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Ancillary rights agreement
An agreement between a music production company and a musical artist in which the artist agrees to pay the company a share of income from activities other than recording, to be used in conjunction with a recording (production) agreement.
This agreement is a companion agreement to a Recording (Production) Agreement between a production company and an artist, drafted in favour of the production company. A production company would not issue this sort of agreement unless it had also issued a recording agreement to the artist.
This type of agreement has come about in recent years as revenues from recording have fallen, with the record companies arguing that the return from record income alone is no longer sufficient to justify the large upfront investment required to launch an artist. Major record companies led this change by replacing their artist agreements with "360-degree" deals, entitling the company to take an interest (either financial or rights-holding) in the artist's activities other than just recording. Although not welcomed by the artist community, this is now part of the fabric of recording agreements worldwide.
The percentages of income paid to the Company are drafted so that they include the share required by the third-party record label. The way in which these tripartite arrangements are made are still in relative infancy, and typically the third-party label may make a direct agreement with the artist at the same time as the recording deal is being put together. However, increasingly this leaves the Company with an inability to conclude the Label Agreement because the Artist has a "ransom strip" of rights that the Company needs. This gives the Artist leverage to demand changes to its existing arrangements.
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