Management agreements, record deals, publishing agreements – they all share one near-ubiquitous feature: Options. By “options” I mean the ability of one (or both) parties to extend the agreement for some period, either on the same terms or on a pre-defined set of terms.
In practice, options in music agreements are almost never in favour of the band or artist. It is the record company that has options for more records. It is the manager that has options for more years. It is the publishing company that has options for more compositions.
And yet time and again, I see musicians signing up for this. I suppose it seems flattering – a musician might think, “if they want options, they must really like me. It’s a sign of their commitment!”
Unfortunately, this is completely false. To put it bluntly, options do nothing for artists, and exist to favour the party with the option.
Let’s play out the scenarios of the record deal:
- Scenario 1: A band puts out their first album, and it does better than anyone could have imagined. The label has an option for a second album on the same terms as the first. Of course they’ll take it! What a great deal for them.
- Scenario 2: The first album does much worse than expected. What are the odds that the label wants to exercise the option? They might even decline to exercise their option and offer worse terms. They might also have a certain amount of time to exercise, during which the band is unable to shop for another deal.
- Scenario 3: The terms of the option magically align with what the parties would negotiate anyway for another record at that point. In which case… why did we need the option?
Sometimes you hear the argument that the option is a way to protect the label/manager/company. If they’ve invested in the artist and not made a return yet, the option gives them another kick at the can. This is similarly specious reasoning. A manager is earning a percentage – if it hasn’t worked out in the original time negotiated, then maybe there’s no reason to continue.
With respect to a label or publisher – who is to say what is fair at the end of the initial term? If the label failed to market the first album properly, why should they still have a one-sided right to option the second album? If the artist has taken off and is poised to make lots of money on a second record, why shouldn’t the artist be entitled to a fair deal?
All an option does is remove an artist’s power to negotiate the best deal for themselves. I think it’s time to stop acting like they are a fair term in music contracts.