Tuesday, April 5, 2011

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

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