Legal Drama, Music Business

Kel Walks Out on Capital Hill Music, Termination Of Record-Deals

(Republished article from September 2010.) In this article, my focus is on the recent official announcement of the departure of artist Kelechi Ohia aka Kelfrom Capital Hill Music (CHM). Before I get into the business/legal shenanigans, let’s get one thing straight.

It is What It Is
There is a tendency, especially in Nigeria (Naija’s) music industry, when an artist “walks out” on a record label to think or call him/her a “traitor” etc.  Ikechukwu (Killz), Dare(y) Art Alade, Jazzman Olofin, Kelly Handsome are examples of artists who have moved on to find a better fit, elsewhere. Music is business and this should be expected. When an employee leaves his/her job, we all understand that such employee is looking out for his/her best interest, and should rightfully do so. The business of music is no different.

The critical thing is how an artist walks out. There should be no bad blood, if it can be helped. The industry is so small, paths do cross, often, and people never forget how you treated them. Now, let’s get into the legal issues in case you find yourself in Kel’s situation.

Kel’s Press Release
In relevant part, Kel’s recent press release says:

“Rap artiste Kelechi ‘KEL’ Ohia and her management M.et.al Entertainment have announced the official dissolution of KEL’s contract with Capital Hill Music. Although her contract with the label was originally scheduled to end in March 2011, the rap artiste has decided to be independent of any record labels for now.

The dissolution of contract with Capital Hill was a mutual decision. KEL still remains good friends with Clarence A. Peters, CEO of Capital Hill Music. The Nigerian femcee is leaving the record label with ownership rights of her debut album “The Investment” and an undisclosed fee to effect her release . . .

This dissolution will not hinder KEL’s studio sessions, performances, appearances or relations with the press . . .”

Who Owns the Music When an Artist Walks Out on Record Deal?

The most important part in Kel’s release from a legal perspective is ownership of her music. Why? Music follows the money, bottom line. The fight is about money and money lies in Kel’s freshman album, ‘Investment.’ In this instance, Kel’s release says, “The Nigerian femcee is leaving the record label with ownership rights of her debut album “The Investment” and an undisclosed fee to effect her release.” For both Kel and CHM, clearly there is “no hard feelings.” The legal relationship, per the press release, was set to end March 2011 but CHM let Kel off the hook. This is mature and commendable.

What is the Typical Scenario Where An Artist Walks Out on a Record-Deal?
When an artist walks out on a record deal, the artist gets nothing. In many instances, the artist still owes the label money. In fact, when an artist walks out on a label, the label still retains the masters and owns the copyrights to the artist’s work. It is also not unusual to see a label limit an artist from recording for a set period of time. In the West, you will see labels even own the artists brand, trademarks, website url etc.

Why Such Harsh Results for the Artist?

Unless an artist is a “minor,” has “mental impairment,” was under “duress (like gun to the head) when the contract was signed,” there is “impossibility,”  “frustration,” “terminal illness” or “natural disaster,” etc. when he/she signs on the dotted line of a record-deal contract, the contract is legally binding. It is legally presumed that such artist has read, understood and willingly and voluntary signed the contract. Accordingly, courts both within and outside Naija will typically enforce these agreements if an artist does not live up to his/her end of the bargain.

Are There Instances Where Artists Can Walk Out with Their Music etc. Like Kel?

Yes. Let’s look at the various kinds of record-deals to better illustrate this point.

  1. Standard Distribution deal: This is the common deal that many artists sign. Here, CHM would advance Kel money so she can record her album. CHM also does its primary function as a label i.e. manufacture, distribute and promote Kel’s album. Kel makes her money after CHM recoups all of its costs from Kel’s album sales, usually very little and sometimes nothing. CHM has ownership of Kel’s masters and copyrights, forever. When Kel walks out, she gets nothing. In fact, she go still dey owe CHM.
  2. 360 Deal: Within the past 5years, this has become a common phenomenon in Yankee given the decline in CD sales. A few African owned labels are also jumping on the bandwagon. Here, CHM, for example, understands all of the vertical revenue that Kel can make for them as an artist. So, they will take their standard cut from sale of her ‘Investment’ CD both on and offline. In addition, they would require that Kel give them a percentage from the profits of her concert tickets, merchandise sales, ringtones, synchronized music videos, endorsement deals and anything else that Kel is involved that uses her as a brand or her music. Traditionally, labels owned only the intellectual property rights i.e. copyrights. Now, they want it all. When Kel walks out, CHM retains the rights to her work per the terms of the 360 deal.
  3. License Deal: “License” means I give you permission to use my work for a limited period. I still own my work and can do whatever I want with it. Here, Kel “licenses” to CHM her music for a certain period of time. When Kel walks out, she retains her masters and copyrights. She can do whatever she likes with her work.
  4. Manufacture & Distribution Deal: In this scenario, Kel signs an agreement with CHM to strictly manufacture (produce) and distribute her album. Kel pulls all the weight by doing everything else herself. CHM does not market or promote Kel neither do they advance her fees to record her music. Accordingly, if Kel walks out on the M &D deal, the same result occurs as in a License Deal.
  5. Profit Sharing Deal: CHM advances a little money to Kel so she can record her music. Kel & CHM both market and promote Kel’s music/ablum. They also both split the profit from sales of Kel’s album. Kel owns her masters and copyrights in her music.

For the most part, for Naija based artists, unless you are very unique or a superstar, you will sign a standard distribution record deal. For our  Naija Yankee based artists, you would most likely sign a 360 deal. This means it is very tough to walk away from your contract. Think smart. Have a brilliant strategy, get an attorney to assist you if you can afford one.

If you want an M &D or licensing deal, it is possible. If you have implemented many of the strategies I have discussed in prior articles, then you know to pull off strong highly favorable moves at the negotiating table, you MUST come to the table with a completed EP/short album, strong numbers on your social media (facebook, twitter etc) fan pages, solid media coverage, radio airplay and if you can, online digital distributors i.e. Itunes, Amazon etc.

Once you have this, you are in a better position to negotiate for an M &D, licensing, or even a profit sharing deal.

You’ve been briefed. Now go make it happen.

_____________________________________________
Follow me on Twitter @africamusiclaw @uduaklaw

Cheers,
Uduak

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AFRICA MUSIC LAW™ (AML) is a pioneering music business and entertainment law blog and podcast show by Fashion and Entertainment Lawyer Ms. Uduak Oduok empowering the African artist and Africa's rapidly evolving entertainment industry through brilliant music business and entertainment law commentary and analysis, industry news, and exclusive interviews.

Credited for several firsts in the fashion and entertainment industry, Ms. Uduak is also a Partner and Co-Founder of Ebitu Law Group, P.C. where she handles her law firm’s intellectual property law, media, business, fashion, and entertainment law practice areas. She has litigated a wide variety of cases in California courts and handled a variety of entertainment deals for clients in the USA, Africa, and Asia.

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2 Comments

  1. […] If you are thinking of walking out on your label, you should read my Kel v. Capital Hill article here. […]

  2. […] If you are thinking of walking out on your label, you should read my Kel v. Capital Hill article here. […]

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