Kanye’s Contracts Reveal Dark Truths About the Music Industry
I read them so you don’t have to.
It’s a pleasant Wednesday afternoon in Cody, Wyoming, and Kanye West is doing what he does best. Tweeting.
Scrolling through Kanye's Twitter account is like diving headfirst down a rabbit hole. The more you read, the further you’re sucked into his stream of consciousness, into a world where Bible extracts, presidential announcements and personal attacks merge into one. And in this Twitterverse, Kanye’s the protagonist.
So on Wednesday (Sept. 16), the rapper picked up his phone and embarked on a new Twitter quest. In a rant that culminated in him urinating on his Grammy Award, Kanye screenshotted and uploaded decades worth of confidential contracts between him and his record label Roc-A-Fella Records, a division of Def Jam (which is owned by Universal Music Group) to Twitter.
“I need every lawyer in the world to look at these,” Kanye said. So I did.
The Backstory
Behind every great quest is a motive. And Kanye’s raison d’etre is ownership of his master recordings.
A master recording is the original recording of a song or album.
Whenever you hear a song — whether on Spotify or as background music in a movie — it’s because the owner of the master recordings has licensed the song to be used in that way. Essentially, controlling the masters means controlling how the song is used and any money the song makes.
“In the streaming world master ownership is everything,“ Kanye said on Twitter. “Without the masters you can’t do anything with your own music.”
It’s normal for record labels to own artists’ masters. As Refinery points out, Columbia Records owns Beyonce’s masters, Republic Records owns Ariana Grande’s — and Universal owns Kanye’s.
But Kanye wants to break tradition. Comparing the music industry to a “modern day slave ship”, the rapper complained on Wednesday of being locked into an “unfair contract”, and accused Universal of ignoring his request to buy back his master recordings.
To be fair, this isn’t the first time Kanye’s cried wolf. Last year he pointed his sword at EMI Records, accusing them of trapping him into a contract of “servitude.” EMI swung back, pointing out Kanye willingly signed multiple contract extensions. After a year of back and forth, Kanye and EMI finally put down their swords and shook hands, settling their lawsuit nine months ago.
Now, Kanye’s once again gearing up for battle. It seems Universal, along with every major record label, is the latest Goliath the rapper is intent on toppling.
Round 1: Did Universal give Kanye a bad deal?
Kanye’s first jab against Def Jam and Universal is the accusation they made him sign a bad deal. Lawyers around the world were quick to emerge from the shadows and defend the labels, arguing a rapper that gets paid six-figure advances shouldn’t be complaining.
And, to an extent, they’re not wrong. The contracts show Kanye received a $2.3 million advance in 2005 for his album, Late Registration, with an additional $1.2 million as a recording budget. For his 2013 album, Yeezus, Kanye was given a $12 million advance, with a $4 million recording budget. For Life of Pablo, he was advanced $6 million, with a $3 million recording budget.
One lawyer told the BBC multi-million-dollar advances like this are “rare” and that Kanye’s royalty rates are “industry standard.” Another said the contracts were “hardly as bad or as predatory” as Kanye makes out. “Nearly any experienced music business attorney,” wrote Variety, “would likely feel proud to have negotiated these contracts.”
But advances aren’t free money. They’re loans.
Record labels are investors. When they give an artist like Kanye an advance, they expect it to be recouped through album sales. So Kanye probably had to pay back every penny Def Jam and Universal advanced to him before he was able to profit from his music. It’s likely managers, lawyers and producers also stuck their hands into this pot of cash to collect their commissions. So even though Kanye got paid millions of dollars in advances, he didn’t get to keep it.
Kanye didn’t get to pocket all of his recording budgets, either. The contracts say any costs Def Jam racked up whilst recording ‘Ye’s albums were deducted from the budget. Kanye only got paid the recording budget if there was any money leftover after these deductions (emphasis on if) and on the additional condition he delivered his master recordings to Def Jam first.
So Kanye’s right to be mad about “hidden costs” in music contracts.
In the past, hidden costs have catapulted artists into financial ruin. In the ’90s, Atlanta girl group TLC was signed to LA Reid’s LaFace Records and was managed by Reid’s wife, Pebbles. After recouping recording costs, LaFace routinely charged TLC for a myriad of other expenses, including airline travel, hotels, promotion, food, clothing and more. The group then had to pay lawyers’ fees and taxes. And, as the cherry on top, Pebbles was mismanaging TLC’s remaining funds.
As a result, each member of TLC earned less than $50,000 a year despite their most successful album, CrazySexyCool, selling over 23 million copies.
TLC’s 1991 contract with LaFace revealed the trio received only 56 cents per album they sold, which they then had to split three ways.
Given these paltry numbers, it’s no surprise TLC had to file for bankruptcy in 1995.
So even though Def Jam and Universal can shrug their shoulders and blame Kanye’s dissatisfaction on ‘industry standard’, it’s not a standard to be proud of. At best, major labels are operating on an antiquated profit model, and at worst they’re exploiting artists. Sure, it’s hard to feel sorry for a billionaire. But at the end of the day, Kanye’s label has probably made a lot more money off of him than he has off of them.
Round 1 goes to: Kanye
Round 2: Is Kanye stuck in his contract?
Yeezy swung his sword at Universal and Def Jam a second time in the same Twitter thread, calling their record deals a “trap.” His contracts show he’s not lying.
One document from 2014 gives Def Jam the benefit of a unilateral extension clause. This means as long as Kanye’s a profitable investment, Def Jam can tell Kanye they’re going to keep him locked into his recording contracts for an extended period of time.
But what if Kanye wants out? Tough luck.
The clause is a one-way street. The record label doesn’t need Kanye’s consent to extend the contract.
Clauses like this are both common and archaic, allowing record labels to keep cash cows close to their chest for as long as possible. And Kanye’s not the only musician who’s struggled with this rude awakening.
In 1993, Prince changed his name to an unpronounceable “love symbol” in the hopes it would make his contract with Warner Brothers unenforceable. (It didn’t). A similar clause is also why Kesha was notoriously blocked from breaking her contract with Sony Music despite one of the label’s producers, Dr Luke, reportedly abusing her. A New York judge told Kesha she needed Dr Luke to approve the contract’s termination — something the producer refused to do.
Today’s artists are increasingly sounding the warning bell for the next generation of musicians. Hit-Boy — a producer who’s worked with Kendrick Lamar, Beyonce and Big Sean — told Variety last week his deal with Universal was described as “the worst publishing contract” his lawyers had “ever seen.” The producer signed the deal when he was 19 and “didn’t even realize how bad it was” until he “made a hit”. He quickly complained to Universal, but was told “business is business” and that renegotiating the contract wasn’t an option.
Hit-Boy is now 33 and is locked in the same contract he signed when he was a teenager.
The trend is clear. Young artists sign contracts without reading them, blindsided by promises of success and protection under the wing of a famous record label. Even worse, a worrying number of artists don’t receive independent legal advice, instead choosing to trust the lawyer their record label refers them to. The result is underground double-dealing and illegal conflicts of interest.
Tyga, for example, signed a deal with Cash Money Records when he was 18. “I had a lawyer at the time,” said the rapper, “but my lawyer was the same lawyer that was representing Cash Money.” The lawyer drafted the contract so heavily in the label’s favour that Tyga, to this day, has never seen a dime from some of his most famous songs. Atlanta rap group Migos made similar headlines last month for suing their long-term attorney for “glaring conflicts of interest” with the group’s label, Quality Control.
The root cause of these issues is how record labels draft documents. When I was scrolling through Kanye’s contracts, it didn’t make for relaxing reading. There were 9 contracts, in total over 100 pages long, each of them coated in unnecessary legalese that was difficult to understand. And I’ve actually been taught how to read contracts. There’s no way the artists signing these things know what they’re getting themselves in for.
So even though Kanye must’ve sought independent legal advice before signing his deals, I wouldn’t be surprised if the rapper has found himself locked into clauses he didn’t grasp the significance of when he first put ink on the dotted line.
Round 2 goes to: Kanye
Round 3: Does Kanye own his masters?
So far, Kanye’s doing a pretty good job of taking down Goliath. But his quest for master ownership might be a little misguided.
Legally, under the 1976 Copyright Act, artists can reclaim their masters 35 years after a record is released.
Yeezy, however, won’t have to wait that long.
According to Republic World, a contract from 2014 shows Kanye entered into a pressing and distribution deal with Universal. While Universal manufactures and distributes the records, some of the masters are owned by another company. Reports suggest this company is Kanye’s own label.
If these reports are correct, they mean Kanye already owns the rights to his later albums.
But the same can’t be said of the rapper’s earlier albums. One of the contracts contains a revision clause which states the rights for Yeezus and The Life of Pablo will revert to the rapper 20 years after each album release — in 2033 and 2036— as long as he’s recouped recording costs by that time.
According to Lisa Alter, a music copyright lawyer, sneaking a reversion clause like this into a major-label contract is a big win. It’s a sign of the huge amount of negotiating power Kanye has with Universal and reveals the narrative of Kanye being hopelessly bullied by philistine labels is a little far fetched.
Regardless, it’s unsettling that Kanye will be 56 before he gets the rights to songs he recorded when he was in his 30's. Artists who have reversion clauses like this in their contracts run the risk of having their intellectual property handed back to them after their songs no longer have any generational relevance and make minimal income. It’s like asking someone to pass you the milk, only for them to hand you an expired carton.
By depriving artists of their masters — reversion clause or not — labels also benefit from a golden bargaining chip. When Taylor Swift left Big Machine Records last year, she asked them to revert her masters back to her. BMR agreed, but only if Taylor signed a new contract with them and earned her masters back one album at a time. For every new album she released, she would receive the masters to an old one. Basically, it was corporate blackmail.
As Prince told Rolling Stone in 1996, “If you don’t own your masters, your master owns you.”
So although Kanye might have stretched the truth about his own masters ownership, the reality on the ground for other artists is bleak. They’re forced to forfeit control over their intellectual property under the guise of standard practice.
Round 3 goes to: Kanye (kind of).
What’s next for Kanye?
Kanye might’ve won all three rounds, but he hasn’t toppled Goliath yet. For starters, he’s probably going to get sued by Universal for leaking confidential contracts. Posting his lawyer’s strategy to Twitter wasn’t a stroke of genius either.
But in an industry where most contracts are egregious and inaccessible, record labels capitalise on the naivety of new artists, and labels keep millions of unclaimed royalties in a black box — Kanye’s tweets are a welcome challenge to the status quo and are an important reminder of the seedy underbelly of the Los Angeles music scene. The fact Kanye owns a label that probably engages in the same practices, however, takes the shine off this victory.
As I’m writing this conclusion, our self-declared protaganist is again mid- Twitter rant. He’s come up with “NEW RECORDING AND PUBLISHING DEAL GUIDELINES,” among them that artists should manage their own catalogues, contracts should be written in plain English and labels should stop calling loans ‘advances’. Although major labels are probably banging their heads against a wall right now, it feels like I’m being validated by Yeezy in real-time.
This latest string of tweets, erratic in true Kanye fashion, echo what Prince said years ago following his own fractious relationship with the music industry.
“I would tell any young artist… don’t sign.”
