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

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)

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)

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)

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)

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)

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"

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)

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)

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)

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)

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)

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)

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)

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)

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)

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)

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)

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)

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)

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"

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)

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)

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"

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)

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)

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)

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)

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)

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)

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)

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)

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"

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"

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"

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"

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"

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)

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)

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"

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"

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"

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"

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"

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"

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"

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"

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"

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"

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"

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.