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
Tuesday, December 28, 2010
Monday, December 20, 2010
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
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
Monday, December 13, 2010
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
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
Monday, December 6, 2010
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
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
Monday, November 29, 2010
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
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
Tuesday, November 23, 2010
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
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
Monday, November 15, 2010
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
(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
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