is according to the statutory term of copyright. This is often misunderstood because the statutory term of copyright in most countries is the lifetime of the composer PLUS an additional 70 years.

This means that even the children of the children of the children of the composer will have to share the composer’s copyright income with the publishing company.

2. Double-checking your royalty payments could cost you thousands of dollars

• Why it’s shocking/surprising/sneaky

Imagine finding out that the record company did not pay you all of your money, but you still have to pay the costs to find that out. Always read the fine print.

• The Clause

The so-called "audit right" is the right to review the accounting documents of a publishing company or record company if you have any doubts about whether the amounts are correct. For this purpose, an accountant (or sometimes a lawyer) with the appropriate skills must be involved, which could cost thousands of dollars. Who is responsible for these costs?

It would be fair for these costs to be paid by the record company or publisher if it turns out that their royalty amounts were incorrect and the artist is owed more money in royalties, right? Often that’s the case, but not always. A common audit clause provides as follows:

If it turns out that, if this is the case, the usual and customary costs of the audit will only be paid by the company if the discrepancy from the correct amount is at least 10 percent, and no less than $5,000.

• Example

If an artist is given a royalty payment of $45,000 but they are actually owed $49,500 according to the audit, the discrepancy is only $4,500 or around 9 percent. In this case, the artist receives the shortfall, and will immediately lose again by covering the audit costs (accountant or lawyer fees). So audit clauses must be carefully negotiated and the decision to audit your earnings should be carefully considered.

READ MORE: 12 Infamous Rock + Metal Legal Battles

3. Earnings for international artists can rapidly hit rock bottom if there are multiple deductions

• Why it’s shocking/surprising/sneaky

Sometimes an artist can start out earning 20 percent in royalties and that amount can suddenly sink to 2.5 percent. Here’s how:

• The Clause

Artist contracts usually have a sophisticated and complicated system for royalty calculation. Deductions are an essential element. 20 percent of the earnings does not always mean 20 percent.

• Example

The contract states, as a basic rule, that the artist receives 20 percent of the net income from the sales and streaming of a recording.

But it’s only 50 percent of the regular share in case the record was distributed abroad,
and it’s only 50 percent if the record is distributed through “special outlets” (whatever that means), and it’s only 50 percent if the record was sold in the “mid-price” category (which is defined by the record company).

That means if you’re an American artist selling your record in Germany in a “special outlet” in the mid-price category, you won’t get 20 percent of the net income, but 2.5 percent (50 percent of 50 percent of 50 percent of 20 percent).

This can be avoided by inserting a clause stating that no double or multiple deductions are permitted, but that only one (the highest) applies in each case where several reasons for deductions occur.

Artists with more “clout” or leverage can sometimes obtain 50 percent of streaming income received from third-party digital service providers (e.g. Spotify, Apple Music, Deezer) calculated on the same or similar terms as the label. However, few early career-stage artists can command these terms.

4. CD and vinyl packaging costs may not be relevant to your release, but you’re paying for it anyway

• Why it’s shocking/surprising/sneaky

Old tricks from the era of vinyls and CDs have found their way into the online age and created painstaking earning reductions for artists.

• The Clause

The origins of this clause date back to the old music industry when there were deductions for packaging and technical aspects of music distribution. This originally meant that the royalty rate for an artist could be reduced by 25 percent, for example, to cover the cost of packaging the vinyl or CD. Even then, it was debatable whether this was appropriate. The absurd result was that an artist would often receive a lower royalty rate than the packaging on their vinyl or CD!

• Example

Sometimes this unfair clause impacts the online age and it is still applied in new contracts - even when there is no physical product to package and the music is only available via streaming or download. The new term is no longer "packaging deduction," but "technical deduction." Record label negotiators, when confronted about this in negotiation, may simply reply, “It is what it is,” or give some other inane response. Artists are advised to push back.

5. My most important advice for contract negotiations

• Why it’s shocking/surprising/sneaky

This is what really counts when you are negotiating your record deal, even more than a few percent more share or a slightly higher advance.

• The Clause

Artist contracts are complex and often dozens of pages long. Without legal expertise, it is practically impossible to negotiate a contract. The focus can be placed on a wide variety of clauses but in my opinion, the most important point is not the percentage share of the income, but the duration of the contract.

How long are you, as an artist or composer, bound to the record company or publisher? In other words: How many recordings/albums or compositions do you have to deliver to the company and for how long? Simply put, when can you jump ship?

• My advice

Always try to negotiate a short-term contract. Of course, from the record company's point of view, it is necessary and understandable for an artist to be bound to them for a certain period so that the high initial investment can be recouped through future releases.

An artist’s negotiating power is limited at the beginning of their career so as a rule, newcomers will not be able to negotiate good conditions. However, the situation is completely different if two successful albums have already been released. Then the artist is in a stronger bargaining position and will be able to negotiate significantly better conditions compared to their first deal.

By having a shorter contract, for example, you can negotiate new terms after two album releases instead of four album releases. You will benefit much more than if you're trapped in a four-album deal you signed.

Don’t be blinded by a monetary advance; it is not a present, but simply money that belongs to you anyway. You just get it a little earlier.