by Jeff and Todd Brabec
Many recording agreements will provide for a reduced royalty rate on new-technology recordings, which can include digital distribution.

For example, a sample clause might state that the artist royalty rate for albums sold in the new technology format would be from 80% to 90% of the otherwise applicable rate.

Under such a new-technology, reduced-royalty provision, if an artist received an 18% royalty on top-line CDs, the artist rate on albums sold in the "new format" would range from 14.4% to 16.2% (i.e., 80% x 18% = 14.4%, and 90% x 18% = 16.2%).

To prevent the artist's royalty from staying at the reduced new-technology level long past the time when the new configuration has become an accepted format, many artists will either negotiate a cutoff date for the reduced rate (e.g., X number of years after the introduction of the new format to the general public) or include a proviso that the lower rate will end if the record company starts to give other artists higher rates.

If the cutoff date approach is selected, many of the clauses will contain language that provides for good-faith negotiations between the artist and the record company to arrive at a mutually agreeable rate, with the negotiations usually taking into account not only the industry practices at the time of the cutoff date but also what other artists of comparable stature are receiving.

Many contracts treat downloads as new technology.

© 2007 Jeff Brabec, Todd Brabec

This article is based on information contained in the new, revised paperback edition of the book "Music, Money, And Success: The Insider's Guide To Making Money In The Music Business" written by Jeffrey Brabec and Todd Brabec (Published by Schirmer Trade Books/Music Sales).

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