| Subject: master acquisition agreement (p2) |
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Anonymous
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Date Posted: 03:49:25 06/03/03 Tue
1 This Form is intended for use in circumstances where the Company is acquiring rights in master tapes recorded by a Licensor. The agreement is drafted from the point of view of the Company and should be contrasted with Form 9 [725] post which is drafted from the point of view of the Licensor.
2 The inducement letters provided to be obtained from the Licensor should contain acknowledgment of the matters warranted by the Licensor in Clause 3.13.
3 As to moral rights see generally Paragraphs 80 [122] et seq ante. See also Form 1 note 18 [630] ante.
4 See Paragraph 67 [106] ante.
5 Rental rights will subsist in literary and musical works (lyrics and music) included in the Master Tapes. Although it is assumed that the Licensor will control the rental rights in respect of performances it is possible that the rental rights in music and lyrics may be owned by music publishers. Whether or not the owners of those copyright works grant the Licensor the non-exclusive right to exercise rental rights will be a commercial matter. If they do not, the Company might acquire the rental right pursuant to its mechanical licence arrangements (see Paragraph 114 [173] ante). If it does not do so, it may nonetheless exploit the Master Tapes otherwise than by means of rental or lending.
6 Failure to accord proper credit might give rise to grounds on which the distribution of the records might be restrained by way of injunction. Although the Company may protect itself, from the point of view of the artist, by means of the inducement letter referred to in Clause 1.4, the right to be identified, to object to derogatory treatment and not to suffer false attribution might be infringed by the records and the delivery material so far as underlying literary and musical and (depending upon the circumstances) sound recording rights are concerned. The Company should therefore make enquiries into these matters, where relevant.
7 Whether rental rights in copyright works included on the Master Tapes will be paid for by the Licensor or not is a matter for commercial negotiation. See note 5 above. The Licensor may additionally require the Company to pay mechanical royalties at the full prevailing rate and the Relevant Rate may therefore need to be adjusted.
8 The Licensor may wish the Company to assume an obligation to distribute the records and to use its best endeavours to maximise receipts. Alternatively, the Licensor may wish to provide for a recapture right if the Company fails to do this.
9 This provision seeks to protect the Company so far as the termination by the artist of the recording contract with any consequent loss of rights to the Licensor is concerned. It does not deal with any underlying musical or literary rights. However, if such rights are controlled by the artist, the inducement letter referred to in Clause 1.4 may be widened to include these, subject to the interest of any publisher. Where this is not the case, the Company will wish to ensure that appropriate consent of all copyright owners have been obtained so as to avoid liability pursuant to the Copyright, Designs and Patents Act 1988 Pt II (ss 180-212) (see generally Paragraphs 93 [145] et seq ante).
10 This provision preserves the exclusivity of the Company although, in practice, the Licensor may wish to vary the provision to allow the licence of compilation records.
11 The Licensor will normally seek to restrict the Company’s rights under this provision.
12 The Licensor may wish that advances are payable irrespective of any suspension or event of force majeure.
13 The Licensor may be expected to resist any provision which makes royalties, when payable, cease to be payable on the happening of any breach (material or not) by the Licensor. The Licensor can similarly be expected to reject any provision which limits the obligation of the company to pay royalties to the Licensor to the duration of the term. The amounts of the royalties are generally a matter of commercial negotiation.
14 The Licensor may not accept that the production costs of pre-recorded tape or compact discs are greater than vinyl discs and may require the rate for tapes and discs to be the full royalty rate.
15 The Licensor may seek to impose a restriction on the time period in which a sale may be effected to a club operation, and may wish to exclude altogether any ability for any record to be made available as an introductory offer or a free or bonus record or on terms pursuant to which the company receives no payment.
16 The Licensor may wish to prohibit ‘premium’ promotional and advertising use altogether or for a specified period.
17 The Licensor may wish to exclude altogether the concessionary rate for libraries educational institutions and the armed forces. The intended effect of the words ‘otherwise applicable’ is to make all royalty reductions cumulative.
18 The reduction for television advertised records may not be acceptable to the Licensor unless the television sales campaign costs a predetermined amount; or the Licensor may wish to exclude the provision altogether. The intended effect of the words ‘otherwise applicable’ is to make all royalty reductions cumulative.
19 The provision relating to extended play records may be irrelevant and the rates for 7” and 12” records are a matter of commercial negotiation. The intended effect of the words ‘otherwise applicable’ is to make all royalty reductions cumulative.
20 The Licensor will wish any discount in the retail price to be borne by the company since the company alone controls such matters and will wish to prohibit the right of the company to license records and master tapes on a flat fee basis.
21 If a club operation sale is to be permitted the Licensor will wish to specify a minimum royalty base price.
22 The Licensor may wish to exclude any right for the record company to incorporate non-licensor material on records. Any compilation right may be by negotiation but the Licensor may not be prepared to accept both a pro rata reduction of the royalty base price and a pro rata reduction of the royalty itself on compilation albums. The intended effect of the words ‘otherwise applicable’ is to make all royalty reductions cumulative.
23 See note 22 above.
24 The Licensor will wish to restrict the point at which such rights may be exercised by the company, and will wish to limit the numbers of records distributed free or for publicity purposes.
25 This provision allows for the Company to apply further reductions and deductions in royalty rates and may be rejected by the Licensor on the grounds that it is for the Company to ensure that it can sub-license the records at the same royalty base price on which it is obliged to pay the Licensor.
26 As to exchange rate, account should be taken of companies who may have received payment at a rate more favourable than the rate of exchange in which the Licensor was paid.
27 The Licensor may not accept that the Company has the right to deduct credits and exchanges from the sales of records, since that sales figure already excludes returns, credits and exchanges. As to the right to deduct reserves against returns of records which are sold on a sale or return basis, the Licensor will seek to limit the amount which the company may deduct by way of reserve. In some circumstances the Licensor may request that the reserve is placed in a joint named interest-bearing trust account, and may require reserves to be liquidated and paid to the Licensor within 2 to 4 accounting periods.
28 Any recoupment of advances from the royalties is normally acceptable. The recoupment of sums deemed to be advances and recording costs is a matter of commercial negotiation.
29 A Licensor may wish the accounting dates to be quarterly and may require the Company to render accounts within 45 days from each accounting period.
30 The Licensor may wish to lengthen the period after which any statement is binding on the parties and may not accept certification by the auditors of the company as being binding on the artist.
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31 A Licensor may resist this provision since it may require notice from the Licensor as a precondition to payment of royalties on each accounting date.
32 The Licensor will normally require certificates of any tax withheld and an undertaking on the part of the company to co-operate with the Licensor to minimise the withholding of taxes.
33 The controlled composition clause will in many circumstances be unacceptable to the Licensor.
34 The rights to use the compositions in synchronisation or timed relation to the record will not apply if only audio rights are being obtained by the Company. The Licensor may seek to exclude this clause entirely on the grounds that the Licensor does not control the publishing rights in the compositions and is therefore unable to procure the grant to the company of a licence at the relevant rate. Even where the Licensor controls the publishing rights, it may not be prepared to do so or it might be in breach of agreements with composers were it to do so.
35 Where the sub-publishing rights of the compositions in the territory are available, the Company may wish the Licensor to enter into an agreement with the Company for such rights. As to the provision referring to the relevant rate see note 34 above.
36 The recording restriction contained in Clause 7.3 and warranty contained in Clause 7.4 may be inappropriate.
37 As far as the other product rights are concerned, the existence of such a clause is a matter of commercial negotiation. If the remuneration payable by the Company to the Licensor for the existing product rights is sufficiently high, the Company may be able to insist on the inclusion of a clause similar to that contained in this form.
38 See Form 1 note 77 [632] ante.
39 The definition of ‘artist’ is required for the purpose of identifying the master tapes in respect of which delivery material is to be delivered to the Company.
40 The definition of ‘associate’ is inserted for the purpose of the controlled composition provision (see Form 1 note 78 [632] ante) which may be inappropriate.
41 The reference to chorus, composer, conductor and orchestra may not be appropriate. Their function is to identify the material to be contained in the master tapes.
42 See note 41 above.
43 A list of all compositions included on the master recordings incorporated in the delivery material should be included.
44 See note 41 above.
45 The delivery material details should specify all material which the Company needs to receive from the Licensor in order to enable the Company to manufacture and distribute records.
46 The record industry has traditionally accounted on 90% or (in the case of the USA 85%) of records sold. The original intention was to provide an allowance for damaged or broken records but, since the sales figure is nowadays usually the net sales figure of all gross sales less any returns or credits, the Licensor will seek to be accounted to on 100% of sales. Additionally, the Licensor will seek to impose some restriction on the nature and amount of credits to be given by the Company, possibly by excluding credits given to any associate or by restricting credits and allowing them only where they are bona fide reasonable and on arm’s length terms.
47 See note 41 above.
48 The packaging charges are used in calculating the royalty base price and are negotiable.
49 It should be noted that the definition extends both to audio product and audi-visual product. The Licensor may wish to limit the scope to audio product only.
50 The definition of ‘recording contract’ is inserted for the purposes of provisions of Clause 3.13.
51 The definition of ‘recording costs’ in this agreement relates to the re-editing and re-mastering costs incurred by the Company in preparing the delivery material. The Licensor may wish to prevent any editing or re-recording since there may be restrictions on such rights in the recording contract. The Licensor may also wish to specify a maximum limit of any permitted recording costs if these are to be recovered from the royalty payable to the Licensor (see Clause 5.16).
52 Since the amount of the retail price determines the level of royalty, the artist may seek to impose some restriction on the ability of the Company to settle this level or provide a notional minimum retail price for the purpose of establishing a minimum royalty.
53 The term and territory of the agreement are matters for commercial negotiation. See also Form 1 note 102 [632] ante as to the length of the term.
54 See note 53 above.
55 The definition of ‘third party liabilities’ is inserted for the purposes of Clause 3.10.
56 This provision is inserted to avoid the operation of the Interpretation Act 1978 s 23 (41 Halsbury’s Statutes (4th Edn) STATUTES).
57 See Form 1 note 107 [632] ante.
58 See Form 1 note 108 [632] ante.
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