Thread by @BrianZisook

This afternoon, I spoke with a veteran legal expert ON THE LABEL SIDE who has anonymously shared their thoughts with me on the #KanyeWest recording contract(s) with UMG and his decision to share those contract(s) with the world on Twitter. More analysis tomorrow, but for now...

Record labels have been moving more toward “distribution” style deals with established stars where the label royalty rate is low in the US because they can earn good revenues from deductions and ex-US sales. Outside the US the artist royalty rate is lower.

In the case of Kanye, before he gets paid, UMG has allowed itself to deduct its marketing costs — which may be internal, and therefore margin-bearing — and unrecouped amounts from Kanye’s PRIOR contract(s).

Overall, the contract(s) shows the dichotomy between a developing artist contract vs. a star artist contract. The 6 album initial deal with UMG through Roc-A-Fella and then Def Jam paid Kanye a base royalty of between 14-18% of US net sales.

On the contract renewal for albums 7 through 10 with UMG and Def Jam, however, Kanye’s rate jumps up to 79-83% of US net sales, BUT with Kanye covering recording costs instead of the label(s) — who covered the costs for his first six albums.

Kanye’s recording costs are INSANE, which is why he still has unrecouped amounts under prior contracts, and why UMG was likely more inclined to shift recording costs to Kanye and take a lower, but at least dependable, royalty.

It highly likely Kanye’s albums were coming in MILLIONS over budget on the recording cost side. (Kanye's decision to transition to Wyoming might be closely tied to him becoming more cost-conscious since the recording cost obligation shifted to him and away from the label.)

As for Kanye’s decision to share these contracts on Twitter, while the decision is “an obvious breach,” it's unlikely UMG would move to terminate the deal (they want to make their $$$), and suing Kanye would mean further harming an already-strained working relationship.

On Friday, @DJBooth will publish a roundtable discussion among several entertainment lawyers, who will further break down the contract(s) from the perspective of the artist.