Music Business/Law Tips - "Start Up"

When starting up a new entertainment business (i.e., label, publishing company, management company, band), there are a few basic business matters that should be handled: 1. Form an LLC so there is a separate business shield and tax ID # (to avoid personal liability). 2. Register the business name/brand as a trademark. This protects the business against infringers. 3. Obtain insurance. Both general liability and workers comp policies if you have employees and deal with the public. Of course there are other matters to attend to, but this is a good start to have a professional set-up. Ben McLane Esq benmclane.com

Music Business/Law Tips - "Bands Invest In Bands"

A business model is emerging whereby a more famous artist becomes a financial stakeholder in a new developing act. Although it is not an original concept per se (as in recent years Lil Wayne took a vested interest in Niki Minaj and ditto Justin Bieber with Carly Rae Jepson, and way back Motown used to always join its acts up on tours, recordings, etc.), the recent pairing of One Direction and their charges the band 5 Seconds of Summer has been quite successful. Essentially how it works is a big name artist like One Direction - in con junction with its management - will find an up and coming artist that would have similar appeal to their fanbase, form a holding company, sign the new artist to them on some level, and farm the act out to a major distributor like Sony, Warners or Universal who will do all the marketing and promotion. One Direction will then take 5 Seconds out on tour as its opening act and use its social media fanbase to help brand the new act. On the back-end, One D and its management share in the net income made by 5 Seconds. 5 Seconds just had a #1 album and big touring and merchandise results, so this has been a win/win for the parties involved. Ben McLane Esq Benmclane.com

Music Business/Law Tips - "Logo Is An Artist"

In the EDM (Electronic Dance Music) realm – where DJs prevail - several unlikely stars have arisen in non-traditional ways. A recent example of this is the producer “Zhu” (Steven Zhu). Although Zhu is a DJ performer who can also sing and dance, he has chosen to market himself as an anonymous graphic/cartoon logo – you never see the person. His true indemnity is mysterious (sort of like “Deadmau5” with the mask also in the same musical genre). Zhu’s brand and music has spread like wildfire via dance music blogs and YouTube videos. His image is even starting to show up as graffiti in Europe. Apparently according to management, since Zhu happens to be of Chinese descent, to get around any potential prejudice it was thought it may be best to market him in this fashion. It has worked - as Zhu signed a major label deal with Columbia Records and is on the charts and playing all the big Festivals. Zhu has proven that these days one can break the mold of how to make it in the music business, and is an encouraging example to other artists that may not fit into a cookie cutter image. Of course, the music always has to be commercial. Ben McLane Esq Benmclane.com

Music Business/Law Tips - "A Piece Of A Legend"

An interesting new business model has cropped up whereby a famous band will offer investors a chance to invest in the band and own a piece of that band's future earnings. This mostly applies to veteran acts that are not currently on the charts as a way for them to supplement their income in leaner financial times. An example of this is the band Queensryche who recently made a private offering to interested investors who for a minimum investment of $50,000 will receive a percentage of the band's future entertainment income (i.e., merchandise, CDs, etc.). Be on the look-out for more classic acts to offer this option, which is cool for music fanatics with some spending cash who want to really be close to their idols and possibly make a few dollars at the same time. Ben McLane Esq benmclane.com

Music Business/Law Tips - Band Agreement

Once a band is formed the members are in business with each other. If the band gets successful or breaks up there will be issues about money and rights that can be quite nasty if the rules have not been agreed to in advance. An internal band agreement is the recommended method to handle it. A band agreement will address issues such as: (1) who owns the name, (2) profit splits, (3) voting on band decisions, (4) songwriting, and (5) leaving members. If there is no agreement, the law presumes a general partnership between the members where all assets (including the name/logo), profits and losses are equally shared. It is recommended to work this out early in the band’s career because it may be harder to come to an agreement once there is a dispute. Ben McLane Esq Benmclane.com

Music Business/Law Tips - "Copyright Protection"

A songwriter should protect the song(s) they write to ensure maximum income streams and defend against infringement. The songwriter(s) own the copyright in an original work. The term of copyright generally is life of the author plus 70 years. This means the originator(s) control all the rights for that period (e.g., record, distribute, perform, etc.). Copyright exists once the song is in a “tangible” form. Generally this would be a recording (demo is OK). There is no requirement to file the song with the US Copyright Office to create a copyright, but a writer obtains additional legal rights by doing so (i.e., right to sue in court for infringement and get statutory damages), and filing is a presumption of authorship. Hence, it’s best to file any songs with the US Copyright Office that a writer plans to exploit, and just to be safe always put the © symbol next to the song title on credits or demos sent out. Ben McLane Esq Benmclane.com

Music Business/Law Tips - Touring Profits

Touring profits for new artists are razor thin as most of the money goes right back out for travel, crew and commissions. It’s estimated that a new act only pockets between 15-30% of the profit from a show (after expenses and commissions), and this is before taxes. For example, a new band playing decent size rooms opening for a bigger act will generally gross about $10,000 a night if you combine the show fee plus merchandise sales. If such a band plays 5 nights a week they are grossing $50,000 a week (on average). Out of that, the band must deduct production costs ($10,000/week average), transportation costs ($10,000/week average), and crew costs ($10,000/week on average). That is a net profit of $20,000. The band must then deduct commissions of up to 40% to pay its manager, booking agent, lawyer and accountant, leaving the band with on average $8,000-$10,000 to split between the 4-5 members. Clearly, for a new artist, touring is all about setting themselves up for making more money in the future once they become a headliner where the fees increase (but so do the production and travel costs). On the other hand, touring is essential to develop a fan base that will stick with the act for many years to come/reap future benefits. Ben McLane Esq Benmclane.com

Music Business/Law Tips - "Royalties for Oldies"

A recent California court case ruled that Sirius XM Radio (digital radio) must pay broadcast royalties for pre-1972 records it plays. The case was filed by The Turtles who sang on several big hits in the 1960s (i.e., Happy Together). Current Copyright law says that terrestrial (i.e., AM/FM band) radio stations don’t have to pay broadcast royalties to performers (only to songwriters via BMI, ASCAP or SESAC). Moreover, there was no copyright in sound recordings (only songs) prior to 1972. However, in 1995 the Digital Millenium Copyright Act carved out an exception whereby digital services like Sirius XM Radio must now also pay a performance royalty to performers and master rights owners when records are played on their stations. This royalty is collected by SoundExchange. The key issue was that Sirius XM was only paying out on records made from 1972 onward on the basis that no copyright existed prior to 1972 so there was no legal right to pay - artists like The Turtles felt they were getting screwed. The ruling is a major precedent and may result in terrestrial radio stations eventually being forced to pay broadcast royalties to performers as well. Of course Sirius XM will probably appeal, so keep posted to see if the decision stands. Ben McLane Esq Benmclane.com

Music Business/Law Tip - "Wristbands = Mo' $$$"

Festivals such as Lollapalooza and Bonnaroo are now having concertgoers wear RFID bracelets whereby an attendee has the option to connect the wristband to his/her bank or credit accounts to pay for what they buy at a concert (food, drinks or merchandise) by tapping the band against a chip reader. Statistics indicate that concertgoers spend about 20% more on on-site purchases when its cashless. This is clearly a trend you'll see more of at venues since the promoters make more money and there does not seem to be a backlash from attendees. Ben McLane Esq benmclane.com

Music Business/Law Tips - "Public Domain"

A song that is in the public domain means that it is no longer protected by copyright laws. This is usually because the song is very old and the term of copyright expired (generally if the song was created before 1922). A song that is in the public domain can be used, released or sampled without having to pay royalties or get permissions. However, when a song goes into public domain varies case by case, so make sure that the song is really in the public domain before you treat it as such. There are some helpful online databases that list public domain works you can Google to find them. Ben McLane Esq benmclane.com

Music Business/Law Tips - "House Concerts"

For a touring band that maybe is new or needs to fill in some gap dates, house concerts are a great way to stay busy, make new fans and generate income. Normally house concerts are promoted by a fan/host and will happen at a private home or backyard. Due to sound restrictions such shows tend to be unplugged/acoustic oriented. Make sure to get a few simple things in writing with the host, such as: (1) the band gets to keep all the merchandise and other donation monies fans pay at the show, (2) the host is liable for any damage to property or person on the premises, and (3) the host will provide food and drinks to the band. Ben McLane Esq Benmclane.com

Music Business/Law Tips - "Business Plan"

If an artist is independent and is seeking money to record and promote an album project, they will need to create some sort of “business plan” to entice an investor to back the project. There is not one way to go about it, but any proper business plan should include the following basic sections: -Bio on the Artist -The amount of funding being sought -How the investment will be used (i.e., recording, touring, staffing, promotion) -A market analysis of the artist’s genre/niche (i.e., rock, pop, country) -How the artist plans to earn income from his/her career (i.e., sell records, tickets, merchandise) -Financial projections on the return on investment (be realistic and note cannot guarantee success) Ben McLane Esq Benmclane.com

Music Business/Law Tips - Copyright Reversion (35 Year Rule)

The 1976 Copyright Act added a provision that allows an artist (or songwriter) to reclaim ownership of masters (or songs) created from 1978 or thereafter once the 35 year term on those copyrights expire. Although it’s a bit more complex and the Act should be read to fully adhere, basically in order to trigger the reversion process, the artist/songwriter must file a termination notice with the label or publisher (and the Copyright Office) no earlier than 10 years and no later than 2 years before the 35 years of date of creation. A failure to miss this deadline waives the right to reclaim. The labels and music publishers who survive off their catalog of old hits cannot afford to lose the golden goose so they are fighting back under the theory that the original agreements with the artists/writers contained “work for hire” language that essentially made the label/publisher the author forever (i.e., the artist/writer waived the right to later claim ownership). A few lawsuits are starting to trickle through the system but there is no clear precedent yet (and they will probably will be resolved case by case if not settled out of court). Some artist/writers are using the threat to cut new deals. Note that Artists (or songwriters) who created masters (or songs) prior to 1978 can also reclaim their copyrights, yet under different and more lengthy timelines (but that is beyond the scope of this piece). Ben McLane Esq Benmclane.com

Music Business/Law Tip - "Shazam"

Music Identification App “Shazam” is becoming a major player in the music space. Shazam helps people ID music playing on radio and TV, and the App lets people then share the song’s name on social media, download the song form iTunes, or stream it on Spotify. The power of Shazam for the health of the music business is twofold: 1. Last year alone it caused more than $300 million is iTunes sales (according to its website); 2. It’s a great way for new artists to be discovered (so it’s key for new artists to have their music available in the Shazam system/database). This year all the major labels bought a stake in Shazam so expect to hear more from Shazam. Ben McLane Esq Benmclane.com

Music Business/Law Tips - "Songwriting Splits"

If 2 or more songwriters collaborate and complete a song, it’s important to sign off on a “split sheet” so that everyone knows each writers' share and resulting income so there are no disputes later. These days - especially in producer-led genres of music such as hip hop and dance - the roles of who a writer are can be difficult to determine so its key to clarify in writing if there is any participant who could make a claim. Be aware that a well-known artist may insist on a larger split or a split even if they did not contribute, since their involvement or “name attached” increases the chances of the song being successful. Under the Copyright Law, a song is deemed to be jointly-authored where there are 2 or more writers, and the splits will be equal for each writer – so if that is not the case (i.e., if each writer did not contribute the same which is often the case) - its imperative to get the actual splits agreed to in writing. If the goal is to have 1 person administer the song for all writers make sure that is clear in the paper (otherwise each writer administers their own share). Try to get the split sheet signed as soon as the song is complete and recorded as it’s hard to chase down people later or when their memories fade/change,, and not having this info handy could delay or block a release. Ben McLane Esq Benmclane.com

Music Business/Law Tips - "Sample Clearance"

If an artist is going to use some existing music as part of the new song, that is a “sample” and permission is needed. Unfortunately, there is no "standard" sample situation. Its case by case depending on who the artist and songwriter is being sampled, who the sampler is, how long the sample is/how much its used and if it’s the hook or not, who the sampler’s label is vs. self-release, etc. The only way to know if one can get permission and what the splits will be is to contact the label that owns the master being sampled and the publisher that controls the song being sampled (there are 2 clearances needed for most samples). Once they hear and it and evaluate what they want/is fair, they propose a split and the sampler will either go with it or negotiate it. It can actually be a pain and expensive to sample as some samples require to pay an advance up front and often its takes forever to get the approval which can screw up a release schedule. Note, there are some clearance houses that can clear samples and make the process easier (but they charge a fee). Ben McLane Esq Benmclane.com

Music Business/Law Tips - "Producer v. Production Agreements"

The 2 main producer related agreements are: (1) Producer Agreement and (2) Production Agreement. What is the difference? 1. A Producer Agreement is where a producer is hired by an artist or label to produce master(s) for the artist/label. The producer is a “work for hire” which means the producer will not own/control the masters (the artist/label will), but will get paid a fee for his/her work and back-end royalties on sales and licensing of the masters to film/TV/ads. 2. A Production Agreement is where the producer acts like a label and discovers/develops the artist, and signs the artist exclusively to his/her production company for a term/number of albums. The producer normally gets 50% of the profits here (a lot more than under a Producer Agreement situation). The producer will normally cut a few demos and then pitch/showcase the artist to a record company who can partner with the producer to distribute and market the artist. If the producer cannot find a distributor within a certain amount of time the artist can usually terminate. Of course there are other key issues that affect the above like recoupment of costs and songwriting/publishing, so if you are an artist or a producer make sure you have good legal counsel before doing either type of deal. Ben McLane Esq Benmclane.com

Music Business/Law Tips - "Royalty Streams"

If an artist is fortunate enough to write, produce, record and release a song that connects with the public he/she can earn income from many different sources. The primary income streams are as follows: 1. Mechanical (i.e., songwriter) income from sales of CDs and downloads 2. Radio airplay (i.e., performance) income [BMI or ASCAP] 3. Performer income from sales of CDs and downloads 4. Streaming income from listens 5. SoundExchange income from digital radio (i.e., Sirius/XM) 6. Producer royalties from sales of CDs and downloads 7. Synch income (i.e., use in TV/film/ads) Now go get that mailbox money! Ben McLane Esq benmclane.com

Music Business/Law Tips - "Foreign Entertainer/Artist Visa"

A foreign entertainer/artist must obtain an O1B Visa in order to legally stay and work in the US for an extended period of time. The entertainer/artist must file an O1B application with the US Immigration Office to begin the process. An O1B Visa is only granted to someone who can prove they have “extraordinary ability in the arts”, have “national or international acclaim” and a “record of prominence in his/her field.” Bottom line the Immigration Office is very strict about who they issue a Visa to (especially after 9/11), so the applicant has to be very careful with the paperwork submitted. There are lot of people trying to get these Visas who don’t really deserve them, so the applicant has to find a way to set him/herself apart from the pack so it’s clear he/she is worthy. The main thing the application needs to show is real evidence of working and making some kind of artistic/valuable contribution in the US. Normally an experienced immigration attorney who has dealt with entertainers/artists is recommended to assist with the process. Since the process can take some time, its best to apply early to make sure future plans are not screwed up by a rejection. Ben McLane Esq Benmclane.com

Music Business/Law Tips - Streaming Income

With the decline of CD sales and slow down of digital downloads, it seems that “streaming’ of music is becoming a dominant business model/way to make money off music (and there are no returns or packaging deductions). Industry reports that billions of dollars could be made off the streaming of music (combined), and perhaps this might even get bigger. The problem is that major labels received monetary “advances” from large streaming companies like Spotify to license them the right to stream their catalogs – but the terms of those deals were secret and none of that income has trickled down to the artists (yet). Where does the money go and how/when will it be split in the future? This is a big deal and a question no one has yet really been able to firmly answer. Certainly, transparency of the labels’ books would help, and it would also be great if artists could do their own direct deals with Spotify or get paid their share direct (like how SoundExchange or BMI does it). Hopefully a few big name artists will make some noise soon to help push through some changes/industry standards in this area so artists can continue to make a living. Ben McLane Esq Benmclane.com

Music Business/Law Tips - "U2's secrets of success"

The rock band U2 has been together for nearly 40 years, and famous for almost 35. How did they do it and what can young artists learn from them? Below are some of the secrets of their success: 1. Great songs. 2. Smart management. 3. Aggressive booking agent. 4. Retained ownership of their masters and publishing. 5. Built a global fan base through consistent releases and touring worldwide. 6. Split songwriting income 4 ways equally in order to keep group harmony. 7. Evolved and stayed relevant with the times/sounds. Ben McLane Esq benmclane.com

Music Business/Law Tips - "Marketing Terms"

For a record label to properly release a record, it needs to market and promote the record. There are a few marketing terms/jargon that are similar/overlap which an artist may hear a label refer to or see as a line time expense on a royalty statement, but which have slightly different meanings to the industry: "Marketing" - Generally refers to money spent for in store promotions, like listening stations, posters or product placement on end-caps or near the sales counter. "Promotion" - Generally refers to the label spending money to hire an outside (or indie) radio or video promoter who can hopefully get a single played. "Advertising" - Generally refers to the label spending money to buy ads on TV, radio or in print. "Publicity" - Generally refers to the label spending money to hire an outside publicist to obtain publicity in the press, TV, print and online media. Ben McLane Esq benmclane.com

Music Business/Law Tips - "Streaming"

The 2 best known sources for streaming music in the US are Pandora and Spotify. Pandora is what is known as a “non-interactive” platform because its sort of like a traditional radio station where the listener has no real control over what is played (other than fixing genres/similar artists that cause a narrowcast). Spotify is known as an “interactive” platform because the listener gets to choose what they listen to (click). While streaming of music is great for the discovery of new music/artists, currently it does not pay out much in royalties to the performers/songwriters. Although it’s hard to say for sure, approximately 140 streams equal what is earned from 1 digital download sale on iTunes. Due to the explosion of cellphones, iPads, etc. (worldwide) where music can be listened to from anywhere via this platform, it will only get to be bigger. We will have to stay tuned to see how the money trickles down to the creators as this new model evolves. Ben McLane Esq Benmclane.com

Music Business/Law Tips - "Business Forms"

Artists and entertainment companies have several options to consider when deciding the best type of business to form. The most common business entity forms are as follows: Sole Proprietorship, Partnership, LLC and Corporation. Factors such as liability, complexity and taxes are considerations. 1. Sole Proprietorship: This is normally for a one person company. Its also known as a DBA. This is the least complex, but there is more potential liability. 2. Partnership: This is for 2 or more co-owners. Its also not very complex, but each partner is subject to liability. 3. LLC: This is for 1 or more more owners, and is sort of a hybrid of a partnership, but there is a liability shield for members. 4. Inc: This is for 1 or more owners, and is more complex than an LLC to operate, but there is a liability shield. Most large companies seem to be corporations. The tax ramifications of each is beyond the scope of this article and its suggested one speaks to an accountant before making any decisions. Ben McLane Esq benmclane.com

Music Business/Law Tip - "Record Release Set Up"

For an indie artist to maximize their chance of success from a record (album, EP or single) release they should do the following: 1. Have the music available on all digital retail outlets/e-commerce sites (i.e., iTunes, Amazon, etc.). This can be done easily via signing up with a distributor such as TuneCore, CDBaby, Orchard or MondoTunes. 2. Have the music available on the main Streaming services, such as Spotify and/or Deezer. 3. Have a Press campaign in effect (via a PR agent or yourself) whereby the music is being serviced to the tastemaker blogs that support your style of music so it gets reviewed, and a viral buzz can start. 4. Have at least 1 video up on YouTube to support the record. 5. Make sure there is a tour or shows performed to help promote the release. 6. All of the above needs to be coordinated to happen simultaneously. Ben McLane Esq benmclane.com

Music Business/Law Tips - "Online Performance Income"

There is positive news to report to songwriters. Even though record sales are down, because of new technology BMI, ASCAP and SESAC can now much better monitor/track, process and pay-out on performances of songs on the Internet, steaming audio, video, and other digital platforms and new media that are constantly emerging. According to a recent Billboard article, ASCAP reported that last year it had tracked 250 billion performances, many of which were from the digital world. Bottom line, that is new money that is coming to songwriters that did not exist a few years ago. Hence, from what might seem like just a small stream now may someday become a roaring river of new income. Ben McLane Esq benmclane.com

Music Business/Law Tips - "Website Tips"

Here are the 3 key things an artist should keep in mind for his/her website: 1. Create a functional/attractive home page, which should contain easy to see/find links to the following basic elements: music, video, shows, contact info, a buy button for merch/music. 2. Make the website the "artist hub" and point back all the other social networking sites (i.e., Facebook, Twitter, etc.) to the website. 3. Update the website frequently with new content to maintain fan interest and interaction. Ben McLane Esq benmclane.com

Music Business/Law Tips - "Fans"

Its elementary that an artist cannot sell his/her music, tickets or merchandise if there is no audience to sell them to. To find out if an artist really has a dedicated fanbase (i.e., a career), the following 3 key factors have to exist: 1. The fan(s) buy an artist's products. 2. The fan(s) make repeat purchases of an artist's products. 3. The fan(s) recommend the artist's product(s) to their friends online and offline (i.e., viral). Ben McLane Esq benmclane.com

Music Business/Law Tips - "Record Company Profit"

Record companies have a choice when they release a record as to what configurations they will create for the market. Those decisions are generally based on cost, profit and demand. The 3 main configurations are (1) CD, (2) digital download, and (3) vinyl. CD album: Wholesales for approximately $8.29. Manufacturing cost is approximately $1.15. Label gross profit is approximately $7.14. Vinyl album: Wholesales for approximately $10.50. Manufacturing cost is approximately $3.50. Unsold stock cannot be returned so have to be careful on units produced. Label gross profit is approximately $7. Digital album: Wholesales for approximately $6.99. Manufacturing cost is $0. No shipping costs. Label gross profit is approximately $6.99. Although vinyl has had a resurgence, since it costs the most to make and sells the least, it is a limited market, with digital sales becoming the dominant trend since there are no costs to produce and there are now fewer stores to sell CDs. Ben McLane Esq Benmclane.com