Music Business/Law Tips

Music Bjsiness/Law Tips - "Breaking A Record Contract" (Part 8)

2012-02-06T17:57:00.000-08:00

A conflict of interest approach might hasten the termination of a recording agreement. At times in the music industry, because of the small number of specialized practitioners, instances occur when there might be a conflict of interest whereby one attorney will represent both the label and the artist in a contract negotiation. In such a case, an artist could postulate that he/she got a raw deal because the attorney was in bed with the label and hence the contract should be rescinded. This argument would be based on Professional Conduct Rule 3-310 which regulates avoiding the representation of adverse interests. In essence, this Rule states that an attorney shall not, without the "informed written consent of each client", represent more than one client in a manner in which the "interests of the clients potentially conflict." However, unless the contract is one of adhesion (i.e., take it or leave it/extremely one sided), it is doubtful that a court would invalidate a contract on this ground alone.

[part 9 next time]

Ben McLane Esq
benmclane.com

Music Business/Law Tips - "Breaking A Record Contract" (Part 7)

2012-01-31T21:45:00.000-08:00

Since recording agreements first came into existence, an oft heard clarion call by an artist is that the contract is patently unfair. A record contract that is one-sided and skewed heavily in favor of the record company could be argued to be a contract of adhesion. A contract of adhesion is a standardized contract which, if imposed and drafted by the party of superior bargaining strength, relegates to the subscribing party only the opportunity to adhere to the contract or reject it. Generally, a contract of adhesion would be valid unless it is ambiguous, or it is "unduly oppressive or unconscionable under applicable standards of equity." In conjunction with this scenario, an artist who was not represented by an attorney before signing the adhesion contract could also argue that he/she was too unsophisticated to understand what he/she was signing.

In a pertinent dispute, singer George Michael filed a suit in England to get out of his long-term recording agreement with Sony. His argument was that certain practices in the music industry were so obnoxious that they amounted to a restraint of trade. These practices included tying up an artist for a long period of time at the company's option, and computing royalties in ways that pay the artist far less than the royalty rate implies. The court held that the terms of his deal were reasonable, and thus there was no restraint of trade. Apparently, the court agreed with the argument set forth by the label that current deals are for a term of six to eight albums at the company's sole option because a label cannot afford to promote new artists unless they are assured the benefit of the artist's success in later years. The foregoing court's rationale in the Michael's matter is evidence that unfairness alone may not be enough to allow an artist to jettison a contract.

[part 8 next time]

Ben McLane, Esq
benmclane.com

Music Business/Law Tips - "Breaking A Record Contract" (Part 6)

2012-01-22T19:45:00.001-08:00

Another situation akin to breach that frequently arises in an artist deal (and which somewhat relates to the Seven Year Statute) involves a dispute over the expiration date of the agreement. As mentioned, many recording agreements provide for a minimum term of minimum one year, with separate options of minimum one year each, sometimes tied to the delivery of product. The record company generally has the privilege of either exercising the right to continue the contract, or to let it lapse. Most contracts have a specific provision for the exercise or non-exercise of options. If the exercise provision is not properly complied with by the label (e.g., the label fails to give written notice of its intent to pick up an option), the artist can argue that it is free to sign a new contract.

Similarly, an artist could also allege that it has fulfilled its recording commitment to the label. Every artist agreement bestows on an artist the duty to record and deliver a specified number of masters to the record company during the term. Unless the contract provides for a detailed schedule of how many records to deliver in any given period, if the artist is signed, for example, to a five album deal, the artist could theoretically deliver the five albums at any time and fulfill the delivery requirement. Legend has it that Frank Zappa once pulled this stunt when he delivered multiple albums at one time so that he could claim he fulfilled his obligations. Apparently, the record company had not safeguarded against this occurrence. On the flip side, when an artist is trying to fulfill the delivery commitment, and the label is not reciprocating, the artist could argue that the label is refusing to let the artist record and wrongfully attempting to suspend the artist for non-delivery of product. If there is no possible basis for failure to accept the recording, this could be a breach of a good faith duty or obligation by the label.

It is important to note that buried within most record contracts is a notice provision whereby any claim of breach by the artist must be submitted in writing to the label with the label having an opportunity to cure the alleged breach. If a notice is not timely and properly served on the label by the artist, the artist may have failed to fulfill a condition precedent to support a legal action for breach of contract.

Obviously, a breach of a recording contract can be argued under a myriad of instances, so the underlying contract should be closely scrutinized for potential cracks.

[part 7 next time]

Ben McLane Esq
benmclane.com

Music Business/Law Tips - "Breaking a Record Contract" (Part 5)

2012-01-11T19:45:00.000-08:00

The charge that the label committed a material breach of contract can also be a successful mechanism for an artist to utilize in a bid to leave a record company. A material breach can be alleged in many different forms, but the most common is the lack of proper payment of royalties by the label.

Just such a breach was highlighted in the court decision involving the band the Kingsmen who had a big hit with the song "Louie Louie" in the 1960s. The Kingsmen won a five year court battle in November 1998 when the U.S. Supreme Court upheld a Ninth Circuit Court ruling that cancelled the record company's contract with the group because the company neglected to pay royalties. The suit was based in part on the law of rescission which states that a party may unilaterally rescind a contract if there have been "breaches of the contract so material and substantial in nature that they affect the very essence of the contract and serve to defeat the object of the parties." This was a most egregious case because the record label - G.M.L./Gusto - had apparently never paid any royalties under the contract, even though the band's recorded version of "Louie Louie" had generated considerable sums over the years through usages in compilations, movies, and TV. In particular, the ruling called for the return to the band the ownership in the master tape of "Louie Louie" and other recordings.

In a similar 1996 dispute, the multimillion selling group the Offspring attempted to exit its contract with Epitaph Records, an independent label. The group fired the first salvo by initially declaring in no particular detail that Epitaph breached its contract. Although the matter was settled, the pressure move worked because the band later signed a lucrative deal with the major label Columbia Records.

A breach argument might also exist if there is a provision in the record contract whereby the label guarantees that a minimum amount of recorded product will be commercially released by the record company. If the company does not fulfill its commitment to release, the company may not be able to pick up the next option. However, unless there is a specific definition of "release" included in the contract, this would not be a definitive escape route.

[part 6 next time]

Ben McLane Esq
benmclane.com

Music Business/Law Tips - "Breaking A Record Contract" (Part 4)

2012-01-03T08:26:00.001-08:00

Being a minor under contract also provides a loophole for dissatisfied artists. In the current marketplace, there is a high consumer demand for teen idols (e.g., Justin Bieber, Cody Simpson). As a result, many minors are signing recording agreements. The major risk in entering a contract with a minor is that generally under California Family Code Section 6751 [and similar laws in other states] the contract is voidable at the option of the minor either "during the minority of the person entering the contract, or at any time thereafter....". In California, the age of majority has been 18 since 1971. Hence, once success is achieved, an artist could use to his/her advantage the fact that the contract was signed during minority, thereby opting to disaffirm the contract.

David Cassidy, the 1970s pop star, used this exact scenario to his advantage. As a teenage unknown, he signed a production contract to act on the TV show The Partridge Family, and to record on Partridge Family records. The contract granted the producers of the show and the recordings the right to use Cassidy's name, image and likeness. Partly as a result of Cassidy's teen idol good looks, the show and records became a runaway success and the producers cashed in by selling millions of dollars worth of recordings and merchandise. In order to force the producers to renegotiate his deal, Cassidy notified them that since he had signed the contract as a minor (21 was still the age of majority when he executed his agreement in 1970), he was disaffirming the contract and thus the producers would have to remove his name, image and voice from everything manufactured up to that point. Not having a legal leg to stand on, the producers renegotiated his deal, making Cassidy the highest paid young performer at that time.

In order to avoid a situation like the above, recording agreements in which a minor "is employed...to render artistic or creative services" (e.g., singer or performer) can be approved by the superior court, as allowed for by Section 6751, which prevents the minor from disaffirming the contract. (i.e., as if the minor had signed the contract as an adult). Approval of the court may be given on petition of either party to the contract and after a hearing and/or simply a court review of the paperwork. Although court approval of a minor contract is routinely done in the entertainment industry, not all record companies make the effort (or are too cheap or lazy) to protect their investment, and thus the artist can use this failure to the artist's advantage.

[part 5 next time]

Ben McLane Esq
benmclane.com

Music Business/Law Tips - "Breaking A Record Contract" (Part 3)

2011-12-28T09:37:00.000-08:00

California Civil Code Section 3423 provides an artist with another tactic to terminate a record deal. Equity will not require a party to perform under a personal service contract, such as a recording agreement. Equity can, however, stop an artist from performing personal services (i.e. recording) for someone else if a valid contract exists which makes the artist's services exclusive to the first party. Such a remedy is in the form of an injunction which would prevent an artist from jumping ship to another label.

Section 3423, nicknamed the "$9,000 Plus Provision", requires that a record company must make increasing minimum annual payments to an artist in order to obtain an injunction. Although somewhat complicated, the law essentially reads that a record company can get an injunction only if it contractually guarantees the artist $9,000 in the first contract year, $12,000 in the second year and $15,000 per year in years three through seven. In addition, in years four through seven, the company must have paid the artist additional sums of between $15,000 and $90,000.

An important case discussing Section 3423 is Foxx v. Williams, involving comedian Redd Foxx and his record company Dootone. A lawsuit for a declaration of rights was filed by Foxx, and Dootone attempted by cross-complaint to enjoin Foxx from performing for another company. The court found that the Dootone contract did not meet the requirements of the injunction statute because it did not guarantee Foxx any compensation, and thus Dootone could not enjoin Foxx. In expounding on the purpose of the statute, the court stated:

"An injunction which forbids an artist to accept new employment may be a harsh and powerful remedy. The monetary limitation in the statute is intended to serve as a counterweight in balancing the equities. The legislature has concluded that an artist who is not entitled to receive a minimum of $6,000 [$9,000 now] per year by performing his contract should not be subjected to this kind of economic coercion."

A similar case which sided with the label is MCA Records, Inc. v. Newton-John. There, singer Olivia Newton-John, unhappy as a recording artist on MCA, tried to terminate the relationship. MCA sought to enjoin her from recording for another record company. The contract between MCA and John did not expressly guarantee her $6,000 [$9,000 now] per year minimum compensation and thus John argued that she could not be enjoined. On the other hand, her contract did provide her yearly six figure nonreturnable monetary advances from which she was to record albums and pocket the difference between the actual recording costs and the advance (i.e., the "recording fund"). Moreover, the contract gave her exclusive control over the allocation of production costs. Under these facts, the court decided that John was, therefore, guaranteed a minimum of $6,000 [$9,000 now], and consequently MCA was entitled to injunctive relief. On the basis of this case, in order to determine whether the minimum annual payments were made under a recording fund scenario, one would have to deduct reasonable recording expenses to see if the remainder is in excess of $6,000 [$9,000 now]. Practically speaking, this method to break a contract is quite common when an artist records for a small independent label that cannot afford to pay an artist an advance.

[part 4 next time]

Ben McLane Esq
benmclane.com

Music Business/Law Tips - "Breaking A Record Contract" (Part 2)

2011-12-22T06:32:00.000-08:00

Another common technique to cancel a recording contract is the use of California Civil Code Section 2855, the so called "Seven-Year Statute". According to this statute, "a contract to render personal service...may not be enforced against the employee beyond seven years from the commencement of service under it." Hence, the Seven-Year Statute prevents a record contract from being enforceable against an artist for longer than seven years.

In general, most recording agreements run for a period of one year, followed by at least four one year optional periods (the "term"). Often, the periods are contingent upon delivery of recorded product. In other words, instead of providing that a period of the agreement will be one year, the term provision may read that a period will last, for example, "one year, or a period of eight months after delivery of a specific number of recordings, whichever is later." A term based on delivery would be open-ended, because the period is dependent upon an unknown future date when the recordings are actually delivered. However, because of Section 2855, few artist contracts are written for a period of more than seven years.

Furthermore, under Section 2855, any employee (i.e. artist) who is a party to a contract to render personal service in the production of phonorecords may not invoke the code as a means of departure until the employee first gives "written notice to the employer... specifying that the employee from and after a future date certain specified in the notice will no longer render service under the contract" by reason of the expiration of the seven year time limit.

Nevertheless, it is important to note that Section 2855 does allow for a record company to sue an artist for monetary damages if, after seven years, the artist terminates the contract and signs with a new company but still owes the first company one or more records. Obviously, however, since the music industry is generally unpredictable with respect to sales, such damages would be speculative.

Interestingly Ms Braxton [discussed last time], who signed her first recording agreement in August 1989, initially utilized Section 2855 when - prior to her bankruptcy petition - she filed a suit against LaFace in the Los Angeles Superior Court on the basis that her agreement became invalid in August 1996. Apparently, before the civil action was filed she had held discussions with her label about adjusting the terms of the contract, but the talks had reached an impasse. (Again, it would appear that the filing of the Section 2855 action was a negotiating ploy.) LaFace countersued Braxton for breach of contract and then Braxton filed the bankruptcy action which put a stay on the lawsuits.

In the same fashion as Braxton, other high profile artists have used Section 2855 as a lever in the renegotiation of - or exit from - an existing agreement. In 1992, recording star Luther Vandross filed a suit against Epic Records in Los Angeles Superior Court claiming he was no longer bound to his 1981 contract. The very next year, former Eagle Don Henley became embroiled in a Los Angeles Superior Court action with his label, Geffen Records, wherein Henley sought to terminate his 1984 contract. Thereafter, in 1994, Henley's Eagle brethren Glenn Frey was involved in a similar lawsuit when MCA Records sued Frey after he attempted to end his deal. In that same year, the band Metallica challenged its contact with Elektra Records when it asked the court to dismiss the band from its contract. In 1997 the Smashing Pumpkins notified Virgin Records that it would not render future services to the label under the contract it signed in 1991. These disputes have all been settled out of court, and thus the judiciary has not had a chance to rule on the implications of Section 2855.

Equally important, the Vandross, Henley and Frey cases involved an interesting issue that was not adjudicated because of the settlements, but which might impact the outcome of such a situation if it went to trial. In these three matters, although the original contracts between the artist and label were more than seven years old when the artist attempted to leave the deal, there had been subsequent amendments made to the contracts, and the amendments were not seven years old. Hence, the labels argued that the amendments counted as new contracts. Fortunately, on this point there is some guidance. In a New York case involving singer Melissa Manchester and her record company Arista, the court held that an amendment to a contract can stop the seven year clock (or start it anew) if the amendment is so all- encompassing as to amount to a new contract, and if the artist freely elected to extend the term from an equal bargaining position. The amendment issue notwithstanding, Section 2855 is the device most commonly introduced by a disgruntled artist when seven years has elapsed since the date of contract execution.

[part 3 next time]

Ben McLane Esq
benmclane.com

Music Business/Law Tips - "Breaking A Record Contract" (Part 1)

2011-12-11T12:44:00.000-08:00

A musical artist, under certain circumstances, can break
an existing recording agreement.

For a new musical artist, securing a recording agreement with a record or production company is the golden ticket. Often, however, the gilt wears thin due to a panoply of circumstances, and the artist will seek freedom from the agreement. Typically, an unknown artist has limited negotiating power, and a first record deal is usually one-sided in favor of the label. Later, after a hit record, the artist might feel that the agreement is adverse in light of the artist's newfound notoriety. In addition, the artist might believe that another record company would be better suited to further the artist's career, or, more simply, pay the artist a greater amount of money. This situation has caused many an artist to seek (or threaten) some sort of legal recourse against the record company as a means to leave the contract, or else to force a renegotiation of the agreement. Over the years, various tactics have been used by artists as a way of cancelling a record contract.

Recently, a novel and highly publicized approach has been taken by a small group of best selling recording artists in their attempt to leave an exclusive contract situation. They have filed for bankruptcy. The Federal Bankruptcy Code states that existing contracts may be rejected if they impair a debtor's ability to get back on his feet or recover financially. Bankruptcy law has thus armed an artist seeking to break or renegotiate a contract with a powerful weapon.

In January 1998, best-selling vocalist Toni Braxton filed for Chapter 7 bankruptcy in the U.S. Bankruptcy Court in Los Angeles. Although her bankruptcy petition ostensibly was filed on the grounds that her liabilities exceeded her assets, music industry pundits believe that the core reason she filed was so the bankruptcy court would void her existing recording agreement with her record label LaFace.

Braxton's 1993 debut album and her 1996 follow-up have sold an estimated 15 million units worldwide. This enormous success begs the question: How can an artist who has sold approximately 15 million albums go bankrupt? According to her label, following the success of the 1996 release, Braxton demanded more money and said that she would no longer record for the label if it did not meet her demands. She made this demand even though she contractually owed the label more albums. The label did not acquiesce and Braxton apparently implemented the bankruptcy action in an attempt to extricate herself from what she viewed as an inequitable contract.

Braxton is not the first successful recording artist to file for bankruptcy while engaged in a contract dispute. In 1993, the members of the act Run-D.M.C. filed for bankruptcy and emerged from the proceeding with a new contract with Profile Records. Likewise, in 1995, the trio TLC filed for Chapter 11 protection in Atlanta and sought to have its contract with its label LaFace abrogated by the court. In 1996, the group settled out of court with LaFace by securing a new contract.

Such a strategic move is risky because there is no guarantee that the bankruptcy court will reject the contract in question. In 1986, actress Tia Carrere, who was seeking to improve her contract with ABC-TV, filed a bankruptcy petition in the U.S. Bankruptcy Court in Los Angeles. The judge dismissed the petition, saying she did not file in good faith, but rather for the primary purpose of rejecting a personal services contract. This ruling was cited by I.R.S. Records in the label's successful bid to have a Chapter 7 petition filed by the members of its then exclusive recording act Concrete Blonde dismissed. However, the gamble paid off for Braxton who signed a new contract with LaFace in November 1998.

The serious issues raised by the Braxton scenario may one day result in new statutory law. In 1999 there was a bankruptcy bill pending before the House Judiciary Committee which would prevent existing recording contracts from being made void within bankruptcy proceedings. The Recording Industry Association of America (RIAA) sought this special interest legislative relief for what its officials have said is a growing problem of artists and artists' representatives either threatening bankruptcy or filing bankruptcy to get out of their contracts. Should this or a similar bill one day pass, it would be the death knell for the use of bankruptcy as a technique for breaking contracts.

[Note: more recently Braxton used the bankruptcy tactic again against her most recent label/to avoid contractual obligations, and although I have not researched it I understand she was successful.]

[part 2 next time]

Ben McLane Esq (with Venice Wong Esq)
benmclane.com

Music Business/Law Tips - "Video" (Part 2)

2011-11-30T13:42:00.000-08:00

If an artist is signed to a label, a video usually will be produced to help promote the release. A video has two aspects: sales tool (i.e., MTV) and potential product (i.e., home video sales). Although a video is mostly a promotional tool, virtually all record contracts require that the artist grant video rights to the label. For contract purposes, a video is treated like a record. Therefore, the concept of recoupment comes into play. Recoupment means that the label will have the right to recoup the costs of the video, usually from all sources of income that the artist might make. As with records, the label will usually initially pay the production costs of the video. There is a strong argument that since videos serve to promote a record, not to generate sales of the actual video, only a part of the costs of the video should be recouped from the artist's royalties. Thus, most labels only require recoupment of 50% of the label's expense for production costs.

At first glance, it would seem that a signed artist would want to demand a guarantee of a as many videos as possible in the record contract. However, the artist must keep in mind that a label will usually spend an average of $25,000+ on a video. Since half of these costs are recoupable from the artist's royalties, a promotional video might not always be the wisest choice. The key is to try and keep the budget low. An artist on a label will also be concerned with creative control. Yet, unless an artist is quite successful, the label generally controls the content and the concept of the video. Finally, it is not reasonable to expect to make a profit from a video. There are rare exceptions (Madonna and Michael Jackson come to mind), but again the reason for making a video is normally to hype a record.

In conclusion, if an artist is unsigned, in most instances a video (with the exception of an internet only YouTube low budget video) is probably not the most practical way to spend money because chances are it will not be seen on mainstream TV channels like MTV. If an artist is signed, although the label will probably insist on a video, the artist should strive to get the budget low so the artist will not owe back as much money to the label.

Ben McLane Esq
benmclane.com

Music Business/Law Tips - "Video" (Part 1)

2011-11-19T10:24:00.000-08:00

Video is a subject that is synonymous with the music business today. Essentially, the main purpose of a video is to promote a record and to help build an image for an artist, not necessarily to make an artist money. However, videos can make money for an artist indirectly because a video can increase record sales, merch sales, and help gain fans for shows. An artist can get utilize a video to get bookings, interest a manager/agent, and perhaps get a record deal. This article will discuss video as it pertains to unsigned and signed artists.

If an artist is unsigned, a full blown video is probably not the best use of resources unless: (1) the artist has a great song along with a great visual or story, (2) the artist can afford to produce a professional video, and (3) the artist can have the video broadcast to a wide audience. Traditionally, the best exposure for a video is of course MTV and similar music video sites. However, getting on MTV is next to impossible without being on a reputable label. It is possible to get on local cable programs with a well produced video. Additionally, many syndicated video and talk shows might consider a video by an unsigned artist. Of course, with the advent of YouTube, Vimeo, Vevo, etc., anyone can upload an amatuer or fully produced video on the internet as well since there is no barrier/gatekeeper, and sometimes the video can go "viral" which can acheive the same end result as being on MTV (but without some promotion its like a grain of sand on the beach).

[part 2 next time]

Ben McLane Esq
benmclane.com

Music Business/Law Tips - "Union" (Part 2)

2011-11-08T14:00:00.000-08:00

As a member of the AFM, one must pay an initiation fee, as well as quarterly dues. However, the benefits are comprehensive. As well as better pay and working conditions, benefits include, but are not limited to: a pension, job referrals, insurance, legal counsel, discounts, collection of unpaid fees, consultation, industry contact information, workshops, etc.

One drawback to being an AFM member is that a person may not work for employers that are not signatory companies. Doing so may result in fines or expulsion from the union. An obvious problem is that many small clubs/coffeehouses and small record companies cannot afford to pay the union minimums. For a musician just starting out his or her career, these smaller outlets are the only supportive showcases for their talents. Many artists work "under the table" and take the risk.

The important question to answer is when, or if, to join the AFM? The best guideline would be for a musician to join the union when he or she has decided to become a full-time professional musician and when there is some reasonable basis to assume that one can survive as a musician.

Ben McLane Esq
benmclane.com

Music Business/Law Tips - "Union" (Part 1)

2011-11-02T09:31:00.000-07:00

If a person is planning to pursue a successful career as a professional musician (either as a player or vocalist), he or she will eventually have to join the American Federation of Musicians (AFM) which is the musicians' union. There are other music-related unions such as the American Federation of Television and Radio Artists (AFTRA) which represents singers and radio/television talent, and the Screen Actors Guild (SAG) which represents actors; however, the AFM will be the focus of this article.

The AFM is a labor union whose membership is comprised of musicians. The AFM regulates wages and working conditions as well as providing a level of job security to its members. The essential reason the AFM formed was because musicians bargaining as a group would have greater negotiating strength than individual musicians. The AFM is a national union with local charters which have their own specific territories (e.g., AFM Local 47 in Los Angeles). Each local union sets minimum wage scales at clubs and theaters in its own jurisdiction. As an AFM member, a musician is free to negotiate wages above union scale, the musician simply cannot work for less than scale.

All of the major record companies have signed an agreement with the AFM whereby as an employer they promise to hire only union members and to provide at least the minimum pay and working conditions set forth in the agreement. Any music employer signing such an agreement is called a "signatory company". As a member of the AFM, a musician authorizes all employers to deduct "work dues", which are a small percentage of the scale wages, from their pay and to have the dues sent to the local union.

[part 2 next time]

Ben McLane Esq
benmclane.com

Music Business/Law Tips - "Trademark" (Part 2)

2011-10-25T09:57:00.000-07:00

If the band cannot afford a federal registration, there are some things which can be done to protect the name. First, do a name search to find out if the name is unique. Google is the easiest, or some large libraries have a publication called (Index To) The Trademark Register. Or, one could check the Billboard International Talent & Touring Directory. Additionally, a person could order a name search report from a professional searching bureau for a few hundred dollars. Such bureaus are listed in the yellow pages on online under "Trademark Consultants." If the name is free and clear, the letters "TM", although unofficial, can be utilized to indicate rights to an unregistered service mark. Finally, the most important thing an act can do is to use the name publicly and consistently.

Assuming the act will seek a federal registration and has done a thorough search, the application procedure basically involves submitting (1) the appropriate application form (online or hard copy), (2) proof of public performance (e.g., advertisement or promo material for the public performance), and (3) the filing fee of approximately $325-375 (subject to change).

In a group situation, it is also important to come to some agreement in writing as to who owns the group name, and what will happen if a member leaves the group. The lack of such an understanding has led to a plethora of lawsuits.

The purpose of this article was to familiarize an artist with the way to protect one of the most important attributes that the public will associate with an act: the name. Since trademark matters can be somewhat complex, it might be wise to consult an attorney who can assist with the search and registration process.

Ben McLane Esq
benmclane.com

Music Business/Law Tips - "Trademark" (Part 1)

2011-10-17T06:57:00.000-07:00

A band contemplating a serious career in the business would be well advised to take the necessary steps to protect its name by obtaining trademark protection. That way, the act will not only be secure in knowing that it has acquired the right to the name, but also the artist will not be sued for infringing someone else's name.

A name used for entertainment services is actually known as a service mark. Although a service mark is akin to a trademark and is governed by the same law, a service mark is used to identify services offered to the public (e.g., live performances by a group). A trademark, however, distinguishes symbols used on tangible physical goods (e.g., a record or merchandise displaying a group name). Neither of the above should be confused with a copyright which instead protects works such as songs and sound recordings.

In the United States, as opposed to some other foreign countries, rights in a group name are usually created by use of the name, not registration. Therefore, the act must actively perform under its name, advertise under its name, and sell product bearing its name to the public. Nonetheless, it is still advisable to register the service mark with the U.S. Patent and Trademark Office in Washington, D.C. This not only allows the use of the (R) symbol which gives notice to the public of your rights, it also will allow an artist to get an injunction and collect damages.

[part 2 next time]

Ben McLane Esq
benmclane.com

Music Business/Law Tips - Taxes (Part 2)

2011-10-08T19:45:00.000-07:00

C. Car. Gas, repairs, parking and depreciation are deductible in total. As an option, in lieu of deducting all the car expenses added together, an artist can simply keep track of the mileage and just take the standard per mile deduction.

D. Entertainment. Meals, drinks, etc. are 50% deductible so long as "primarily" business related.

E. Equipment. For an artist, many tools of the trade are deductible. These would include such things as musical equipment, instruments, computer, etc. Moreover, if an artist uses a portion of their home or apartment on a regular basis for business (e.g., practicing, recording, booking, etc.), that portion is deductible as a home office. This means that a percentage of the rent/mortgage and utilities are deductible. For instance, if an apartment has 4 rooms and 1 is used for business, 25%of the rent and utilities are deductible expenses.

The foregoing is only meant to give an artist an overview of potential business deductions. It is advisable to contact an accountant before filing a tax return to confirm that the artist's particular situation allows for these, or other, tax deductions.

Ben McLane Esq
benmclane.com

Music Business/Law Tips - "Taxes" (Part 1)

2011-09-29T21:20:00.000-07:00

If a person is actively pursuing a career as a musical artist, and not just playing/writing as a hobby, that person is engaged in a trade or business (i.e., the music business). Hence, an artist can use the Internal Revenue Laws of the United States to his or her advantage. This article will discuss the main deductions that an artist can utilize for the purposes of paying taxes.

So long as an artist incurs expenses that are "ordinary and necessary" in pursuit of that artist's career, the expense should be deductible. However, any expense deducted from a tax return must be backed up by documentation. Therefore, it is imperative that an artist keep complete records of any and all expenses paid in pursuit of the artist's career. Usually, the record will be a receipt. Note that the IRS does not consider a cancelled check, by itself, adequate to verify a deduction; a receipt is more official and credible. An account book/file is also recommended to keep track of expenses. The main deductions to be aware of are as follows:

A. Travel. This would include air, bus, taxi or train fares, and any related transportation.

B. Meals and Lodging. These are deductible if related "primarily" to business.

[part 2 next time]

Ben McLane Esq
benmclane.com

Music Business/Law Tips - "Songwriter Agreement" (Part 2)

2011-09-21T09:57:00.000-07:00

Statements. Once the song is recorded or printed, the writer is entitled to receive royalty statements at least once every six months. Further, the writer should be allowed to audit the publisher's books to see if royalty calculations were done correctly.

Writer's Credit. The publisher must see to it that the writer receives proper credit on all uses of the song.

Arbitration. In order to avoid large legal fees, it is advisable to include a provision to allow an arbitrator to settle any disputes between the writer and publisher.

Future Uses/Rights. Any use/right not mentioned specifically in the contract should be retained by the writer because it could be a valuable bargaining chip in the future.

Performing Rights Affiliation. The writer must affiliate with either BMI, ASCAP or SESAC and the contract should read that all writer performance royalties must be paid directly to the writer by the performing rights organization; and, if the publisher should be paid these monies in error, the monies must be immediately sent to the writer.

Because of the length of a publishing relationship and rights transferred, the writer should obtain an experienced person to assist with a contract negotiation, preferably an entertainment attorney.

Ben McLane Esq
benmclane.com

Music Business/Law Tips - "Songwriter Agreement" (Part 1)

2011-09-12T09:27:00.000-07:00

Important decisions a songwriter faces concern which publisher to sign with and what type of contract to sign. Publishing deals are of two basic kinds: the single song contract (generally for one song) and the exclusive songwriter's contract (for all songs written during a period of time). Although these two deals are quite different, they have one thing in common that the writer must be aware of: copyright ownership is transferred to the publisher. Therefore, it will be a long-term deal. This being the case, the writer needs to be certain that he/she is entering into a fair contract. Some basic points that a songwriter's contract include are the following:

Reversion Clause. There should be a provision that if the publisher does not secure a commercial release within a specified time (i.e., one year), the songwriter can terminate the deal.

Work For Hire. If it is a single song deal, make sure that "employment for hire" and "exclusive writer agreement" phrases are not included. Also, there should be no options for future songs.

Changes To Song. The publisher should only be able to change the title, lyrics or music with the songwriter's consent.

Royalty. The songwriter should receive at least fifty percent (50%) of all income earned from the song(s).

Deductions. The costs of demos should be paid 100% by the publisher.

[part 2 next time]

Ben McLane Esq
benmclane.com

Music Business/Law Tips - "Royalties (computing)" [Part 2]

2011-09-05T09:31:00.000-07:00

Since new, unknown acts do not have a guaranteed audience, the label is hesitant to grant a high rate because there a is good chance that the artist will never even sell enough records to recoup all of the costs that go into releasing a record (i.e., recording, promotion, pressing, etc). In comparison, a well-known artist is almost assured of making a profit and hence would receive a higher rate.

The artist must be knowledgeable about what the royalty is based on. The base is usually the suggested retail list price, but oftentimes the wholesale price of the record acts as the base upon which the royalty is computed. Since the wholesale price is roughly one-half of the suggested retail list price, the artist should receive approximately twice the royalty that would be allowed under the retail base price system.

The artist should try to negotiate escalations for royalties. In essence, this means that the artist is rewarded in the future with a higher rate if the artist reaches certain sales levels. For example, it the artist has a 10% royalty, the rate would be bumped up a percentage point if 250,000 units were sold. Increases can continue for even further sales levels. Escalations can also be tied to when the label picks up an option for another year/record.

Royalties for sales outside of the United States are usually reduced. The reduced rates depend upon whether sales are in major foreign markets or not. For example, Canadian sales usually receive 85% of the U.S. rate; sales in the United Kingdom, Germany, France, Japan and Australia receive 75% of the U.S. rate; the remainder of the world receives approximately 50% of the U.S. rate. The justification for the lower foreign rate is that the label is probably licensing the product to an independent foreign distributor that must also be compensated.

Other things which affect the rate but which were not discussed here consist of, but are not limited to, packaging deductions, free goods, and whether a record is a budget release or not.

Ben McLane Esq
benmclane.com

Music Business/Law Tips - "Royalties (computing)" [Part 1]

2011-08-29T07:38:00.000-07:00

Once an artist is fortunate enough to obtain a deal from a reputable record company, the artist is probably most interested in how much money will be made on sales of the records which are released. This article will briefly explain some of the elements of an artist royalty clause.

The artist royalty clause determines how much money an artist will receive from the sales of CDS, downloads, etc. In most contracts, the royalty is expressed in terms of a percentage, rather than an actual dollar or cent amount. The percentage is called the "rate".

Generally, for a new artist, the rate will range from 10% to 15% of the selling price. However, some smaller independent labels might offer even a lower percentage (or a net profit split). As with most things in a contract, the rate is negotiable depending on the bargaining power of the artist. A new group with no proven sales record that has never toured will probably not be able to achieve a very high rate. However, if the A&R staff feels that an act has tremendous sales potential and/or there is a bidding war between labels, the rate will tend to increase.

[part 2 next time]

Ben McLane Esq
benmclane.com

Music Business/Law Tip - "Reserves" (Part 2)

2011-08-18T16:42:00.000-07:00

Generally, the label does not state any percentage limit on reserves in the contract. Instead, it is common to see that "reasonable" reserves will be held back. If a percentage is stated, it will be lower for established artists and higher for new artists. Additionally, different configurations have different reserves percentages because of the return history for that type of recording. For example, usually more singles and EPs are returned than CDs and cassettes. (Note there are no returns on digital, so reserves should not apply to that configuration.)

An artist needs to be mindful of the reserves percentage because it can substantially reduce the initial royalty payments and it postpones the date that the artist will be paid. An artist can negotiate protections into the contract. First, the artist should have a specific reserves percentage in the contract (25% is common for an album). Second, the artist should limit the amount of time that a label can withhold royalties (i.e., "liquidation period"). Instead of just accepting that reserves will be liquidated within a "reasonable" amount of time, the artist should ask for a specific liquidation period (12 to 24 months is common).

Ben McLane Esq
benmclane.com

Music Business/Law Tips - "Reserves" (Part 1)

2011-08-12T07:33:00.000-07:00

Every record contract includes a hazy and mysterious concept called "reserves". Since this concept can have such a negative impact on the artist's ability to be paid royalties, it is important that an artist be aware of this clause and know how to limit it.

The language of a record contract generally sets forth that royalties will be paid to the artist only on records that are actually sold to the general public, not on records that are manufactured and shipped but eventually returned because they are unsold (i.e., "returns"). Depending upon the particular artist, the number of records that might be returned can be substantial. For example, if the label ships 300,000 records to the stores, 150,000 might be returned as unsold goods. Imagine what would happen if the label based its royalties payable to the artist only upon the amount of records shipped; it would have paid royalties on 300,000 units instead of 150,000, resulting in an overpayment of 150,000 records. Hence, since the label knows that there will normally be returns, to protect itself it withholds a certain percentage of an artist's royalties in anticipation of such returns. This ensures that the label will not overpay an artist.

[part 2 next time]

Ben McLane Esq
benmclane.com

Music Business/Law Tips - "Record Clubs" (Part 2)

2011-08-04T16:56:00.000-07:00

The club giveaway offers can have a dramatic impact on an artist. First, the artist will only receive about 50% of their usual royalty rate on sales through clubs. This is because the royalty payable by the club to the label is very low (less a container deduction), based on 85% of sales. The rationale for the lower royalty is that the marketing costs are higher for record clubs and there are a lot of people who never pay for the records ordered. Moreover, the mechanical royalty to the songwriters is also reduced (usually 75% of 75% of the statutory rate). Finally, there is the unseen factor that the clubs' special offers devalue the product in the eyes of the public. If the public can buy eleven CDs for a penny, how can an artist be worth $25 for a concert? Because of the low monetary rate of return to the labels and acts, some major record companies are no longer licensing their catalogs to the clubs.

When an artist signs a record contract, there is always language that allows for the label to license the artist's product to record clubs, for a reduced royalty to the artist. However, the artist can attempt to negotiate certain provisions into the contract that will lessen the financial hit to the artist from record clubs sales. First, the act can try to exclude record club sales entirely. Second, the artist can ask that the record company agree that the number of royalty free records distributed by the clubs will not exceed the number of records sold. Hence, even if the number of free goods exceeds the number sold, the label still has to pay a royalty on that excess. Third, the act can request to be paid a straight 50% of the company's net licensing receipts.

Record clubs will probably always be around in some form (but are evolving due to the internet). Although they can provide exposure and sales to an artist, it is important for the artist to try and maximize the royalty payable on such club sales.

Ben McLane Esq
benmclane.com

Music Business/Law Tips - "Record Clubs" (Part 1)

2011-07-26T15:23:00.000-07:00

To the consumer, joining a record club might seem like an inexpensive way to obtain some music. However, the recording artist that creates the music should understand how record club sales influence that artist's bottom line.

Record clubs first became popular long ago when there were no major record chain stores. To some in remote areas, a record club would be the only way to buy a certain record. These clubs generally license the entire product catalog (i.e., records) of various record companies. The clubs then manufacture and distribute these records to their club members for very low prices. Unlike product sold at retail stores, clubs have the right to give away one free good for every one sold. They must have the right to do this; otherwise, they would not be able to make offers such as eleven CDs for a penny. This is problematic because an artist receives no royalty on free records distributed by clubs. Also, there is no way for the record club to limit how many copies of one particular artist's records are given away. Hence, a popular artist would be negatively affected.

[part 2 next time]

Ben McLane Esq
benmclane.com

Music Business/Law Tips - "Raising Money" (Part 2)

2011-07-11T21:39:00.000-07:00

BORROWING

This involves accepting a loan for a fixed sum of money and agreeing to repay the sum plus interest by a certain date. Loans usually must be paid back whether or not the project makes money. There are two basic loan sources:

Commercial Sources. A commercial source of money would include banks, finance companies and credit cards. In particular, banks generally want to secure a loan with collateral, such as a home, auto or equipment. (If the artist is established, copyrights might be acceptable collateral.) Unfortunately, most artists are not in a position to have collateral in place. However, if an artist has some credit cards and has been paying rent consistently, a bank may loan the artist a small sum. Otherwise, if the artist does not qualify for a loan, the artist can ask a relative or friend with a good credit rating to be a co-signer for the loan. Because the co-signer is agreeing to make the payments if the artist does not, a co-signer is accepting a great responsibility.

Family And Friends. Normally, family and friends will lend money at a lower rate of interest with a more flexible repayment schedule. The downside of this type of loan is that there is a strong potential to strain the relationship if repayment becomes a problem. When obtaining this type of loan, the artist can prepare a simple promissory note. For example: "On or before December 31, 20XX, Artist agrees to pay Lender the sum of $2,000.00 plus 8% interest from April 30, 20XX, signed, Artist."

Ben McLane Esq
benmclane.com

Music Business/Law Tips - "Raising Money" (Part 1)

2011-07-04T14:47:00.000-07:00

Many struggling artists have the need to record some music or finance a tour, only they lack a necessary element: money. This article will explain different ways to raise capital in order to finance a project.

SELF-FINANCING

In this instance, the artist uses his or her own money. On the positive side, the artist will: (1) retain artistic control, (2) be free of financial obligations to a lender, (3) not be bothered with a maze of paperwork, and (4) will reap all of the monetary benefits. On the negative side, the artist will: (1) bear all of the risk, and (2) will have to be solvent enough to finance the project (which is probably not the case).

INVESTMENTS

Another source of money is investment from a financial backer who can be either active or passive. An active investor will put up money and become involved in the management of the project. This type of arrangement includes a general partnership, joint venture or corporation. A passive investor will put up money but have no role in the management of the project. This type of arrangement is usually a limited partnership, and the artist has to be careful when accepting money from a passive investor because there are security law regulations which may apply. Thus, a professional should be consulted before choosing this latter route.

[part 2 next time]

Ben Mclane Esq
benmclane.com

Music Business/Law Tips - "Publishing Company" (Part 2)

2011-06-13T10:49:00.000-07:00

Third, the publisher must register the songs to be published with the Copyright Office in Washington, D.C. in the name of the publishing entity. If the songs have already been copyrighted under the name of the writer, assignments need to be filed which transfer the ownership of the songs to the name of the publisher.

Fourth, it is advisable to affiliate with the Harry Fox Agency in New York. For a small percentage fee, the Harry Fox Agency acts as the publisher's agent to issue mechanical licenses (which allow others to record the songs), collects the mechanical royalties, and accounts to the publisher.

Finally, if the artist ends up signing a record deal, third party publishers (major or indie) will then want to become the publisher (or co-pubisher) because a record deal almost always ensures that the songs will generate some income. By acting as his or her own publisher, this does not mean that the writer cannot one day be published (or co-published) by a larger, more established publishing company in exchange for an advance and better promotion of the songs. The writer simply has to assign the publishing (or part of it) over to the major or indie publisher.

In conclusion, if an artist is planning to release his or her own record and is without a publisher, forming a publishing company might be advisable and the above-mentioned steps should be helpful in doing so.

Ben McLane Esq
benmclane.com

Music Business/Law Tips - "Publishing Company" (Part 1)

2011-06-06T13:51:00.000-07:00

The area of the music business known as publishing can be very lucrative. Because of the income potential, many writers form their own publishing companies. Some writers do this in order to "keep their publishing," while others do so because the established publishing companies have shown no interest. However, getting published means nothing if the songs are not recorded or exploited in some other way. Thus, If a writer is also an artist that has an independent record coming out, or has a song being used in a film or on television, the writer should consider forming a publishing company.

It is easy to form a publishing company assuming that there is a record coming out or if a film or television show is using one of the writer's songs. First, the writer must affiliate with ASCAP, BMI or SESAC. (All 3 if the writer intends to publish other writer's songs as well.) The reason for joining is that these rights societies pay the publisher performance royalties if the songs are played on radio, television, etc. These societies will not let a publisher use a name which is similar to an existing company because the wrong party might be paid accidentally. An uncommon name should be selected for the company so that the name will clear. If the publisher is also a writer that has not yet affiliated with either SESAC, BMI or ASCAP, he or she should affiliate as a writer with one of the three societies at the same time as joining as a publisher. Because the societies require that the song's publisher be affiliated with the same society as the song's writer, the publisher will have to affiliate as a publisher with the same society joined as a writer. Part of the registration process will involve registering all songs written by the writer with the performance rights society selected.

If the publishing entity will not be operating as a corporation or LLC, the second step is to file a "fictitious name statement" with the county recorder. This puts the public on notice that the publisher is doing business under a name that is different from the writer's surname. In California, this statement is necessary in order to open a bank account, and to cash checks made out to that name.

[more next time]

Ben McLane Esq
benmclane.com

Music Business/Law Tips - "Performance Royalty" (Part 2)

2011-05-23T18:25:00.000-07:00

BMI, ASCAP and SESAC represent both songwriters and publishers. It should be noted that even where a songwriter is represented by a third party publisher, that songwriter needs to also join a society because songwriters and publishers are paid separately by the societies. One would normally join when they have a song being performed in some medium (i.e., radio, tv, internet). As for which organization is best, each songwriter will have to decide that for themselves because it is difficult to say with certainty which society pays more. BMI, ASCAP and SESAC all have websites and will be happy to send out information brochures to interested applicants.

Choosing a performing rights society is an important decision for a songwriter to make because if a song ever becomes a hit, the performance royalties can be substantial. Thus, any serious writer should find out about affiliating with either BMI, ASCAP or SESAC.

Ben McLane Esq
benmclane.com

Music Business/Law Tips - "Performance Royalty" (Part 1)

2011-05-16T08:38:00.000-07:00

There are several ways that songwriters can make money in the music business. One of the most significant is from royalties generated by the public performance of their songs. These royalties result from what are called "performance rights".

In the United States, "performance royalties" are paid out mainly by three performance rights societies, BMI, ASCAP and SESAC (most foreign countries also have their own societies). Under the copyright law, a songwriter controls the public performance of that songwriter's songs. In essence, a songwriter designates either BMI, ASCAP or SESAC as his or her agent for the public performance rights of that songwriter's songs. A songwriter can only affiliate with one society at a time. BMI, ASCAP and SESAC have arrangements with the parties - such as radio, television, concert venues, restaurants, etc. (essentially any user who performs music publicly) - who want to use the songs in the societies respective catalogs. For a licensing fee, BMI, ASCAP or SESAC will grant to that user what is called a "blanket license", which means that the user can play any song, by any songwriter or publisher affiliated with that society, any number of times. It must be stressed that fees are collected from the entity or venue user, not from any actual performer.

The money earned by a songwriter from the societies (i.e., the performance royalty) is proportionate to the volume of airplay or performances of the songwriter's songs. Performance royalties are based on extremely complicated formulas. Basically, however, the societies monitor radio and television airplay to determine how often a song is heard and by how many people. The larger the audience and the more times a song is played, the more the income. Since it is impossible to cover all media outlets, BMI, ASCAP and SESAC rely on estimates based upon samples as well as data tracking software. After deducting operating expenses, the societies divide the fees up and pay it to their affiliated writers and publishers. The societies pay quarterly.

[part 2 next time]

Ben McLane Esq
benmclane.com

Music Business/Law Tips - "Name" (Part 2)

2011-04-28T19:28:00.000-07:00

B. There could be a question as to who owns the name between two, or more, different groups who all perform under the same name. The actual ownership is usually decided by which artist performed under (i.e., used) the name first. However, there is a legal term called "secondary meaning" which could override first use. A secondary meaning is when the public identifies a name with a particular artist. The Rolling Stones are a good example. There is no question as to who this name refers to. It could be that another act using the name the Rolling Stones was around first, but the public identification is with the famous group. If the artist is just starting out and finds itself in a situation where there is a rival claim to the name, it is probably better to change the name early on to avoid legal hassles.

C. There could be a question as to who owns the name between the members of a group. This becomes a problem if a member leaves or the group breaks up. It is advisable for the group to enter into a partnership agreement, or form a corporation, so that this issue is dealt with in advance.

An artist should also be wary of any record label that attempts in the contract to have ownership rights in the name transferred to the label. The artist must refuse this request because it is unfair for the label to benefit from owning a name that the artist created and developed.

In conclusion, a name is very important and great care should be taken in selecting it, protecting it and clarifying ownership in it.

Ben McLane Esq
benmclane.com

Music Business/Law Tips - "Name" (Part 1)

2011-04-19T15:10:00.000-07:00

The professional name that an artist performs under is a valuable commodity to both the artist and to any record company that releases the artist. Both the artist and the record company should be concerned that the name is protected, and that the rights in the name are reserved and understood. Usually, a record contract will have provisions dealing with the name, whether it is the artist's real name or a professional name. This article will discuss some of the common problems surrounding names.

The record label will essentially be concerned with two aspects of the name. First, the label will demand that the artist warrant and represent that the name used by the artist is in fact owned by the artist. Second, the label will demand that the artist grant to the label the right to use the name for publicity and promotion of the artist's recordings.

Often, the ownership of the name is disputed. There are three common scenarios:

A. There could be a question as to who owns the name between the artist and a third party (i.e., producer, production company, label, manager). In these situations, there is usually a contract between the artist and the third party that sets forth who in fact owns the name.

[part 2 next time]

Ben McLane Esq
benmclane.com

Music Business/Law Tips - "Merchandising" (Part 2)

2011-04-12T06:06:00.000-07:00

Term. This period is usually one or more years, or until the advance is recouped. The artist should make sure it has the right to repay the advance so that the deal does not drag on if sales are slow. The merchandiser will want to have a sell-off period (generally six months) after the deal ends in order to finish selling the goods that were manufactured. However, there should be no right to manufacture any further items.

Territory. The territory can be worldwide or rights can be licensed on a region by region basis.

Creative Control. The artist should insist that it has approval over any artwork which will be marketed so that shoddy or negative merchandise does not enter the marketplace.

The sale of merchandise can be very lucrative depending upon the type of artist because some forms of music lend themselves better to the sale of merchandise. Yet, since most popular artists will enter into some type of merchandising agreement, knowledge of the parameters of the contract will help ensure a fair deal.

Ben McLane Esq
benmclane.com

Music Business/Law Tips - "Merchandising" (Part 1)

2011-04-05T16:03:00.000-07:00

Signed artists, as well as unsigned artists that tour and have a strong following, can make a considerable amount of money by selling merchandise such as T-shirts, jackets, buttons, bumper stickers, posters, etc.

When an artist is preparing to tour, the artist will enter into a merchandising agreement with a merchandiser. The artist licenses to the merchandiser the right to use the artist's name, likeness or logo for the manufacture and sale of merchandise. In exchange for the license, the merchandiser pays the artist a royalty on the goods sold. Artists and their representatives beware because many record companies try to obtain the exclusive merchandising rights to the artist when the artist signs a recording contract.

The merchandising agreement consists of a few basic deal points:

Royalty. The royalty will either be a percentage of the gross sales of the item sold (usually from 25%-50%), or it will be in the form of a flat fee per unit sold.

Advances. Although the amount of the advance depends upon the stature of the artist, it can range anywhere from $0 to over $1,000,000. As with record royalties, merchandising advances are recoupable from royalties.

[part 2 next time]

Ben McLane Esq
benmclane.com

Music Business/Law Tips - "Management Agreement" (Part 2)

2011-03-27T11:37:00.000-07:00

Further, the Agreement will have a time limit, or "term". The average term is three years. Normally, there is an initial number of years and then "options" for additional years, with the manager generally having the option power. The artist can limit the term by requiring "performance standards" whereby, for example, if the artist does not obtain a recording agreement or does not make a certain amount of money in the initial period, then the manager cannot pick up an option for more years.

Moreover, the Agreement will set forth the manager's fee, which on average is fifteen to twenty percent "of gross earnings" (i.e., before deductions) from all aspects of the artist's career. Yet, the artist can exclude certain monies from the manager's commission. If the artist, for example, is already a successful songwriter or actor, the manager should not be able to commission those earnings. Further, there are other monies which only "pass through" the artist's hands and which the artist never really earns. These, too, should be excluded and consist of: recording costs, tour support, independent promotion money, producer fees, and live gigs where the "net" is minimal.

Finally, with respect to commissions, the Agreement should have what is known as a "sunset clause" on activities which occur after the termination of the Agreement. Although a manager normally wants to be paid perpetually on sales of records released during the term, the band can negotiate that the percentage is reduced over a span of a certain number of years until the manager is no longer entitled to any commission.

Although this is not an exhaustive list of the important points, an artist needs to at least have a grasp of these concepts before he or she signs on the dotted line.

Ben McLane Esq
benmclane.com

Music Business/Law Tips - "Management Agreement" (Part 1)

2011-03-10T10:21:00.000-08:00

Once an artist has decided to work with a manager in which there is mutual trust and belief, it is advisable to memorialize a management agreement ("Agreement") in writing. Such an Agreement has certain elements an artist should be familiar with. This article will discuss the most important components.

The Agreement will contain a description of what the manager will do for the artist. The standard terminology is that a manager will "advise and consent" the artist in all aspects of the artist's career. Although this is vague, the manager will be performing creative functions, such as formulating an image, selecting material, and finding ways to promote the artist. Further, the manager will act as the artist's liaison with record companies, publishing companies, attorneys, agents, the press, etc.

The Agreement will also set forth that the manager is "not a talent agent". This means that the manager is not agreeing to find live gigs for the artist. There is a law in California which requires a talent agency license in order to procure live engagements for an artist. A talent agent must abide by strict standards which most managers do not want to be shackled by (i.e., posting a bond, limited commission percentage, cannot work out of home). If a manager violates this law, the artist can terminate the Agreement and require the manager to pay back commissions collected from the act in the past.

Additionally, the manager is usually granted some form of "power of attorney" to act on behalf of the artist on business matters. This allows the manager to approve such things as ads and publicity. However, it also allows for abuses because this power lets the manager sign documents on behalf of the artist. Thus, it is best to limit the signing authority only to short term live appearance documents or publicity matters, and only then once the artist has consented to the terms.

[part 2 next time]

Ben McLane Esq
benmclane.com

Music Business/Law Tips - "Infringement" (Part 2)

2011-02-28T15:46:00.000-08:00

Under the Copyright Act, the copyright owner is entitled to several remedies. Along with the damages suffered, the writer can obtain attorney's fees and court costs. In some instances, the writer can obtain profits of the infringer and an injunction. However, in order to take advantage of the full remedies under the Copyright Act, the song must be registered with the U.S. Copyright Office. Moreover, it is important to not delay in bringing the infringement suit once the infringement is discovered. Otherwise, the suit might be barred by what is known as the "statute of limitations". The party sued for infringement may raise certain defenses which are exceptions to copyright infringement. For instance, the doctrine of "fair use" allows a work to be copied if there is no "profit" motive (e.g., for education, research, news). Another legitimate defense is that the new work is a parody of the original work.

Although copyright registration is not mandatory under the Copyright Act of 1976, songwriters are encouraged to officially register their works because if an infringement situation arises, it will be easier to recover damages.

Ben McLane Esq
benmclane.com

Music Business/Law Tips - "Infringement" (Part 1)

2011-02-24T08:24:00.000-08:00

Many songwriters are concerned that someone may steal their song and make a profit. If such an act occurred, it would be an instance of "copyright infringement" and the original writer would be entitled to relief. This article will explain how a copyright is infringed upon and what a writer can do to protect his or her works.

Under the 1976 Copyright Act, the copyright owner (i.e., the creator of the song), has certain exclusive rights: to reproduce, to distribute and to perform the work. Any or all of these exclusive rights may be transferred to third parties through an "assignment" or "exclusive license". Each separate owner of an exclusive right can sue for copyright infringement.

The most common type of copyright infringement occurs where a commercially available song is, or seems to be, very similar to another pre-existing song. In order to sue for infringement here, the original writer must show three things: (1) ownership of the song infringed upon, (2) the infringer had "access" to the original song, and
(3) "substantial similarity" between the two works. Infringement can also occur when someone uses a song without permission/license and when a record is "pirated" or "bootlegged".

[part 2 next week]

Ben McLane Esq
benmclane.com

Music Business/Law Tips - "Independent Promotion" (Part 2)

2011-02-08T08:18:00.000-08:00

Promoters can be found in most large cities in the yellow pages under record promotion or via an internet search. Call and make an appointment to play the record for the promoter. A genuine promoter will not work a record unless they believe in it. The artist should check references and the track record of the promoter.

Once the artist has located the right promoter, a contract should be entered into. The two most important points to cover are the fee and the duties of the promoter. Although the fees vary depending on the type of music and scale of the campaign, a good promotion person could require around $300-$500 per week minimum (college radio campaigns may be less); a proven hit maker may charge more. The promoter will want bonuses built into the contract to be triggered by certain happenings, such as having the record chart, entering the top ten, and hitting number one. Moreover, the promoter's expenses (i.e., phone, mail, travel) will have to be paid by the artist. The artist should require that the promoter specify the number and type of stations he or she will be contacting.

Finally, the artist should not forget that it is meaningless to hire a promoter if the record is not going to distributed in some way; otherwise, the listening audience cannot buy the record and this would defeat the entire purpose of generating airplay.

Ben McLane Esq
benmclane.com

Music Business/Law Tips - "Independent Promotion" (Part 1)

2011-02-01T07:54:00.000-08:00

Once an artist has gone to the time, trouble and expense of producing and manufacturing/digitizing an independent release, it is usually the case that the artist's goal is to earn exposure for the record, which translates into sales, and, hopefully, a career. Support from radio is key in order to make the masses aware of a new record. Unfortunately, obtaining radio play is difficult and competitive. Hence, an artist should budget for the services of an independent promoter ("promoter").

In order to compete with the major labels, the artist must be able to take the steps that a major label would take in order to promote a record. Since an independent artist does not have a promotion staff to service the hundreds of appropriate radio stations across the country necessary for an effective radio promotion campaign, a promoter is the vehicle to generate airplay. The promoter can gain the necessary radio "adds" for several reasons that the artist cannot, because they: (1) have years of experience, (2) have established relationships with program and music directors, (3) know how to properly pitch a record, and (4) know who to approach with the pitch.

Because a promoter is not cheap to employ, smaller labels and artists will generally just hire the promoter to work the record in a particular region. If airplay becomes significant in that region, often the record will then take on a life of its own and other regions will want to play the record. The hard part is developing the first important adds.

[part 2 next week]

Ben McLane Esq
benmclane.com

Music Business/Law Tips - "Independent Deals" (Part 2)

2011-01-24T08:51:00.000-08:00

Production Deals. In this type of deal, the artist signs on with a production company (usually headed by an established producer). These deals are normally structured like a regular recording agreement. In essence, the producer will record the act's music and then attempt to obtain a deal with a record label. If the production company is successful in procuring a deal, the royalty paid by the record company to the production company on records sold will be divided between the production company and the artist.

Pressing and Distribution Deals (P&D Deals). In this situation, the artist delivers a fully mixed master and finished artwork to the record label, which in turn manufactures and distributes the records. One advantage of this kind of deal is that the artist should be able to obtain a higher royalty on sales because the act has already paid for the costs of recording the product.

Since it seems that major labels prefer to see what the public responds to before making a large financial commitment, many artists are considering independent labels, distribution deals, production deals, and P&D deals in order to prove that they do appeal to a record buying audience. As a warning, some of the operations listed above can be suspect. Thus, an artist should make sure that any deal made is with a reputable entity/person.

Ben McLane Esq
benmclane.com

Music Business/Law Tips - "Independent Deals" (Part 1)

2011-01-18T15:16:00.000-08:00

In today's rapidly changing music business, major labels are hesitant to sign new, unproven acts to their rosters. However, do not be disheartened; a major label deal is only one avenue to obtain mass exposure for a musical artist. This article will explain some alternatives to signing a recording contract with a major label.

Independent Labels: These labels tend to specialize in a particular style of music and obviously have smaller rosters. This can work to the artist's benefit because the act should receive more attention. Also, an independent will usually have some form of distribution in place, which is necessary to put records in stores. Many independents have become successful subsidiaries of major labels, which has provided them with major label distribution.

Distribution Deals: Here, the artist delivers to a record company an agreed amount of completed product (e.g., compact discs). Then, the label will distribute the product to stores. Sometimes, the label will also market and promote the product. Otherwise, this duty is left to the act. For its services, the label will collect a percentage of the selling price of the record. Digital distribution these days is normally part of any such deal.

[part 2 next week]

Ben McLane Esq
benmclane.com

Music Business/Law Tips - "How Distributors Pay" (Part 2)

2011-01-10T07:52:00.000-08:00

The artist will only be paid the remaining 75% of the monies for records actually sold and paid for in/at the store. Although it is a bit complicated, a distributor normally has an arrangement with a store whereby the store can "return" any record it orders for a refund or credit from the distributor if it cannot sell the record over a certain period of time. Since there is no way for a distributor to know how many records sold to a store will ultimately be sold to customers (and hence not returned), the distributor will hold back a "reserve" of the sales monies it was paid by the store for a period of time to see if there are returns (which are common). This is how a distributor protects itself so it does not overpay the artist. To combat this, the artist needs to provide in the distribution agreement that there is a return limit. (The average is 25% for an album and 50% for a single.) Also, the artist needs to provide that the reserve can only be held back for a limited time; the shorter, the better. Note that there are/should be no reserves hold back against digital sales.

Finally, once a distributor is paid by the store for the record, the distributor has a duty (after its fee is deducted and reserves are accounted for) to pay the artist his or her share. Generally, the distributor will pay the artist anywhere from between 30 to 90 days after it is paid by the store. Obviously, the sooner the better.

A distributor is a necessary cog in the record selling wheel if the goal is to maximize record sales. Therefore, an artist should seek out a reputable distributor for its product.

Ben McLane Esq
benmclane.com

Music Business/Law Tips - "How Distributors Pay" (Part 1)

2011-01-03T09:08:00.000-08:00

For an artist to increase his or her chances of selling records, a record distributor should be utilized. This article will attempt to simplify how the artist gets paid by the distributor.

The artist/distributor relationship at its most basic is as follows: (1) the artist records a record; (2) once the record is manufactured, a distributor will sell/ship the record to a store (brick and mortar or e-commerce); (3) the store will, in turn, sell the record to a record buyer. Hence, the distributor's main job is to sell. Ancillary to the function of selling, the distributor will also warehouse the record (if CD), ship the record, collect the money from the store, and pay the artist. Occasionally, a distributor will also promote and advertise an artist, but that is the exception.

Once the distributor receives an order from a store for a physical record, it will sell the record to the store at a wholesale price (far less than the retail price), but for e-commerce the record is basically in the "cloud" waiting to be downloaded/sold.

From the wholesale price it is paid by the store, the distributor will then deduct its fee, which is generally about 25% of the wholesale price.

[part 2 next week]

Ben McLane Esq
benmclane.com

Music Business/Law Tips - "Band Partnership" (Part 2)

2010-12-28T13:31:00.000-08:00

Fifth, profit splits are very important. In most cases an equal percentage of the net profits (i.e., after expenses) as well an equal division of any losses is the most equitable approach. The splits can be different, however, if certain members contribute more than others (such as songwriting, etc.).

Sixth, leaving member issues need to be anticipated. A way of handling this would be to allow a leaving member to receive the same percentage for activities he or she participated in before departing, but no percentage for any future activities of the group.

Seventh, voting is also crucial to any partnership agreement. It is probably best to provide that any band decisions - such as hiring or firing a new member, buying a piece of equipment, etc. - be approved by a majority vote. If there is a deadlock situation, this can be overcome by a third party vote (such as a manager) or by a coin flip.

Finally, every member of the group would need to sign and date the agreement.

As explained above, this is merely a guideline for some provisions that should be in a band partnership agreement. Obviously, each group situation is different and may require additional - and perhaps more complicated - terms. Although a partnership agreement might seem unnecessary when everyone is friendly and there is no money being made, if the band considers it to be like an insurance policy to prevent possible future disagreements, it can certainly make any transition in the group happen much smoother and without the threat of a lawsuit.

Ben McLane Esq
benmclane.com

Music Business/Law Tips - "Band Partnership" (Part 1)

2010-12-20T18:45:00.000-08:00

When a band forms, the usual intention is to become a successful recording and/or touring act and to make a profit. To accomplish this collective goal, the individual members contribute their time, talents and money. In essence, there is an implied partnership agreement between the band members. When most people go into business together, there is an official written partnership agreement. However, the majority of bands - including many who are best selling acts - have never formalized their relationship. Often this can lead to expensive litigation when a band breaks up or a member leaves because there exists a question as to how profits are to be split, or who actually owns the group name. This being the case, bands should be encouraged to enter into a simple partnership agreement early on when everyone is getting along. This article will briefly explain the contents of a basic partnership agreement.

First, there needs to be a name for the partnership. Generally, this will be the name of the band.

Second, there needs to be an official location selected as the place of business. A band member's address will do.

Third, the complete name and address of each partner must be specified.

Fourth, ownership of the group name must be discussed. Normally, the group as a unit owns the name and a majority of the members performing together can use the name. The common problem which arises is when a member leaves the band and feels that he or she has the right to perform under that name. A situation such as this needs to be addressed in the agreement.

[part 2 next week]

Ben McLane Esq
benmclane.com

Music Business/Law Tips - "Gig Contract" (Part 2)

2010-12-13T16:50:00.000-08:00

Sound/Lights - Make sure the agreement specifies who provides/pays for the sound system (PA) and the sound operator, as well as when/if there will be a sound check. Also, specify who provides/pays for the lights and light operator.

Insurance - Although this is often overlooked, it is important that the club have a liability insurance policy in place which covers the artist's performance so that if some injury occurs in relation to the show on the premises of the club, the artist is not liable.

Cancellation - From the artist's perspective, if the club cancels, it should pay the artist a specified amount of damages (preferably the guarantee).

There are some other points that can be covered such as promotion/advertising commitments of the club, allowing the artist to sell merchandise at the club, etc. Above all, make sure the club signs and dates the agreement.

By entering into the above agreement, the artist will find that there are less hassles because there is certainty as to what is to take place and how the artist gets paid. Although there is always the possibility that a club might renege, at the very least, the agreement offers some form of legal protection.

Ben McLane Esq
benmclane.com

Music Business/Law Tips - "Gig Contract" (Part 1)

2010-12-06T10:19:00.001-08:00

For musical artists that perform in clubs, especially artists that intend to tour, the best form of protection is a "performance agreement" ("agreement") between the artist and the club. It is not always possible to get a club to sign an agreement. However, it is worth requesting. Having your own ready made agreement to present to the club will ensure some comfort that there is proper payment, etc. Such an agreement is imperative if the musician is traveling out of town for the gig.

A performance agreement should contain the following provisions:

- Place Of Show

- Date/Time And Length Of Show

- Wages - It is best to get a "guaranteed" fee agreed to in advance. This is generally paid 1/2 at some time prior to the show and and 1/2 at the gig. Sometimes there is a guarantee, plus a percentage (or else just a percentage alone). It is important to specify what the percentage is based on and how it is calculated. Is it a percentage of ticket sales? Is it a percentage of the door? Is it a percentage of the bar? Is it based on gross or net (after expenses) receipts? If the deal with the club is for a percentage of the door, put a friend at the door with a clicker counting people coming in. Stipulate in the agreement that there are no free entries for anyone (unless they are part of the music industry) if they are not on the guest list.

[part 2 next week]

Ben McLane Esq
benmclane.com

Music Business/Law Tips - "Free Goods" (Part 2)

2010-11-29T09:38:00.000-08:00

Record Club. It is quite common for a record club to offer records for free as an incentive for a new member to join. The problem is, since new members are given a choice of which artist's record they want for free, there is no way to really control how many copies will be given away. The only way to handle this dilemma is for the artist to restrict the number of free records which can be given away without paying a royalty. The protective language included in the record contract should provide that the number of free records given away through record clubs will not exceed the number of records sold (i.e., royalty shall be payable on not less than 50% of records distributed through record clubs).

Promos. A promotional record, or "promo", is often lumped together with the free goods because it is, in essence, also a free good since there is no royalty paid. A promo is generally a record given away to a radio station to promote airplay. It is not meant to be sold in stores and will contain a stamp on the record that reads: "not for sale". A big problem with promos is that they often ultimately wind up being sold in used record stores anyway, with the artist not being paid a royalty. Since airplay is so important to the success of a record, there generally are not restrictions placed on the number of promos sent to radio stations, etc. because in theory they are not intended for sale.

Since the number of free goods given away can substantially lower the royalty payable to the artist, the artist needs to be keenly aware of a label's policy and make sure this area is well defined in the contract.

Ben McLane Esq
benmclane.com

Music Business/Law Tips - "Free Goods" (Part 1)

2010-11-23T15:56:00.000-08:00

This article will discuss the concept of "free goods" as it relates to the sale of records. Whether an artist is signed to a label, or is putting out an independent release for sale to the public, free goods is an important issue to understand because it affects the artist's bottom line. This is because royalties are paid only for records sold. As the name implies, there are no royalties payable on free goods. The information herein is applicable to both the signed and the independent artist.

In theory, the stated purpose of free goods is to help establish an artist, which hopefully translates to the sale of more records. Actually, free goods exist on a few different levels, all of which need to be understood. The three main types are set forth below:

Normal Sales. Generally, these are free goods that exist when a label is trying to push a record. In order to get the stores to stock the record, the label agrees to give away (i.e., not charge a wholesale price) 10% to 20% of all the records shipped to the store. For example, if the label ships 100 records by an artist, it will only charge the store for 85. This is to encourage the stores to buy the record. It often works, too, because the store can then turn around and sell the 15 free goods for 100% profit. For protection, the artist needs to put a restriction in the record contract that fixes a limit on the number of records considered free goods. Most labels will agree to a limit of 15% on albums and 30% on singles, with the artist to be paid a royalty on any excess given away for free. A major issue associated with free goods sold in stores is what are known as "returns". Returns are simply physical records which have been sent back to the label by the stores because they did not sell. The problem arises because royalties are only paid on records sold, not records returned. Many labels will wrongly lump the free goods in with the real returns, and then subtract the full returns from the total records sold, which is what the royalty is based upon. Since the free goods were never "sold" by the label in the first place, is unfair to deduct them later. For protection, the artist needs to have language in the record contract that the artist will receive a "credit" against returns for free goods.

[part 2 next week]

Ben McLane Esq
benmclane.com

Music Business/Law Tips - "Compilation Album Royalty"

2010-11-15T10:01:00.000-08:00

Under a standard record deal, most artist royalty deals with a label are about 15%-20% of the retail price (i.e., in general if a record sells for $10 that's about $1.50 to the band) - its the same for a compilation, but instead of a solo act/band getting all 15-20%, its 12-15 acts splitting that royalty on what they call a pro-rata (fractional) basis - so in a compilation deal, the artist needs to ask for:

(1) A pro-rata royalty of 20% (and hopefully no less than 14-15%), and also if the artist can get whats called a "most favored nations" rate it means the artist gets paid the same royalty (pennies per sale) as all the other acts on the comp (even if there is a big name;

(2) That the label lists the artist's credit on the package (name and website);

(3) That the label can only use the artist's track for the compilation (i.e., nothing else like licensing to film/tv) without artist's permission.

Ben McLane Esq
benmclane.com

Music Business/Law Tips - "Foreign Performance Income" (Part 2)

2010-11-08T08:04:00.000-08:00

The money earned by a songwriter from the societies (the "performance royalty") is proportionate to the volume of airplay of the songwriter's songs. Performance royalties are based on complicated formulas. Basically, however, the societies monitor radio and television airplay to determine how often a song is heard and by how many people. The larger the audience and the more times a song is played, the more the income. Since it is impossible to cover all media outlets, the societies rely on estimates based upon samples. After deducting operating expenses, the societies divide the fees up and pay it to their affiliated writers and publishers. Societies pay quarterly. All major foreign countries also have a performance rights society. All of the U.S. societies have "reciprocal agreements" with the major performance rights societies throughout the world. Based upon their own individual rules and procedures, these foreign societies log and (after deducting an operating fee) pay the U.S. societies for performances in the foreign territories of the works that are in the U.S. societies' catalog. The U.S. societies (after deducting their own processing fee to analyze the foreign performance monies) in turn pay the songwriter the foreign performance money earned. If there is a separate publisher of the song, societies pay 50% to the writer and 50% to the publisher.

Now, and in the future, there is great potential for money to be earned outside the U.S. Hence, songwriters must position themselves to be able to collect all that is owed them. Joining a performance rights society is the key.

Ben McLane Esq
benmclane.com

Music Business/Law Tips - "Foreign Performance Income" (Part 1)

2010-11-01T21:22:00.000-07:00

If a songwriter composes a hit song, it is quite possible that the song will receive airplay in foreign countries. If so, there will be what is called "performance money" due that songwriter from the foreign countries playing the song. This article will explain the process of distributing "foreign performance" monies to the songwriter.

Any serious songwriter should first become a member of one of the United States performance rights societies: BMI, ASCAP or SESAC ("societies"). The songwriter will enter into a contract with the society chosen, giving that society the right to license the public performance of that songwriter's songs. The societies have arrangements with the parties (radio, television, concert venues, restaurants, etc.) who want to use the songs in the societies' respective catalogs. For a licensing fee, the societies will grant to that user what is called a "blanket license", which means that the user can play any song, by any songwriter or publisher affiliated with that society, any number of times. Publishing companies enter into a similar agreement with the societies.

[part 2 next week]

Ben McLane Esq
benmclane.com

Music Business/Law Tips - "Foreign Licensing Deal" (Part 2)

2010-10-25T15:13:00.000-07:00

Money. The company will make payments to the artist in the form of royalties and advances. The royalty will usually be a percentage of the suggested retail list price in the licensed territory on records sold, or, if there is no such list price, the equivalent in that territory. Sometimes, the royalty will simply be a certain number of the company's country's currency for each CD sold (e.g., three German marks for each copy sold). The artist could request that royalties be paid in U.S. dollars. The artist should also expect an advance against royalties (i.e., recoupable). Here, unlike domestic recording agreements, the company generally will absorb the costs to manufacture and sell the CDs and not charge these costs back to the artist.

Guaranteed Release. The artist should insist that the company commence manufacturing and selling the CD (and online) within a few months after the deal is signed, or else the rights granted will terminate and revert back to the artist. Logically, the company wants to release the CD because it bears all the costs of manufacturing and selling; each record sold results in a payment to the company.

Payments. Royalty payments are generally due to the artist semiannually within 30-90 days following June and December of each year. Such payment will be accompanied by a statement setting forth the amount of records sold, if any, and the royalty computation.

Copyright. The copyright to the master(s) remains with the artist. The artist is only granting to the company the right to make reproductions of the master. The artist should make sure that the company puts the proper "notice of copyright" on the CDs manufactured (i.e., © [name of artist]).

Termination. Once the term ends, the company is usually allowed a sell-off period of six months for the CDs already manufactured (with royalties still payable).

Ben McLane Esq
benmclane.com

Music Business/Law Tips - "Foreign Licensing Deal" (Part 1)

2010-10-19T10:14:00.000-07:00

Foreign licensing deals are becoming quite common today as the appetite for American acts grows internationally. Further, they are an excellent avenue for an artist to sell product worldwide without having an actual record contract. Although such an agreement is similar to a domestic recording contract, the essence of the foreign licensing deal is that the artist is licensing the master to a foreign company ("company") to manufacture and distribute the music. This article will briefly discuss some of the main deal points which are incorporated into a foreign licensing agreement.

Territory. The territory is defined to be only specific continents or countries. It is important that the territory not be stated as being for the "entire world". It is best to limit the territory to the areas that the artist feels the company can sell music. The licensed territory should be spelled out (e.g., UK, Japan, etc.)

Product. The licensed music should be defined by title(s) so that the company does not infer that it is being granted the right to release the artist's entire catalogue.

Rights. The artist will normally grant to the company the right to (1) manufacture and sell the music in CD and digital form; (2) use of the name and likeness of the artist in connection with advertising and sales; and (3) the right to publicly perform and broadcast.

[part 2 next week]

Ben McLane Esq
benmclane.com

Music Business/Law Tips - "Flow Through" (Part 2)

2010-10-11T12:39:00.000-07:00

There are various ways to handle this inconsistency so that the playing field is level. First, and most popular, is what is known as the "flow through" provision. This means that no matter what the agreement between the artist and production company, the artist will receive the benefit of any more favorable royalty computation in the production company's contract with the record company.

Second, the production company and artist agree that the artist's royalties will be a set percentage of what the production company receives from its agreement with the record company. For example, 50% of the money received by the production company from the record company will belong to the artist.

Third, and least definite, is for the artist to attempt to negotiate the highest royalty percentage it can get from the production company.

The "flow through" model can be applied to other main provisions of the artist's contract with the production company (e.g. term). The key is to make sure that the provisions offered by the production company will match the provisions the production company receives from the record company.

Ben McLane Esq
benmclane.com

Music Business/Law Tips - "Flow Through" (Part 1)

2010-10-04T10:13:00.000-07:00

In the music industry today, producers and production companies are signing a large number of artists to production deals, which are essentially record contracts. Then, the production company will enter into a recording agreement with a record company in order to obtain distribution and marketing for the production company's releases. Hence, the artist is actually released by a label with which it has no direct contact or contract. This situation presents a unique problem both to the artist and the production company with respect to royalty computations in particular. I will explain.

The artist fears that the production company will receive a higher royalty percentage from the record company than the artist receives from the production company. Oppositely, the production company fears that it has given the artist a higher royalty percentage than it will receive from the record company. For example, the artist's agreement with the production company reduces royalties paid on foreign sales by 50%. Yet, the production company's contract with the record company only provides for a 25% reduction in royalties on foreign sales. In this instance, the production company potentially gets a windfall because it gets seventy five cents on the dollar, while the artist only gets fifty cents. In another example, the artist's agreement with the production company caps free goods at 20%. Yet, the production company's contract with the record company limits free goods at 30%. Here, the artist receives the windfall because the production company must potentially pay the artist on the basis of one extra record for every ten records sold.

[part 2 next week]

Ben McLane Esq
benmclane.com

Music Business/Law Tips - "Synch License" (Part 2)

2010-09-27T07:58:00.000-07:00

If the song is used in a television program, the amount of money made depends upon the way in which the song is used and when it is aired. If a song is performed in prime time, ASCAP, BMI and SESAC will pay more money because supposedly more people are watching. Synchronization fees for television are modest compared to film for mainly two reasons: (1) the synch fee takes away from the producer's bottom line profit; and (2) the songwriter and publisher stand to make money from the exposure.

If the song is used in a major film, the fees paid for the synch license can be much higher than television for mainly two reasons: (1) films are generally produced on a much higher budget than television programs; and (2) the rights to exhibit the song in all media (i.e., film, television, video) for the duration of the copyright are usually obtained by the producer.

Now, more than ever, there is an abundant need for songs in major and independent films, network and cable television, and other media. Hence, there are chances out there for songwriters to generate revenues and gain exposure for their music; these opportunities should not be overlooked or scoffed at.

Ben McLane Esq
benmclane.com

Music Business/Law Tips ""Synch License" (Part 1)

2010-09-20T13:11:00.000-07:00

There is a major source of income that many songwriters overlook: the use of music in television or film. Television and film producers need material for their projects. Not only is there money involved in licensing music for television and film, the use of a song in either of these mediums can mean widespread exposure. However, a producer will require the songwriter to sign a contract so that the producer can "license the rights". This allows the producer to utilize the material in whatever way the producer wishes.

In the world of film and television, decisions are made quickly and the producer will generally license the song which is the easiest to obtain at the cheapest price. The producer will not use a song until there is satisfaction that all of the rights are "cleared" (i.e., the copyright owner has granted the producer the right to use the song). If there are several songwriters, clearance must be obtained from each. Thus, songwriters need to make sure that the rights are easily obtainable.

The earnings generated from the use of a song in television or film normally come from performing and synchronization rights. A significant portion of ASCAP, BMI and SESAC (performance rights societies) revenues are collected from television broadcasters (in the United States, motion pictures currently do not generate performance royalties payable by ASCAP, BMI or SESAC). These monies are divided up amongst ASCAP, BMI and SESAC writers and publishers. Therefore, songwriters are advised to become members of one of these societies, and register with them all songs written. A producer will not usually take a chance on using unregistered material because of the likelihood that the rights may not be available. Further, in the television and film business, music is reproduced when it is recorded on the soundtrack for the production. The right for the producer to make such a reproduction is called a synchronization right and the producer must negotiate a synchronization ("synch") license for each composition to be used.

[part 2 next week]

Ben McLane Esq
benmclane.com

Music Business/Law Tips - "Endorsements" (Part 2)

2010-09-13T09:03:00.000-07:00

Although endorsements tend to go to the established players, it possible for a local or new artist to enter into an endorsement deal. The key is whether the manufacturer thinks that someone will be attracted to the product if they see the artist endorsing it. For example, a local artist that is playing a guitar in his shows could have the ability to draw buyers into the guitar store.

Obviously, a more established player is generally approached by the manufacturers because there is name recognition and respect already in place. However, if you are not yet a recognized player, the first step to becoming an endorsee is to contact the manufacturer of the product you would like to endorse (i.e., the instrument you play) and let them know you are interested in endorsing the product. Then, send a press kit with a list of the gigs you have/will play. The gig schedule is very important because then the manufacturer will know that your playing is being exposed to the public. Finally, follow up and see if there is any interest.

If there is interest from the manufacturer, you will enter into an endorsement deal. Generally, in exchange for endorsing the product for a period of time, the artist will either get gear at a reduced price, get free gear, or be paid a fee. Fees are rare and are usually paid to an artist with great notoriety.

In conclusion, an endorsement deal is a way for an artist to gain some exposure and pick up some first rate equipment for little or no money. However, it is advisable from a philosophical standpoint that the player really believe in the product being endorsed.

Ben McLane Esq
benmclane.com

Music Business/Law Tips - "Endorsements" (Part 1)

2010-09-06T11:57:00.000-07:00

An important sales tool for musical product manufacturers is to have musicians endorsing their products. Hence, an endorsement deal is something serious players should investigate.

Product endorsements generally involve endorsing musical gear such as guitars, strings, drum sticks, pedals, etc. Product endorsements can include any/all of the following: (1) mentioning the product in liner notes on albums, (2) mentioning product in interviews, (3) endorsing the product at trade shows, (4) giving clinics, and (5) appearing in ads.

Both the artist and the manufacturer extract a benefit from such a deal. For the manufacturer, an endorsement by an artist is an opportunity for a player to be seen using their product. By mentioning/playing the product, or appearing in ads, the player is essentially saying that he or she recommends the product. To the manufacturer, they hope the endorsement will be a magnet to draw people into the stores to purchase the product. The benefit to the artist is free or reduced cost gear, and possibly a fee.

[part 2 next week]

Ben McLane Esq
benmclane.com

Music Business/Law Tips - "Distribution" (Part 2)

2010-08-30T08:19:00.000-07:00

Major label distribution has some other players that contribute to sales. One stops are middlemen who buy records from labels and then make them available to local record stores that prefer the convenience of one stop shopping. Rack jobbers are middleman that buy records from labels and then stock them in the racks that they operate within retail stores. Chain stores such as Wal-Mart buy records from labels and then place them in their stores. Record clubs buy from labels and then resell to their members at discount prices.

Independent distribution can put records in stores, although to a lesser extent. Some independent distributors have huge territories, while others are much more regional. Independent distributors generally distribute the product of smaller labels. Occasionally, they will distribute an unsigned artist's record if they can be convinced that there is potential for substantial airplay and sales (the artist will probably have to generate some sales first).

As the reader can now see, without distribution, the public would never have an opportunity to buy a record. Further, an artist fortunate enough to obtain a deal which has major distribution in place stands the best chance of achieving economic prosperity in the music business.

Ben McLane Esq
benmclane.com

Music Business/Law Tips - "Distribution" (Part 1)

2010-08-23T15:54:00.000-07:00

The key to selling records is to find a way to place them in stores. This is where the concept of distribution comes into play. Distribution can come in the form of either major or independent or online distribution. Since major labels have distribution down to a science, that will be the focus of this article.

Assuming that an artist signs to a major label, the major label will then distribute the finished record. Another scenario for major label distribution is for an independent label to be distributed through a major label. This usually happens only if the independent label has several acts on its roster (distributors are interested in a steady flow of product). Occasionally, a major label will sign an act off an indie and re-release the record under the major label banner.

Major labels utilize major label distribution systems to position records in physical and online stores. These are giant conglomerates known as "the big 4" which consist of: SONY/BMG, EMI, UNI, and WMG. "The big 4" in turn distribute a multitude of major and independent labels. Each of "the big 4" has a regional warehouse in each major metropolitan area from which the records are distributed to local record stores and other outlets. It is the distributor's obligation to (1) wherehouse inventory, (2) solicit sales from stores, (3) fill orders, (4) process returns (unsold records), (5) bill/collect, and (6) generate sales reports.

[part 2 next week]

Ben McLane Esq
benmclane.com

Music Business/Law Tips - "Development Deal" (Part 2)

2010-08-16T16:53:00.000-07:00

With a right of first refusal, the record company protects itself by not allowing the artist to make a great sounding demo and then use that demo to get a deal elsewhere - that is, until the label is certain that it wants nothing to do with the artist. After the artist delivers the finished demos to the label, under the right of first refusal concept the artist has to give the label a period of time ranging from thirty to sixty days in which it has to decide whether it wants to sign the artist. From the artist's perspective, it is best to keep that period short. Moreover, under this same concept, the label will generally provide in the demo deal that if the label wants to sign the artist, the artist must negotiate a recording deal, and, if an agreement cannot be made, the label gets first refusal. This means that the record company gets a chance to match an offer given to the artist from a competing label, and if it matches or betters that offer, the artist must sign with the demo company. The artist should limit the time within which the label which funded the demo can accept or reject the other offer. Ten to fifteen days is a reasonable amount of time, and never give the record company more than thirty days to match the offer.

If the label which funded the demo passes on the artist and does not match an offer under the first refusal provision, the artist is free to record elsewhere. However, the original label will still want to make its money back for the cost of the demos. The only recourse for the demo label is to get the money from a record deal an artist might make in the future. Most labels signing an artist are willing to reimburse the demo company for the cost of the demos as long as the cost is recoupable from the artist's royalties. The artist should include in the demo deal that the company funding the demos can only get its money back if the artist makes a record deal within a specified time limit (i.e., one year).

Since a record deal is not easy to come by, a demo deal can be the entree an artist needs to obtain a record deal. Therefore, it is probably to the artist's advantage to enter into such an agreement with a reputable label so long as the above matters are discussed.

Ben McLane Esq
benmclane.com

Music Business/Law Tips - "Development Deal"

2010-08-09T08:23:00.000-07:00

It is possible for a record company to see potential in an artist and yet still be reluctant to sign the artist to a full blown recording contract. When a situation such as this rears its head, the label might offer what is known as a demo or development deal ("demo deal"). Such a deal can eventually lead to a recording contract. However, the artist should try to include certain provisions in the demo deal.

In a demo deal, the label gives the artist a certain sum of money ranging from $500 to $5,000 to enter the studio and record demos. Based upon the sound of the demos, the record company will decide whether or not it wishes to sign the artist to a record deal. If it decides in the affirmative, great. Yet, often the label will pass on the artist. When the label passes, it still keeps some strings attached because it did pay for the demo and wants to be reimbursed. For this reason, the label will include a right of first refusal in the demo deal.

[part 2 next week]

Ben McLane Esq
benmclane.com

Music Business/Law Tips - "Delivery" (Part 2)

2010-07-20T08:09:00.000-07:00

The better - but more rare - standard for an artist is known as delivering technically satisfactory recordings. Under this standard, as long as a recording is done using the proper sonic equipment, the company does not have the same leeway to reject the tracks. This standard is usually reserved for midrange and superstar artists.

Along with the standards set forth above, labels generally add other delivery requirements to the contract. Some of the most common are the following: (a) tracks must be recorded during the term of the contract, (b) songs must be new (not previously recorded by the artist), (c) tracks are studio recordings, (d) material does not infringe upon someone else's copyright, (e) songs must have a minimum length (normally at least two minutes), (e) recordings feature only the artist's performance, and (f) recordings are not completely instrumental.

The delivery portion of the recording contract might seem insignificant on its face, but the way it is phrased can become quite important. Therefore, an artist should seek to have the technically satisfactory language added to the contract if at all possible.

Ben McLane Esq
benmclane.com

Music Business/Law Tips - "Delivery" (Part 1)

2010-07-12T09:36:00.000-07:00

Whether an artist signs a recording contract with a major or minor record company, the label will have some say over what type of material will eventually be released by the artist. Hence, there exists what is known as a delivery requirement in recording agreements.

As the concept is known in the music industry, delivery means that the record company has to accept the recordings which are brought to them by the artist as adhering to the terms of the record deal. The contract will specify what standard the record company will use to test how acceptable the recordings are. It is important that the artist be aware of what standard they are agreeing to.

The most common standard is that the artist must deliver commercially satisfactory recordings. In essence, this means the company will only accept recordings which it believes are hit records. Such language is what a newer artist or an artist without much bargaining power can expect. This ambiguous standard can cause many problems, including: (a) the label suspending the contract period until acceptable tracks are delivered, (b) putting the artist deeper in debt to the label because additional recordings cost more money, and (c) allowing the label to terminate the deal under the argument that the artist was late in delivery and thus breached the contract.

[part 2 next week]

Ben McLane Esq
benmclane.com

Music Business/Law Tips - "Copyright"

2010-07-06T08:32:00.000-07:00

If you are a musician or songwriter, the copyright law affects your craft, so it is important to have a basic understanding of it.

The term "copyright" really means that the creator has the right to copy. If an artist writes an original song, that artist is the owner of the copyright. As it pertains to artists in general, the copyright law basically grants the creator the right to (1) reproduce (e.g., make copies), (2) distribute (e.g., sell copies) and
(3) perform (e.g., play the song live).

Once the song is in a tangible form (i.e., written), the artist should take steps to protect the work. In essence, an artist needs to prove the date of creation. Actually, under the present copyright law, a work is copyrighted once it is written or recorded. However, it is best to have proof of creation. The best method is to obtain a registration form from - and register the copyright with - the Library of Congress in Washington, D.C. To request the free registration form, the mailing address is: Register of Copyrights, Copyright Office, Library of Congress, Washington, D.C. 20559 (forms are also online). The fee is $45.00 per song. Another less sound technique is known as the "poor man's copyright", which consists of the artist simply enclosing a copy of the song in an envelope and sending it to the artist certified mail. The envelope should not be opened or it will spoil the purpose of securing the date.

It is also important to put the proper copyright notice on songs and recordings that are presented to the public, such as a demo. The copyright notice for songs and sound recordings must include three elements: the symbol © (for lyric sheet or sheet music) or (p) (for tapes, records, CDs), the year of publication and the name of the copyright owner.

A song can be a valuable commodity. It is imperative that any artist who wishes to be taken seriously - and not be ripped-off - do the things described above as a form of protection.

Music Business/Law Tips - "Controlled Composition" (Part 2)

2010-06-28T11:35:00.000-07:00

One potential problem that an artist faces with the controlled composition clause, is that generally such a clause requires a rate for all songs on the album. This issue becomes real when some of the songs recorded for the album are written by outside writers who refuse to accept a reduced rate. If the artist cannot convince the outside writer to take a reduced rate, the artist must pay out of his/her royalties the extra 25% payable to any producer or outside writer who will not agree to the 75% rate.

It is significant that under the 1976 Copyright Law the minimum statutory rate changes over time. The minimum rate is set to increase at certain yearly intervals based upon the U.S. Consumer Price Index. The label will want to lock-in the rate at a certain point in time, usually: (a) the date of signing the contract, (b) the date of recording, (c) the date of master delivery, or (d) the date of first release of the master. It is advantageous to the artist to get the latest possible date, since there is a strong chance the rate will go up.

Although it is usually the case that a new artist does not have much leeway with respect to negotiating a rate higher than 75% of statutory, it does not hurt to request a "full rate", or perhaps an 85% rate.

Ben McLane Esq
benmclane.com

Music Business/Law Tips - "Controlled Composition" (Part 1)

2010-06-22T08:36:00.000-07:00

One of the key provisions in any record deal is known as the "controlled composition" clause. It is important that the artist understand this provision.

A controlled composition is related to the concept of mechanical royalties ("mechanicals"). Mechanicals are the fees paid by the label to the owner of the copyright ("song") - whether it is the artist or the artist's publisher - for the use of the song on a recording sold to the public. A controlled composition is a song written, owned or controlled by the artist. Many labels insist that any song written by the producer shall also be a controlled composition.

The purpose of a controlled composition clause is to put a limit on how much the label has to pay for each controlled composition. Labels want to put a limit on how much they have to pay to use the song, because unlike artist royalties, labels generally do not recoup advances, recording costs, etc. from mechanicals. Hence, in the record contract, labels will only offer an artist what is called a "rate" on controlled compositions. The rate is usually 75% of the minimum statutory rate set forth in the 1976 Copyright Law for each song. Further, the rate for an album is usually a limit of ten times the 75% minimum statutory rate. In other words, labels will only pay mechanicals on ten songs for any album at the reduced rate (and only two times the minimum statutory rate for singles), regardless of how many cuts are on the album. Labels will normally require an even further reduced rate of 50% of the minimum statutory rate for record club or budget record sales.

[part 2 next week]

Ben McLane Esq
benmclane.com

Music Business/Law Tips - "Songwriter Collaboration" (Part 2)

2010-06-14T09:46:00.000-07:00

Third, the writers must agree that if expenses are incurred for the preparation or presentation of the song, each of the writers shall be responsible for a percentage of the expenses. The percentage is usually in the same proportion as would apply to the net profits.

Fourth, it should be agreed that expenses shall only be incurred upon all parties' consent.

Fifth, the writers should agree that at any time before the song is placed with a publisher, the writer may withdraw his/her collaborative contribution freely, provided that he/she shall have no claim to, or rights in, any subsequent collaboration on that particular song.

Sixth, the writers should agree that the collaboration agreement only applies to the song listed, and no other.

Seven, the date, signatures, addresses and social security numbers of the writers should be included at the end of the agreement.

So that there is no confusion as to rights and profit splits, when two or more persons write a song together, a simple agreement including the above will make life much easier if and when the song makes money.

Ben McLane Esq
benmclane.com

Music Business/Law Tips - "Songwriter Collaboration" (Part 1)

2010-06-07T08:27:00.000-07:00

Whenever two people sit down to write a song together, they create a "joint work" and both of the writers own the song. Although each person may create a distinct part (such as the lyrics or the music), each writer has an interest in the entire work. In other words, a situation where there are different contributions to just one song is analogous to having the co-writers pouring small glasses of water into one large glass; it is virtually impossible separate the parts.

For example, if A writes only the music and B writes only the lyrics, B still owns half of the music and lyrics, as does A. When there is a joint work, either of the writers can deal nonexclusively with the entire song, subject to the obligation to pay the other writer(s) his/her share of the net profits. Therefore, it is advisable that the writers enter into a collaboration agreement which sets forth how the profits should be split if it is intended that the split be anything which deviates from a 50/50 ratio. Fortunately, a collaboration agreement can be quite simple and need only include a few major points:

First, the title of the song collaborated on must be listed in the agreement.

Second, the writers must agree to divide any and all net profits received from the sale of the song. To do this, next to the composer's name, there needs to be a percentage share he/she is entitled to. It should be specified whether the composer contributed music and/or lyrics.

[part 2 next week]

ben mclane esq
benmclane.com

Music Business/Law Tips - "Business Formation" (Part 2)

2010-05-31T10:31:00.000-07:00

A corporation or LLC is the best alternative for an artist. However, because there are costs involved in beginning a corporation/LLC, most artists do not incorporate until they begin making real money. A corporation is a company which is owned by stockholders (i.e., band members) and an LLC its members. A corporation/LLC is preferred because it provides two advantage that a sole proprietorship and partnership do not: (1) limited liability, and (2) tax benefits. Under the concept of limited liability, if the artist does something and gets sued, the plaintiff is limited to recovering from the corporation/LLC only, not from the artist or band members individually. Hence, under a corporate/LLC shield the artist cannot have his or her home taken away or wages garnished. An accountant or tax attorney should be contacted concerning the tax advantages. If an artist decides to incorporate, they will usually form what is known as a "loan-out" corporation. Under this concept, the corporation/LLC contracts with other parties for the artist's services. For example, if the artist gets a record deal, the corporation/LLC would sign the contract and would provide (i.e., loan-out) the services of the band.

It would be helpful for the artist to engage a professional to help select and properly set-up the above business forms.

Ben McLane Esq
benmclane.com

Music Business/Law Tips - "Business Formation" (Part 1)

2010-05-24T08:22:00.000-07:00

Any band or solo artist that is performing music to make money is involved in the music business. An artist must behave like a business in order to increase the chances of surviving and succeeding. Hence, the artist must decide what form of business to operate under. Basically, the three choices are: (1) sole proprietorship, (2) partnership, or (3) corporation/LLC.

A sole proprietorship is an option only if the artist is a solo artist. There is but one owner of a sole proprietorship. He or she keeps all the profits and is personally responsible for all debts. This option is unavailable for a band.

A partnership is the most popular option for a band. Most bands have a collective goal: to create music (and consequently earn money). In order to accomplish this, each member contributes their time, talent and money. In essence, there is an implied partnership agreement between the band members. When most people go into business together, there is an official written partnership agreement. However, the majority of bands - including many who are best selling acts - have never formalized their relationship. Often this can lead to expensive litigation when a band breaks up or a member leaves because there exists a question as to how profits are to be split, or who actually owns the group name. Without a written agreement to the contrary, the law assumes that each partner is bound by the actions of the other partners, and that everyone is equal. This being the case, bands should be encouraged to enter into a simple partnership agreement early on when everyone is getting along so as to specify exactly what the relationship between the members is to be concerning such matters as: (1) who owns the band name, (2) who owns the songs, and (3) what happens when someone leaves the band.

[part 2 next week]

Music Business/Law Tips - "Advance" (Part 2)

2010-05-17T08:29:00.000-07:00

The amount of the advance is based upon a number of factors. These factors include, but are not limited to, the style of music the artist creates, how badly the label wants the artist, whether the artist has had any success in the past, the projected sales of the album, and how strong the negotiators are for both sides.

In reality, it is more than possible for an artist to never even see a royalty. Remember, the advance is paid back from royalties. For example, if the artist got a $100,000.00 advance but only earned $60,000.00 in royalties, the artist is still unrecouped by $40,000.00 and would not see a dime until the label was paid back in full. Moreover, even if the artist may have sold enough records to be fully recouped, by the time the label has made an official accounting of the sales in order to pay a royalty, it will already be time for the artist to go back to the studio and borrow another budget from the label. Hence, there would not be a royalty until the artist has paid back both advances.

The key is to use the advance monies effectively and economically. Depending on the circumstances, it may be best to negotiate a smaller advance and a higher royalty rate. Furthermore, it might be smart to negotiate a smaller advance and have the label increase the amount of money used to promote the record. Finally, since advances are recoupable only from royalties, even if the record flops and the artist is dropped by the label, the artist does not owe the label personally.

Ben McLane Esq
benmclane.com

Music Business/Law Tips - "Advance" (Part 1)

2010-05-10T08:34:00.000-07:00

Upon being offered a record deal, most artists are very interested in the amount of money they will be paid to record the album. The money which a label pays to an artist to sign and record an album is called an "advance". However, as this article will point out, an advance is similar to a loan and thus it has to be paid back, or "recouped", from the artist's royalties. In other words, the advance has to be paid back in full before the artist sees any money.

There are essentially two kinds of advances. First, there is what is known as a "signing advance". A signing advance is a sum paid to an artist to induce the artist to sign the deal. Generally, this money will be used by the artist to live on while the artist is making and promoting the record. The other type of advance, which is more widely used today, is called the "recording fund". A recording fund is a set amount of money which is utilized to record the album. Whatever the artist does not spend on recording costs, the artist gets to keep. The label normally prefers to offer a recording fund because it is tied to a recording budget which the label has preapproved. Hence, this tends to keep the artist from recording a terrible album in order to pocket the majority of the money.

[part 2 next week]

Ben McLane Esq
benmclane.com

Music Business/Law Tips - "Synch Deal"

2010-05-03T09:12:00.000-07:00

Common provisions that a songwriter/artist would want to see included in a synch deal are as follows: (1) a fee, (2) a credit, (3) a reversion if the song is not used, (4) limits on how the song is used in the show/film/commercial, (5) a term, and (6) copies of cue sheets sent to writer/artist so he/she can track the usage and make sure they get paid by BMI, ASCAP or SESAC.

Ben McLane Esq
benmclane.com

Music Business/Law Tips - "Publisher"

2010-04-26T07:50:00.000-07:00

Publishing companies have many benefits to songwriters. A publishing company/deal can be: (1) a bank to support a songwriter, and (2) a way to get the songwriters songs “covered” by recoding artists or placed in film/tv/commercials which generates income and credits for the songwriter. Publishing deals can also have drawbacks:
(1) the songwriter has to split the income and the copyrights with the publisher (usually forever), and (2) normally the deal is for several years so the writer can only write for the that one publishing company during the term and if the publisher is lazy or short staffed the songs might languish and the songwriter will starve.

Ben McLane Esq
benmclane.com

Music Business/Law Tips - "360 Deal"

2010-04-19T18:39:00.000-07:00

A 360 deal is either a “rights grab” by the label to make sure they profit from an artist if the artist blows up, or is an incentive for the label to actually put more effort into marketing and promoting the artist. The truth is probably somewhere in the middle, and the concept is so new there are not yet many known examples for the artist to hang their hat on as a guideline. In any event, unless the artist has a lot of leverage going into the deal, they will probably not have any choice but to enter into this type of agreement in the current music business. If so, at least hold the label’s feet to the fire in the contract by requiring them to pay advances for the extra rights they participate in (i.e., touring, merchandise, publishing), and to commit to spending money to market and promote those rights so that the money pie gets bigger and everyone wins.

Ben McLane Esq
benmclane.com

Music Business/Law Tips - "Reversion"

2010-04-12T07:39:00.000-07:00

Most record deals are set up so that the label owns the sound recording copyrights (i.e., masters) forever. This business was built on catalogs - Capitol and RCA would probably not be around today if they did not own the masters to the Beatles and Elvis. Hence, labels do not part with masters easily. However, it’s possible to get a reversion of the masters at some point, but the artist would have to ask the label for this concession to be built into the contract. Normally, a reversion might kick in if: (1) the label fails to commercially release the masters, or (2) a certain amount of time goes by (e.g., 10 years) where the label had time to squeeze all the profits out of the masters (which normally have a life cycle of no more than 5 years unless it’s a big hit). There is also some language built into the Copyright Act that copyrights can revert after 35 years, but that involves some hoops to jump through and no one wants to wait until they are an old fart to get their property back so try to built it into the deal as discussed above.

Ben McLane Esq
benmclane.com

Music Business/Law Tips - "Trademark"

2010-04-05T11:57:00.000-07:00

If an artist is serious about a long-term career and branding their name so that they can make money off of it – and also to keep others from ripping them off – it is advisable to trademark the name at the earliest possible stage to lock it down so that the artist exclusively owns it worldwide. The key is using the name in commerce (i.e., for profit) by playing shows, selling CDs, and selling T-shirts under that name before someone else does. Make it official by going to www.uspto.gov and applying online. It’s worth the time and money to avoid name disputes/hassles down the line.

Ben McLane Esq
benmclane.com

Music Business/Law Tips - Accounting/Royalties (Part 2)

2010-03-29T07:38:00.000-07:00

The record contract will usually also contain the right to "audit" the books and records of the label. If this clause is absent, the artist should demand the right to audit. The artist will only have the right to audit during the objection period discussed above. Normally, the artist will have the right to audit only once a year. Further, the label generally will require that any audit be performed by an accountant. The labels's rationale is that this makes an audit more expensive and thus discourages audits. Moreover, an accountant should be more efficient and cause less disruption to the label's normal operations. Finally, the label will seek restrictions on what can be audited (e.g., only books and records relating to actual sales reports for the artist).
In the normal course of things, it is only reasonable for an artist to audit an accounting if the artist is making a lot of money because then there is a high probability of underpayment by the label. However, since one never knows who will have the next hit, the artist must ensure that his or her rights are protected in the contract.

Ben McLane Esq
benmclane.com

Music Business/Law Tips - Accounting/Royalties (Part 1)

2010-03-22T12:28:00.000-07:00

An artist signed to a label and who has commercially released a record will look forward to the day when he or she can be paid royalties. The process by which an artist is paid royalties is called an "accounting". Incidentally, the accounting process discussed herein is also applicable to a songwriter with a publishing deal.

Accountings are generally made twice a year, within sixty to ninety days after the close of each calendar six-month period. The cut-off for the six-month periods are usually - but not always - June 30th and December 31st. Sometimes, labels make quarterly accountings, which is better for the artist because the waiting time for monies is less. However, on the flip side, some labels account only once per year. When an artist is accounted to, in addition to receiving a check (if any records were sold), he or she will normally receive a statement showing record sales and how the royalties were calculated. Because the artist will only receive royalties on records actually sold, as opposed to records shipped, in some instances an artist has to wait a long time to be paid.

The record contract usually will contain language which allows the artist to "object" to the accounting. An objection occurs when the artist questions the accuracy of the accounting. In other words, the artist believes he or she has been ripped-off. It is important for the artist to understand that the contract will specify a specific time limit to object; otherwise, the accounting becomes final ("binding") and the artist waives the right to audit or sue the label for breach of contract. The objection period is generally stated as being one year after the statement is sent to the artist. The artist should attempt to increase the period to two or three years.

[part 2 next week]

Ben Mclane Esq
benmclane.com

Music Business/Law Tips - "Arrangements"

2010-03-15T07:38:00.000-07:00

If you are arranging an old song already in the public domain, then you can copyright your new arrangement/version of the public domain work [see copyright.gov for form]; however, with respect to royalties from exploitation, when you register the new work with ASCAP or BMI since its a contemporary arrangement of a public domain work, they have some sort of committee that applies a formula comparing the original version to your new version to see if the new version has changed significantly (i.e., amount of new material) and will give you a writer percentage based on their review (e.g., they might agree to give you 50% writer credit/income instead of 100% as if it were a brand new song you wrote); record companies will normally pay mechanical royalties based on whatever bmi/ascap has determined is your percentage.

If your arrangement is of a contemporary song that is not yet in the public domain, under the copyright law only original words and music are copyrightable and in general an arrangement is not considered copyrightable (except in the rare case of public domain arrangements that are significant - see above); so under this scenario you would not be able to claim copyright (unless you contacted the original publisher and they agree to make you a co-writer of the derivative works which is rare or everyone would be trying to say they cowrote song with the beatles, etc), but you can list yourself as arranger for what its worth since that is true.

Music Business/Law Tip - "Journalist"

2010-03-08T07:48:00.000-08:00

All bands need press and exposure. There are a multitude of fanzines (both traditional and online) that print interviews, review CDs and shows, etc. Try to hook up with one of these as a writer and/or reviewer, even if you have to do it for free at first. All of these fanzines and blogs need content. This will get your foot in the door and give you a calling card to have access to bands. Then, if you approach a band (either directly, through management, PR agent, etc) as a "journalist" and seem to know about the band and its particular scene (make sure you study your subject) - and not act like a wacky fan or stalker - you will be able to speak to the band and get your story. It all builds from there to one day maybe you will be writing for Alt Press or Rolling Stone if you stick with it.

Ben McLane Esq
benmclane.com

Music Business/Law Tips - "Attorney"

2010-03-01T07:57:00.001-08:00

In my opinion - and this would apply to any industry person you would want to approach, be it an attorney, manager, booking agent, PR rep, label, etc. - the best time to hit up an attorney is when you have laid the proper foundation to give the attorney the tools to work with so that he/she can actually help you, or have a reason to help you (e.g., touring history, fanbase, great songs, killer image, stability); without these elements in place, you are probably not yet a real business, and despite how "hooked up" the attorney is, it is probably too early to get him/her involved because any situation he/she would introduce you too would no doubt require these elements.

Ben McLane Esq
benmclane.com

Music Business/Law Tips - "A&R"

2010-02-22T07:59:00.000-08:00

The basic function of an A&R person is to find amazing talent for the label he/she works for; talent that hopefully will sell lots of records/have a long career. Hence, the A&R function exists at labels both large and small. Major labels might have designated A&R reps, while an A&R person at an indie might also perform other functions (e.g., sales, marketing, janitor). In general, once the A&R person signs an act, he/she would be involved in helping administer the making of the record (i.e., setting budgets, selecting producer, choosing songs, etc.), and ultimately helping create the marketing campaign/imaging the artist. The A&R person is normally the biggest champion at the label for the artist, and it is wise for the artist to keep close communication with that person. Unfortunately, there is a lot of turnover at the A&R level and some new A&R types might make an unwise decision that damages an act, so an artist would be well advised to get everyone at the label behind the project to ensure it has the best chance of success.

Ben McLane, Esq
Benmclane.com

Music Business/Law Tip Of The Week - "Full Time Artist"

2010-02-15T10:22:00.001-08:00

If an artist is serious about making music his or her career, then quit the day job immediately. The clock is ticking and there is no time to waste. To beat the competition requires a 100% full time commitment to the band. The building process takes years for most, so start now. There are countless ways to make money in music while at the same time moving the career forward (e.g., tour, film/tv placement, sell merch). Worst case, there is always grandma, girlfriend, dad, aunt, investor, credit card, etc to keep a person going until they are self sufficient. So, no excuses.

Ben McLane Esq
benmclane.com

Music Busines/Law Tip Of The Week - "Agent"

2010-02-08T07:30:00.000-08:00

If you are a new band only drawing a small crowd in your own backyard, it is doubtful that any booking agent will be interested, or be able to do much to help. You have to remember that an agent's livelihood depends on taking a cut from what the artist makes off the show (usually 10%). Most new bands lose money or break even on shows, so it is not worth an agent's time at that level. Because of that, in general it is up to you to book yourself initially. Once you start to develop a following in your region and elsewhere, at that point a good agent might be able to take over the reins for you as they will then have something to work with, and also will be able to make some money. If an agent does work with you, along with the commission you will be paying them, one would hope that an agent could increase your fee, get you opening slots for larger bands, book more prestigious venues, introduce you to the industry, etc. Many agents work without an exclusive contract, and I would suggest not signing anything if possible since it is in the best interest of the band to keep its options open. Touring is the bread and butter of the band, and you want to make sure you have the best agent on your team, and it may take some auditioning to find the right one.

Ben McLane Esq
benmclane.com

Music Business/Law Tip Of The Week - "Self Promotion"

2010-02-01T09:21:00.000-08:00

Maybe this is not a completely new concept, but it has certainly been reinforced this past year: that artists need to act like a business/their own label to market themselves. They need to play live and tour as much as possible in and outside of their region, and use any and all means to self-promote/sell music (internet, street teams, print, radio, etc). Only then will an actual record company take interest - once there is a following.

Ben McLane Esq
benmclane.com

Music Business/Law Tip Of The Week - "Form Own Label"

2010-01-25T13:31:00.000-08:00

Forming a label and selling music is doing business. You will need to take care of some basics: (i) decide what type of business formation to use (DBA, partnership, LLC or corporation), (ii) come up with a cool name/logo, (iii) obtain a business license from your county, (iv) open a bank account, (v) print up business cards and stationary, (vi) obtain UPC and ISRC barcode(s) for your label/product, and (vii) find a retail and online distributor (or you and the bands can sell independently until a distributor cares).

Ben Mclane, Esq
benmclane.com

Music Business/Law Tip Of The Week - "Video"

2010-01-18T10:28:00.000-08:00

For the majority of musical acts, the songs and vocals are the most important part of the package, and the biggest selling points. Having a following and touring history are also key. That being said, a great image/visual presentation can also very important to an audience, and for marketing purposes (e.g., MTV, mags). I have found that industry types tend to prefer to see a group perform live before they can really decide if the band has the right stuff. However, if the band cannot get the industry to come see them in person, then having a video for the industry to watch at their convenience could be a good sales tool, and might help create the desired effect (although the energy of a live show rarely comes across on a tiny screen). If you do plan to invest in a promo video, I would not suggest spending too much time and money on it because the odds of it being a determining factor in an artist's career - or even being seen - are not that great in most cases.

Ben McLane Esq
Benmclane.com

Music Business/Law Tip Of The Week - "Demo"

2010-01-11T08:11:00.001-08:00

The basic necessary element of any demo is strong material for the format/market your music is geared towards. The most commercial song should always be sequenced first as some A&R persons may never get past that song if it does not hook them. A demo consisting of 3-4 songs is the standard. Production or sonic values are a factor to some, so you should seek to create the best sounding recording you can afford, since that is what your competition is doing. With new technology a person does not have to spend a lot. Just make sure the vocals and whatever other aspects of your "sound" that make you special jump off the speakers. However, forget the fancy packaging, etc. as form never wins over substance. Moreover, if you are developing a following and selling records you have already proven your worth, so no one will really care what your demo sounds like anyway. Of course, if the purpose of your demo is also to sell to fans, you will need to make it sound good so a buyer feels they bought something of quality.

Ben McLane, Esq
Benmclane.com

Music Business/Law Tip of the week - "Connections"

2010-01-03T12:14:00.000-08:00

In general, I think the best way for a young band to make connections in the music industry is to work hard to put themselves in a position where industry people want to speak to them, and better yet, help them. This would mean the band should tour, sell CDs and merch, invade the internet and all the music related websites, generate press, enlist a street team, network like crazy, etc.; whatever the band can do to raise its profile and generate a buzz. Once a band has some value in the marketplace, the industry will magically appear. Of course, the band then has to be careful about who they hook up with in the industry when assembling their team so that the band is joined at the hip with pros and not schmos.