Legal Essentials for Starting Your Music Label: Contracts, Royalties, and Copyrights

For anyone looking to succeed in starting your music label, understanding the legal landscape is critical. The music industry is complex, with numerous legal considerations that protect both the label and its artists. From drafting contracts to managing copyrights and royalties, navigating these legalities helps prevent costly disputes and fosters trust with the artists who sign on with your label. Without the right legal foundation, even the most promising label can face challenges that could otherwise be avoided with proper guidance.

In this article, we’ll cover essential legal steps for starting your music label, including the importance of artist contracts, the basics of copyright law, royalty management, and more. These considerations are necessary not only to protect your label’s assets but also to ensure that you build lasting relationships with artists and collaborators. If you’re committed to creating a label that’s legally sound, these steps will provide a roadmap to a secure and structured launch.

1. Understanding Artist Contracts

Artist contracts are foundational documents that outline the relationship between the label and the artist. As you’re starting your music label, these contracts clarify expectations, responsibilities, and financial arrangements. Each contract should address:

Rights and Responsibilities: Define what the label will provide, such as marketing, recording support, and distribution. In return, outline the artist’s commitments, including exclusivity, production schedules, and deliverables.

Revenue and Royalties: Specify how income from music sales, streams, merchandise, and live performances will be split.

Duration and Termination: Outline the length of the contract and any terms under which either party can terminate the agreement.

Ownership of Masters: Decide whether the label or artist will own the master recordings, as this affects future earnings and licensing rights.

Creating contracts that are both fair and clear can prevent misunderstandings and build artist loyalty. Work with an entertainment lawyer to ensure each contract complies with industry standards and protects your label’s interests.

2. Copyright Basics for Label Owners

Copyright law protects the original work of creators, ensuring they control the distribution, performance, and reproduction of their music. For anyone starting your music label, understanding copyright law is crucial, as it applies to both the music you release and your label’s brand assets.

Key copyright elements include:

Composition vs. Recording Rights: Copyright law separates a song’s composition (lyrics and melody) from the recording. Your label will need permission to use both if you’re licensing external music.

Ownership and Assignment: If your label owns the copyright to a song, you have exclusive rights to reproduce, distribute, and license it. If the artist retains copyright, they’ll have a greater say in how the music is used.

Fair Use and Infringement: Ensure that all music used by your label is original or properly licensed to avoid copyright infringement, which could lead to lawsuits or hefty fines.

Understanding copyright basics helps you avoid legal disputes and secure exclusive rights that are valuable for monetizing music across various platforms. Collaborating with a copyright attorney can clarify complex issues and help you protect your label’s intellectual property.

3. Licensing Music: Mechanical and Performance Rights

Music licensing is essential to legally distribute and monetize music, particularly when it’s played in public, sold, or streamed online. As you’re starting your music label, you’ll need to understand two primary types of licenses:

Mechanical License: Allows you to reproduce and distribute a song. This license is necessary for selling music through digital platforms or physical copies.

Performance License: Required for publicly performing music, whether it’s streamed online, played on the radio, or used in a commercial setting.

To streamline licensing, many labels work with licensing organizations like ASCAP, BMI, or SESAC, which handle royalties and provide access to comprehensive rights for public performances. Setting up the correct licensing ensures that your label and artists are compensated fairly and that you’re in compliance with legal standards.

4. Royalty Management and Collection

Royalties are a primary revenue stream for music labels, and managing them accurately is essential for maintaining trust with your artists. As you’re starting your music label, royalty types you’ll encounter include:

Mechanical Royalties: Earned from physical and digital sales.

Performance Royalties: Collected whenever a song is played publicly or broadcasted.

Synchronization (Sync) Royalties: Paid when music is licensed for use in media, such as TV, movies, or advertisements.

Digital Streaming Royalties: Collected from streaming platforms like Spotify, Apple Music, and YouTube.

5. Intellectual Property and Brand Protection

Beyond music copyrights, your label’s intellectual property (IP) includes its name, logo, website, and any unique branding elements. Protecting this IP is essential for establishing a recognizable brand. When starting your music label, consider the following steps:

Trademark Registration: Register your label’s name, logo, and any signature elements to prevent others from using them without permission.

Domain and Social Media Protection: Secure your label’s domain name and social media handles to build a consistent online presence.

6. Working with Legal Counsel

Legal counsel is invaluable when navigating the complexities of starting your music label. Hiring an entertainment lawyer who specializes in the music industry provides multiple benefits:

Contract Drafting and Review: An attorney ensures that artist agreements, licensing contracts, and other documents are legally sound.

Intellectual Property Advice: From copyright registration to IP protection, a lawyer can help secure your label’s assets.

Conclusion

Navigating the legalities of starting your music label can be complex, but these steps lay the foundation for a secure and reputable operation. From drafting clear artist contracts and managing copyrights to understanding royalties and brand protection, each legal element serves as a building block for a successful label. Taking these precautions will protect both your label and your artists, ensuring that your operations are both fair and legally compliant.