It’s rather unusual for an unredacted copy of an artist’s recording contract to see the light of day. As such, while a Texas judge decides the outcome of Megan Thee Stallion’s lawsuit with 1501 Certified Entertainment, we asked industry veteran Mark Tavern, an artist manager and consultant who regularly contributes at DJBooth, and Kevin Casini, an entertainment lawyer and the founder of Ecco Artists Services, to breakdown and annotate the actual deal.
Tavern and Casini agreed to share their conversation and annotate parts of the agreement to offer readers a better understanding of how recording contracts like this work from both legal and business perspectives.
LEGAL DISCLAIMER: Information and/or opinion presented here are not legal advice or legal opinion and may not necessarily reflect the most current legal developments. You should seek the advice of legal counsel of your choice before acting upon any of the information on DJBooth. Kevin Casini is an attorney, but he is not YOUR attorney. Nothing contained herein should be considered legal advice, and in no way creates an attorney-client relationship.
Mark Tavern: One of the first things I noticed with the contract are blanks that Megan Thee Stallion used to fill in her name and address. It suggests to me that she wasn’t allowed to change any language, and that’s a big red flag.
Kevin Casini: Yes. Agreed there. Having spaces to handwrite your name isn’t necessarily a tell-tale sign of sloppiness, but it does suggest a more fly-by-night operation than most artists would want.
In the best case, consider a contract as a first draft, an initial offer. In the worst case, you may have a brand new company (as is the case here), and they got this contract from who knows where. There is some language in the contract that makes me wonder if an attorney-drafted it (more on this later), but if Megan had to fill in the blanks, maybe that means she did read it.
MT: I’ve read that she owns a portion of her masters, but the contract says she’s an “employee-for-hire” and I don’t see any other language regarding a split. What does that mean?
KC: Carl Crawford, who founded 1501, says Megan Thee Stallion owns “parts of” her masters. I’m not sure exactly what this means, or even if he knows, but she doesn’t see it that way. The fact remains: unless you have the wherewithal to exploit the rights associated with ownership, owning your masters isn’t worth anything. Even Prince could only do something with them once he was established. If you just shift to the next label, you’re not gaining anything.
As for work-for-hire language, here’s where it isn’t murky: There is a clear test to see if someone is producing work-for-hire. Most of it comes down to who has control over the work and the final product. The first question is whether the artist is an employee? Here it’s clear Megan is not a work-for-hire, but let’s go through it.
Is she receiving W-2 income? Is 1501 paying payroll tax, Social Security, unemployment insurance, etc. in connection with any salary or wage they pay her? No, of course not.
Are there specific hours she’s expected to be “at work”? No. Does she have allotted sick time, vacation time, health insurance, a handbook that explains her rights and responsibilities? Of course, she doesn’t. She’s a rapper, not an office worker.
So, failing to be an employee, can it be said she’s a contractor? Well, she may get 1099 forms for her income. We can get into the weeds here, but all of this has been pretty well defined by Congress or the Court.
17 USC § 101 defines a “work made for hire” in two parts:
(a)a work prepared by an employee within the scope of his or her employment (subject to control by the employer)Or (b) a work specially ordered or commissioned for use:as a contribution to a collective work,as a part of a motion picture or other audiovisual work,as a translation,as a supplementary work,as a compilation,as an instructional text,as a test,as answer material for a test, oras an atlas,
And ONLY IF the parties expressly agree in a written instrument signed by them that the work shall be considered a work made for hire—and sometimes not even then.
MT: Some have likened the deal to a “360” or “all-rights” deal, in which the company shares in additional revenue streams because the artist gives them more rights. Most contracts nowadays are 360 deals, but what about the terms? I see that she is giving up percentages of a variety of things (merch/sponsorships/endorsements, and touring, plus 30% of everything else) and that 1501 has approval over all her performances and can deduct overages or costs for tardiness. Is this reasonable?
KC: This seems to me like a stab at a 360 record deal, but are they a label? No. A publisher? Maybe, I suppose. It seems more likely that they’re middlemen and wanted a finder’s fee in perpetuity. More than just giving up some rights—supposedly in exchange for help exploiting those rights—Megan was asked to give up all rights to her name and likeness.
MT: Also, there is language that provides 1501 receives 50% ownership of her publishing. This section is a huge “NO” for me. How about you?
KC: I generally think about this stuff holistically. There’s the moral rights side to royalties, but in the end, any rightsholder wants to be able to exploit them for monetary gain. If assigning 50% to a label, publisher, or some other partner grows that pie from 100% of $0 to half of something? Then sure, maybe. But as an assignor, you need to be very careful: what’s the duration of the assignment? What’s the expected deliverable? What’s the exclusivity? Can another potential partner monetize those rights better?
I think every deal point has a value where it makes sense to say yes, I have very few absolutes in deals. It’s more about the parties than anything else. If I think my artist is partnering with the right party, then I can always find the potential upside.
MT: It’s important for people to understand that this recording contract is not a record deal. I saw many like it when I worked for majors. What they mean in practice is that the artist is not “signed” to the label; instead, they give their rights to an intermediary and that company signs to the label. In this case, Megan signed with 1501 Certified Entertainment, and then 1501 got a deal with 300 Entertainment. 300 Entertainment has a distribution deal with Atlantic Records, which uses parent company Warner’s distribution system.
It’s a complicated chain of ownership, and because the standard terms of the distribution or record deal still apply, we need to remember that the revenue split the artist participates in takes place AFTER everybody else takes their cut. What this means for Megan—who receives 40% from recordings—is that she’s not getting 40% of 100%, but 40% of what 300 pays out to 1501, a considerably lower number.
KC: Everyone should have known this wasn’t a record label deal because it contemplates what happens when they get a MAJOR LABEL / PUBLISHER involved. In your experience working with an artist’s teams, rather than the artist directly, was there a difference between who was footing the bill and who was calling the shots, creatively?
MT: Yes, because artists with these kinds of deals are not signed directly—or as an attorney might say, are at” arm’s length”—to the label, he or she doesn’t have as much say over what happens. I planned hundreds of records when I worked in the majors, and this was a common situation. The artist would call me to set up a recording session, but I had to tell them to wait until their production company approved the budget. Often, the artist wanted to do something their production company didn’t, and I had to be careful who to listen to. At the major, our contractual relationship was with the production company and not the artist, so you can imagine the confusion that created.
What can you tell me about the delivery requirements? My read on the fine print of the contract is that she has to deliver a 45-minute album every year she’s signed, for a minimum of one, and as many as three years (or three albums) total. Despite that, she’s put out three projects to date, none of which have met the minimum length requirement. Why nobody told her to complete a record that satisfies the deal so she can get out is beyond me.
KC: The deliverables section of the contract is funny. Do they care about a 45-min “LP”? Is that their model at all? Yes, she could’ve just given them the bare minimum, been compliant under terms of the deal, and then been done for this part, but they still try to own her 360°. Also, look at 3(d)(i): “satisfactory Master Recordings in the form of two-track stereo tape, fully edited, mixed, leadered, equalized or otherwise in the proper form for the production of parts necessary for the manufacture of records (“Masters” or “Master Recordings”)”
MT: I love how even current agreements contain references to old formats. There is language in this contract about what Megan is to deliver, and it’s funny that the requirement remains that it be on “tape” and properly “leadered” (meaning that it has the correct amount of colored plastic at the beginning and end of the music to ensure it is spooled correctly, so the tape machine has a chance to come up to the correct speed once one pushes “play”). There is also language about her delivering what is necessary to create “parts,” which is the term for the elements—called lacquers, masters, mothers, and stampers—used to press vinyl.
KC: That’s part of the reason I think this is a cobbled-together contract from something someone found somewhere. It’s clear the beginning is from a cover letter. What else is spliced from something else? Likely much of it.
MT: Carl Crawford did an interview with Billboard in which he stated he has, to date, invested over $2 million in this deal. How does that affect the terms being offered?
KC: I don’t think it does. Deliverables are spelled out, and he committed himself to that money, for some reason. But are there any receipts? Does anyone have any rights to look at them?
MT: I see in several places that Megan is giving up name and likeness rights. My understanding is that it’s necessary for these deals because those rights need to be passed along to the distributor. Is that true?
KC: Well, sometimes. No one is pressing jackets or booklets for a debut hip-hop album. The intellectual property in an image is owned by the owner of the IP in the individual image. This could be more for branding or marketing purposes and further confuses what exactly 1501 was actually doing for Megan. I’ve said this a few times in this conversation already: everything 1501 wanted to get done in the contract could’ve been done more simply, transparently, and effectively. A simple license for the use of name and likeness would suffice for marketing purposes. If she has a trademark in her stage name, it becomes even more straightforward.
MT: I’ve never seen a deal like this using an arbitration clause. What does that mean, and how might it affect things as they play out in court?
KC: Any adult in their right mind can sign a contract for anything they see fit so long as it’s not illegal, but mandatory contract arbitration is unnecessary here. IF Megan blows up, she renegotiates. I bet further research would show us that Carl Crawford had some kind of arbitration clause when he was a Major League Baseball player; it’s much more regularly employed there.
MT: Since I wrote a piece about the temporary restraining order that allowed Megan to release her newest EP, SUGA, on Friday, March 6, 2020, I’ve been asked whether or not her contract could be voided. Now that we’ve seen the contract, what do you think? Is this deal that bad?
KC: When I read the story, I expected to see a REALLY egregious contract. In my opinion, the contract is a bit sloppy, and it uses some tactics to try to get 1501 Certified some things it didn’t need to use. For instance, if you’re 1501, ask why you think work-for-hire clauses are beneficial, and see if you can have those benefits conferred in a way that is also mutually beneficial, or at least less subject to scrutiny. But like I said when I read it, I didn’t see anything that would make the entire deal null-and-void.
Is it a great contract? No, but I’ve seen worse, and there are ways to invalidate certain portions but leave an agreement in place, if not intact.
Mark Tavern is an artist manager, consultant, educator, administrator, and arts advocate with more than 20 years of music business experience. In addition to running his own management company, Tavern currently teaches music business at LaGuardia Community College and before that, at the Institute of Audio Research. Kevin Casini is the founder of Ecco Artists Services. Prior to launching Ecco, he was the principal of Casini Law, LLC, where he had been recognized by New England SuperLawyers™ as a Rising Star since 2015. In addition to practicing law and consulting, Casini teaches entertainment, copyright, and arts law at Quinnipiac University School of Law.