Ethical Music Contracts Pt II:

How Should We Write Ethical Contracts?

***Note: I am not a business, music law, or otherwise industry expert. Should you choose to follow the ideas presented in this article, you are doing so of your own accord and agreeing that I am not legally liable for any consequences of this decision. This article series is only meant to serve as an example of the kinds of situations a young composer may face in the field of music business.***

In 1971 an American Philosopher by the name of John Rawls proposed a thought experiment that is commonly known as “The Veil of Ignorance”. In this experiment, a person tries to create a just society. Knowing that all people analyzing or creating a society would regularly be influenced by their own background, societal standing, and talents, Rawls proposes that this architect imagine that they know nothing about themselves. They do not know: their gender, their societal class, their talents, their age, their mental, or physical capacities. According to Rawls it is only possible to be just when a person considers that they could be anyone. This will ensure that they create a society that is fair to the most amount of people possible.

Writing contracts should be approached in a similar manner. When you draft a contract you should look at it from the perspective of everyone involved. Does everyone have the knowledge of language and relevant information required to fully understand what they are signing? Are all parties involved in the contract being given adequate compensation for their time and effort? Does the contract you are writing fairly give credit and ownership to everyone involved?

Autonomy and Intellectual Property

What it looks like

If we acknowledge that we are all equal, we must acknowledge that we deserve equal rights and protections involving our work. One of the most basic intellectual rights that humans have is the right to own and be acknowledged for our creations. Think about it this way: say Sally Stockbroker proposes a concept in a business meeting. In an email after the meeting, Laura Lawmaker claims Sally Stockbroker’s idea as her own. Is it rude for Laura Lawmaker to take credit for Sally Stockbroker’s idea? Of course it is! Sally deserves full credit, ownership, and recognition for everything involved in her ideas, just as Laura deserves full credit, ownership, and recognition for everything involved in her ideas. Now, Laura Lawmaker says that Sally Stockbroker’s idea was never implemented, so it doesn’t really matter that Laura took credit for Sally’s idea. Does this make it any better? No! It is still just as inappropriate for Laura to take credit for Sally’s work that results in a 0% increase in Company Profits as it is for Laura to take credit for Sally’s work that results in a 160% increase in Company Profits. Sally created the idea, therefore Sally owns the idea.

Why it’s important

There are various important reasons that an artist (or anyone signing and contract with an artist) may want to claim ownership of that artist’s work.

The first is autonomy. Autonomy is defined by the Merriam-Webster Dictionary as “the quality or state of being self-governing”. What does this mean for contracts? An artist has . autonomy involving their works unless they sign it away in a contract. This means that, unless otherwise legally stated, an artist owns their work and can choose the capacities in which their work is used.

One famous example of this involves Donald Trump using music by Queen in his rallies and propaganda. After repeatedly telling Trump that he did not have permission to use their music in his political career, Queen asked that a video containing clips of Trump rallies set to “We Will Rock You” by Queen be taken off Twitter. Twitter obliged and the propaganda video is no longer available on the social media platform. Had Queen not exercised their right to choose how their music is used, this video would likely still be available.

The second important reason that an artist or anyone signing a contract with them may wish to own their work is royalties. Royalties are one kind of money paid to an artist for the use of their art. In the case of music, this money is collected and distributed by Performance Rights Organizations (PROs). There seems to be a widespread misunderstanding involving who pays a musician for royalties, so I’m going to give a quick explanation here. Filmmakers and Developers do not pay royalties to their composers for using their music. Once again. FILMMAKERS AND DEVELOPERS DO NOT PAY ROYALTIES TO THEIR COMPOSERS FOR USING THEIR MUSIC. Royalties are collected by a PRO from the stations, channels, streaming services, and other platforms that play the content that contains a Composer’s music. So, let’s put this into an easy to understand example. Fanny Filmmaker licenses music by Cathy Composer for use in her film. Fanny Filmmaker is (understandably) concerned that she does not have the money in her budget to pay royalties to Cathy Composer. Cathy Composer is able to explain to Fanny Filmmaker that this is ok, because she will not have to pay royalties in order to use Cathy Composer’s music. Cathy Composer knows that she is represented by ASCAP (my PRO too — good choice Cathy) who will collect all royalties on her behalf. Any platform that wants to play Fanny Filmmaker’s film will have already paid a blanket fee to ASCAP in order to use the music of all ASCAP musicians. ASCAP will then distribute this music fairly amongst the musicians they represent based on how often each platform plays their music. Fanny Filmmaker doesn’t have to be involved in Cathy Composer’s royalties at all! (Note: YouTube’s Content ID does not involve royalties and will be briefly discussed under “Adequate and Appropropriate Compensation”.)

The third is credit. Credit is the most slippery of these three reasons an artist may wish to own their work, for a few reasons. Let’s contemplate this with an example from the film-scoring world. Say Cathy Composer writes music for Debbie Director’s film. Debbie Director should tell everyone that Cathy Composer wrote the music, right? Now, say Ally Assistant helps Cathy Composer write the music for Debbie Director’s film. Will Debbie Director and Cathy Composer give Ally Assistant credit for the music she wrote? Not necessarily. There is a certain stigma attached to having more than one composer work on a film. Although it is very common, and nobody should ever be judged or shamed for it, composer and filmmakers often do not to admit to having multiple composers. This can be for social reasons, but also because it can disqualify the film and lead composers for certain awards. Credit may seem like a straightforward issue, but it is a many-faceted issue in the world of entertainment contracts.

How to apply it

The application of Autonomy and Intellectual Property in entertainment contracts in particular is slippery. I read some very interesting dissertations and articles in the process of writing this article. As I understand that very few people have the time or desire to read these articles, I will distill the essence of them. Philosophers have, with very few exceptions, always agreed that a person should own what they create. It has been institutions and opportunistic individuals who have prevented this from being a legal mandate. Therefore, the most pure representation of ethics on the subject demands that people retain ownership of their creations and contributions. This would include partial ownership of additional music cues. While this challenges the status quo, it is what the Philosophers and students of ethics tend to agree on.

Clear and Concise Language

What it looks like

The single most important factor to making ethical contracts is clear and concise language. When people do not understand what they are reading, they cannot possibly understand what they are signing. There are two major parts of clear and concise language: making sure that everyone signing a contract has the opportunity to read it in their native language and making sure that everyone has full and complete mastery of all words used in the contract. This is going to be a bit of an unpopular opinion, but “contract language” can be needlessly exclusionary, especially when there is a way to simplify the language while keeping the same meaning. There’s no need for flowery language that requires scratch paper and a dictionary just to understand what you’re signing.

Why it’s important

The purpose of a contract is to act as a written reminder of the protections agreed upon by two or more people or entities. If a person or entity is unsure of the meaning of anything they are signing, it is not possible for them to consent to the terms while being fully informed. This greatly increases the risk of accidentally creating a contract that is not 100% fair to everyone involved.

How to apply it

1. Ask each person involved in the contract what their preferred language for contracts is. This may be different than the one you normally communicate with them in.
2. If possible, have the contract professionally translated into this language. If this is not possible, set aside as much time as needed to go over the contract in detail with this person to make sure you both fully understand the contract and each other.
3. Allow each person a day or two alone with the contract to make sure they have time to research anything they may need to.
4. Speak to each party individually to see if they have any questions or suggested revisions. This is important as not everyone feels comfortable speaking out in a group setting.
5. If there are more than two people or entities involved in the contract, speak as a group as well.
6. In general, avoid unnecessary use of flowery or archaic language. This may be traditional, but it can be confusing and off-putting.

Adequate and Appropriate Compensation

What it looks like

As every project is different, compensation will need to be slightly different for each contract. The general principle of it will remain the same, but numbers will change. Compensation in contracts should be decided by two things: How much work a person or entity puts into a project and how much value a person or entity provides to a project. Once the Veil of Ignorance is applied, a fair solution for everyone involved can typically be found.

Why it’s important

The typical student going through the education in the US is taught several things. Most of what we think about when look back on our time in school is Reading or Math, maybe a Science experiment that was particularly impactful. Fortunately for those of us who barely remember long division, the two lessons that explain why adequate and appropriate compensation is important were taught to us by the time we entered first grade. The first is the Golden Rule. Do unto others as you would have them do unto you. The second is this; nobody likes a bully. Whether that bully is making fun of your freckles on the playground, a powerful man with a powerful Twitter, or a CEO more concerned with doing his best Smaug impersonation than with ensuring the well-being of his employees, nobody likes him. People may follow him out of fear or out of desire to express latent sadistic tendencies — but nobody genuinely likes him. Let me share a third lesson that I learned as a child: no bully is as big or unstoppable as they may seem. Now — there are two major reactions to me saying this.

For those of you who were bullied as children and grinned and beared it rather than get in fights like I did:

I promise, you can topple any bully. You do not have to sign a contract that is the grown-up equivalent of pushing you down in the dirt and taking your lunch money.

For those of you who are rolling your eyes while reading this, thinking that some outdated concept of Social Darwinism should allow you to take advantage of people who either do not know their rights or know them and are afraid to enforce them — nobody likes a bully. Your reputation will suffer and eventually your business will as well. Millennials and Gen Z are very concerned with being socially conscious and tend to boycott businesses with unsavory practices. I would suggest getting your act together and practicing thinking about the needs of everyone involved when you are writing your contracts.

How to apply it

Now that you’ve read what I had to say about what adequate and appropriate compensation looks like and likely skimmed what I had to say about why it is important, let’s talk about how to apply adequate and appropriate compensation.

There are several kinds of compensation. The first is immediate monetary compensation, frequently referred to as an Up-Front Fee or Primary Income. Should you have the budget to pay everyone involved in your contract their full rate, this should be your first course of action. If possible, pay people more than what they quote you. Aside from being kind and appropriate if you have the budget, paying people more than what they quote you will do three important things. It will increase the likelihood that a positive reputation forms around you and your team. It will make people more likely to be willing to work with you again. It will make it faster and easier to establish the trust and cooperation of your team.

If you cannot afford to give your team Primary Income, you can consider giving your team percentages of Secondary Income, also referred to as “Back-end Income”. This means giving each team member or entity involved in your contract a percentage of all money earned from your project, including but not limited to: sales, grant money, and award money. It is acceptable to stipulate that the project recuperate all financial losses before this money is distributed. (ie: If Patricia Producer pays $10,000 to fund a film and the film makes a combined $30,000 from sales, grants, and awards, $10,000 should go to Patricia Producer to reimburse her before the additional $20,000 is distributed amongst the contract members.) Exact percentages should be determined by a detailed analysis of the amount of time and effort put in by each person or entity involved in the contract. This is when The Veil of Ignorance becomes the most important. My suggestion is to ask for advice from multiple trusted and experienced mentors in your field. This is one of the best ways, along with discussions with your team and doing your own research, will allow you to gather the information you need to establish fair and reasonable percentages. (This is the category Youtube Content ID falls under. I’m not going to delve too much into it here because it deserves it’s own separate article — one that I may choose to write at a later date. I just wanted to clear up the misconception that it is related to royalties. It is not. Splitting ad revenue from a streaming service is a kind of Secondary Income.)

In addition to Primary Income and Secondary Income, there is the matter of ownership of intellectual property. This was covered in more depth earlier in the article as part of the “Autonomy and Intellectual Property” section, but in the world of Music contracts it can occasionally fall under the umbrella of compensation. This is because there are two shares of royalties: The Writer’s Share and the Producer’s Share. The Writer’s Share should always stay with the people who write the music. Don’t be a bully and try to take this. The Producer’s Share is typically held by the production company, but can and should be held by the musicians if they are not given enough Primary Income from the project.

Moving forward:

We seem to treat contracts as some mystical art form that only the chosen few will truly master. In reality, they are simple agreements between two or more people or businesses that should equally serve the interests of everyone involved. Before you draft a contract, place yourself behind the Veil of Ignorance. Ask people who you trust to read through it in order to ensure that you are being as fair and just as humanly possible. Be open to alterations from other parties involved in the contract, while still being reasonable and protecting yourself. Make sure that everyone is able to fully understand what they are signing. Remember that business people do not have to be ruling in a castle on a hill while taking advantage of others. You have the capacity to be both empathetic and just.

Sources:

Ethics Unwrapped — McCombs School of Business — The University of Texas at Austin. (2020). Veil of Ignorance.

Veil of Ignorance - Ethics Unwrapped

Merriam-Webster. (n.d.). Autonomy. In Merriam-Webster.com dictionary. Retrieved May 28, 2020, from https://www.merriam-webster.com/dictionary/autonomy

Blistein. (2019, October 14). Queen Push Trump to Take Down Campaign Video Featuring ‘We Will Rock You’. Rolling Stone. https://www.rollingstone.com/music/music-news/queen-donald-trump-video-we-will-rock-you-898852/

Moore, Adam and Himma, Ken, “Intellectual Property”, The Stanford Encyclopedia of Philosophy (Winter 2018 Edition), Edward N. Zalta (ed.), URL = <https://plato.stanford.edu/archives/win2018/entries/intellectual-property/>.

Burton. (2018). The Case for Plain-Language Contracts. Harvard Business Review. (January — February 2018). 134–139 https://hbr.org/2018/01/the-case-for-plain-language-contracts

Oakes. Sustainable Luxury: Millennials Buy Into Socially Conscious Brands. Luxe Digital. https://luxe.digital/business/digital-luxury-trends/millennials-buy-sustainable-luxury/#:~:text=Sustainable%20Luxury%3A%20Millennials%20Buy%20Into%20Socially%20Conscious%20Brands,-The%20luxury%20industry&text=A%20study%20from%20Nielsen%20showed,than%20what%20older%20generations%20indicated.