The Basics of the Key Person Clause in a Recording Contract
The key person clause that appears in a lot of record contracts inspires a certain amount of fear among musicians and prompts some music business lawyers to spend a lot of time (and your money) getting rid of it. But it may not be as bad as it seems.
What Is a Key Member Clause?
A key member clause in a record deal (sometimes known as a key person clause) is a clause that states that if a member of the group who is considered to be critical to the overall sound, style, or identity of the group decides to leave, the record label can claim breach of contract, which can result in its cancellation.
Often, with this cancellation, the label also discontinues the active promotion of the band's earlier releases. In other words, you and what's left of your band are back on the street. While this repercussion may seem pretty major, there's more than one way of looking at it.
The Good News for Musicians
This contract feature cuts both ways for musicians. Although the clause gives the label an out if they want to drop you if a "key member" leaves, it also offers some level of protection. With the key person clause in place, the label can't easily use the sudden departure of your sometimes xylophone player as a reason to cancel your whole deal because they've implicitly admitted that the departure of the xylophone player was not a serious concern. If she were, they would have named her as a key person in the contract.
Everything Is Negotiable
Another point that musicians sometimes miss when dealing with the key member clause is that just because it's in the contract doesn't mean the label will enforce it. When the Kronos Quartet signed its first contract with Nonesuch Records, the label identified both the first violinist, the group's founder, and the cellist, who was extraordinarily talented, young, and beautiful, as key persons.
Some years later, the cellist left the group for health reasons. But the label not only didn't cancel the contract, but they also renewed it. Why? Because the group was critically acclaimed, commercially successful and found other excellent cellists to replace the departed original member.
The Label Isn't out to Get You
Sometimes musicians get a little paranoid about their record company and they assume that the company is somehow out to get them. But record company execs aren't inherently evil, at least not most of them. They're simply trying to manage their companies profitably. If there's some way that the impact of the departure of a key person can be lessened, most labels will go along with the group and, as with the Kronos Quartet when they lost their original cellist, won't enforce the clause.
Taking the Sting out of the Key Person Clause
When one or two members of a group are designated as "key persons" in the recording contract, it can provoke not only fear of the label but also resentment by other band members.
Why aren't they key persons, too? In some instances, groups have solved this problem by asking the record company to include all group members as "key persons" in the contract. While this may not seem like a good idea—now the label has cause to drop the group if anyone leaves—it may be a viable solution. Just because it has a contractual right, the label's not going to drop the group if someone they don't consider essential leaves, and it solves the ego-problem. You're all key members!