It was the early 2000s, and I was making records for RCA Victor. My phone rang, and when I picked up, a woman’s voice drawled, “Hi, this is Etta.”
Etta James called me. Etta. James. Called. Me.
“Hello, Ms. James. What can I do for you?” I replied, starstruck at hearing her voice. I was now standing at attention at my desk.
“I need your help,” she uttered, “my sons aren’t getting paid.”
When I was at the majors, my role was to work closely with each project’s artist, A&R, and producer, facilitating their creative decisions and planning the recording sessions. During this time I fielded lots of calls like Etta’s. Dealing with a record company’s bureaucracy was never easy, especially for those who didn’t work there. I understood how to navigate it, and was always happy to help solve problems, especially if it meant getting people paid faster.
I sat back down and asked “Ms. James” some questions to get a better understanding of the situation. It turned out her sons had co-produced several of her records, and despite there being a contract that outlined their compensation, something was still holding up their royalties. I just needed to find out what that something was.
Luckily for Etta and her sons, the problem was just some missing paperwork. And while Etta’s issue resolved quickly and easily, I wish that were always the case. Sadly, however, I’ve seen many producers encounter similar, if not even more complicated problems.
One such producer is DJ Shok, who recently took Ruff Ryders to court over unpaid royalties. Fed up with the run-around he received trying to get paid, Shok is accusing Ruff Ryders of breach of contract, unjust enrichment, and several other claims. His lawsuit seeks at least $400,000 in unpaid royalties, interest, costs, and legal fees in addition to punitive damages. In response to the suit, Ruff Ryders denied all of Shok’s allegations and asked the judge to dismiss the case.
DJ Shok’s current problem began to unfold at about the same time Etta James alerted me to hers. In 1998, Shok signed a contract with Ruff Ryders making him an in-house producer and songwriter. In connection with his producing services, he was to receive a yearly guarantee, plus an advance and royalties in connection with each track he produced. In connection with his songwriting services, the deal provided for a co-publishing advance, and he was to receive the industry standard split of the publishing income generated by the compositions he wrote. But even after the label amended his deal in 2000 with even more generous terms, the royalties remained unpaid.
How is this possible? DJ Shok’s productions, including the classic DMX cut “Slippin’,” Eve’s “Heaven Only Knows” and “Life Is So Hard,” Jadakiss’ “Cruisin’,” Styles P’s “Soul Clap,” Busta Rhymes’ “How Much We Grew” and Big Pun’s “You Was Wrong” and “Ms. Martin,” are hip-hop staples, having earned him six RIAA-certified Platinum® Records, two RIAA-certified Gold® Records, and two GRAMMY® nominations. Certainly, consumers are still playing these tracks, so they are generating both record royalties and publishing royalties years after their release.
There are a lot of reasons why producers don’t get paid. I outlined the difficulties they often face in a recent piece. Shok’s situation is similar to that of Etta James’ sons: while there was a contract in place that outlined the agreement between the parties as to compensation, the royalties still got held up. The question remains why, but his problem is the amount of time and effort it has taken to get an answer.
To collect their producer royalties, producers typically need to have two documents in place: a contract and a Letter of Direction (LOD). The contract outlines the terms under which the producer will provide his or her services. The LOD is a set of instructions by which the artist tells the label about the producer contract, and asks that the label account pay the producer directly. Aside from the rights issues involved, both documents are necessary because 1) the label considers the producer to be the artist’s employee (and not the label’s); 2) the advance and royalties to be paid to the producer actually come out of the artist’s pocket; and, 3) it’s most likely that the label is paying the recording costs directly, so regardless of numbers 1 and 2, it is the label which will still be paying the producer.
In practice, this means that even if the label suggested the artist and producer work together, the producer is the artist’s employee and the label has nothing to do with hiring or paying them. Consequently, the label isn’t a party to the producer contract; they don’t write it or sign it, and can’t independently act on any of its terms. But because the label is paying the recording costs—on behalf of the artist and pursuant to the artist’s recording contract—anything paid to the producer will require explicit approval by the artist. Furthermore, the artist likely doesn’t have the cash to pay the producer anyway, so both the artist and the producer will be looking to the label to make the producer payment. Despite the existence of a signed contract, the LOD is still necessary: it ensures that the label makes the producer payment at the direction of the artist.
So, yes, producers can have a signed contract that stipulates the terms that were what agreed upon and yet still not get paid. All it takes is a missing Letter of Direction to prevent a label’s royalty department from paying out the money. Without the LOD, the label has no instructions about what to do with the royalties the producer earned. (And remember, the label is paying the producer using the artist’s money, so you can be sure that the label is going to make sure the artist has signed off.) This bureaucracy exists for a reason, but it’s a wonder that anyone gets paid!
To collect their publishing royalties, the producer first needs to confirm the songwriting splits. These splits reflect the percentage of income each songwriter is to receive from the exploitation of the music publishing rights. Usually, they are proportional to the amount of each songwriter’s contribution to the writing; that is if one songwriter writes the music and the other the lyrics, they typically each get fifty percent of the income. (In pop and hip-hop music, there are often multiple writers splitting ownership, sometimes with a sample that takes a piece of the publishing, too.)
Once agreed, the splits are usually included in the producer agreement and communicated to each writer’s publishing company, collection society, and/or affiliated performing rights organization (PRO), who use them to divide up the music publishing royalties. No separate LOD is necessary in connection with these payments. (In DJ Shok’s case, they couldn’t be, but each artist he worked with likely signed a separate split agreement with him.)
Tracking down an answer to Etta James’ payment issue was easy: I called the royalties department and asked what they had received. The answer was as expected: there was a signed producer contract, but no LOD on file. The result? The agreement didn't matter; without an LOD, the royalties department was unable to send out any payment. The resolution? Etta signed a LOD and sent it in. Payment to her sons went out soon after that.
Tracking down an answer for DJ Shok will be more difficult. He’s looking for both unpaid producer royalties and unpaid publishing royalties, and there are many questions to answer. If producers typically share a portion of the artist’s royalties, why weren’t the artists instructed to handle the payment for each of their own producer’s royalties? Given that Shok was an in-house producer, is it not unreasonable to expect Ruff Ryders to account directly to him? Because Ruff Ryders was also signing artists, should they have had an accounting department to handle all of these payments? If not, could they have hired an outside firm to do so on their behalf? And lastly, why couldn’t Ruff Ryders send an LOD to their distributor for handling?
These questions are about the missing producer royalties. What about the missing publishing royalties? Shok’s lawsuit includes a demand for payment of outstanding mechanical royalties and any other music publishing income. Given that Shok could’ve written at least half of each of the compositions in question, his unpaid publishing royalties may be equal to or greater than his unpaid producer royalties. It’s safe to assume that the song splits were worked out when the songs were initially written, so why was DJ Shok not paid the mechanical royalties? Unlike his producer royalties, labels don’t need to be directed to make those payments; instead, they are required to do so by US copyright law.
Ruff Ryders has neither accounted for DJ Shok nor instructed their distributing labels to do so; in fact, Universal told Shok they were not allowed to send him any statements, and that he should look directly to Ruff Ryders for payment. What this means is that all of the income derived from the sound recordings and their underlying compositions was paid to Ruff Ryders. And if DJ Shok never received what he was due, it’s highly likely there are other producers, songwriters, and/or artists who remain unpaid as well.
Do I know how the lawsuit is going to play out? No, I do not. Does DJ Shok appear to have a legitimate claim? Yes, he does. But regardless of the outcome, the ultimate lesson for producers is this: make sure your paperwork is complete and correct; otherwise, don’t expect to get paid—at least not without a fight. The parties are due in court on August 6, so this story is not yet over.
Mark Tavern is an artist manager, consultant, educator, administrator, and arts advocate with more than twenty years of music business experience. In addition to running his own management company, he currently teaches music business at LaGuardia Community College and before that at the Institute of Audio Research. Prior to 2012, Tavern worked at major record companies including Universal Music Group, SONY Music Entertainment, and BMG Entertainment. As an A&R Administrator with such labels as Island, Def Jam, RCA, and RCA Victor, he took part in more than 200 recordings, a dozen Broadway cast albums, and numerous reissue projects, including the GRAMMY®-winning 24-CD box set The Duke Ellington Centennial Edition. Visit his website for insider tips about the music business, and subscribe to his newsletter to get a free ebook: Listen Up! A Simple Guide To Getting Heard On Spotify.