Understanding “The Hit” Clause in Recording Agreements

Recording Agreements today can be comical.  I’m not talking about the contract itself, rather the use of should be lost language which instead has been handed down over decades as if to preserve  accent Sanskrit documents for the next generation of music professionals.  Music has evolved and so should contractual language.  It hasn’t.  Although not on par with the archaic terms used to enforce royalty deductions (i.e. – breakage fees, reserves, etc.) “hit clause” is often a section that causes similar concern because it appears so outlandish.  The origin of the hit clause alone provides such an entertaining story that it’s worth a discussion.

Sometimes the language is descriptive and sometimes it’s delicate (as seen below), but in a nutshell, if you die someone benefits from your death.  EXAMPLE:

Company shall have the right to secure insurance with respect to Artist for Company’s own benefit. In this connection, you shall cause Artist to be available for physical examinations by a physician as and when reasonably requested to do so and to complete such questionnaires and other documents which Company or any insurance carrier may from time to time require in connection with securing and maintaining such insurance. Company shall keep such information confidential, except that Company may disclose such information to the applicable insurance carrier(s) or as required by law. None of you, Artist or Artist’s estate shall have any right to claim the benefit of any such policy obtained by Company.

In short, the company (i.e. label) will take out a life insurance policy on the artist.  What does a life insurance policy have to do with music? A lot – and the mafia agrees.  Back in the early days of major labels, the mafia remained deeply involved by providing financial support.  The “hit clause” was born from this era.  Should an artist sign with a label but never achieve the expected level of success, the artist would become more profitable dead.  Sell records or die.  Seriously.  Remaining relevant by selling records and performing became an essential tool for survival otherwise the mafia would have you killed.  Pretty simple, the label would collect when you die but hemorrhage when you’re alive and not selling. Solution, KILL.

Slight different usage today, the hit clause still applies, but to my knowledge artists aren’t waking up to horse heads in their bed.  Again, the concept behind a hit clause remains valid, however instead of scaring the hell out of musicians; the hit clause should come with an explanation section as to why it’s applicable.  Labels invest millions in new talent and the hit clause (i.e. life insurance policy) is a way to protect that investment in the event of tragedy.  With 360 deals, the hit clause begins to make more sense.  In the event of death, a musician can’t make money performing; they can’t put out new albums, music videos, or merch, so a life insurance policy provides added insurance to protect a label’s investment.  No one is dying; rather it’s a means to protect a financial investment in the event someone does.

If you’ve been offered by a major label, good for you, the hit clause will apply.  Unfortunately there is no way around this contractual monster but you can negotiate against it.  As previously discussed in the “Universal Rights” blog, music industry negotiation is all about creating throw away points. Quid pro quo situations.  One way to create such a distraction is to demand a hit clause in return.  “Sure we’ll allow for the company to take out a life insurance policy on the band, but the band will also need to take out a life insurance policy on the label President because he’s the only reason their signing.”  Heads will spin but you’ll be further along in the negotiation as opposed to giving it away and remaining silent on the issue.  The label will reject this offer (expect nothing less) however you’ve created a throw away point in order to gain something in return.

If you have additonal questions about the hit clause, feel free to contact me.

Want more? Stay connected:

@frascognamusic or mff@frascognalaw.com

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