An Examination of the Songwriter & Music Publisher Relationship [PART 2]

[Editors Note: This is a guest blog written by Justin M. Jacobson, Esq. Read Part 1 of this series here. Justin is an entertainment and media attorney for The Jacobson Firm, P.C. in New York City. He also runs Label 55 and teaches music business at the Institute of Audio Research.]

We will now continue our examination of some of standard clauses contained in the music publishing company’s exclusive agreement with a songwriter.

Below is another clause included in a major publishing agreement.

ROYALTIES – Provided that Publisher has recouped any and all monies payable to Writer under this Agreement, Publisher shall pay to Writer the following royalties with respect to the exploitation of the Compositions: 

(a) Mechanical Income – fifty percent (50%) of Publisher’s Net Receipts derived from the license of the Compositions. 

(b) Synchronization Income – fifty percent (50%) of Publisher’s Net Receipts derived from the license of the Compositions for use in commercials and synchronized in audiovisual works. 

(c) Print Income – fifty percent (50%) of Publisher’s Net Receipts derived from the licensing of the right to print, publish or sell printed editions or other printed reproductions of the Compositions. 

As the paragraph heading states, the above language describes the royalty rate that the writer earns. It is important to note, similar to most agreements in the music industry; the music publisher must first recoup “any and all monies” already paid to the writer, such as advances or other costs or expenses incurred on behalf of the songwriter, prior to the songwriter earning any of the above listed royalties. This means that until the writer’s account is balanced, they will receive no additional funds from the publisher.

However, once the songwriter recoups the outstanding balance, they will begin to earn royalties based on the above listed percentages. For instance under the above language, the writer is entitled to fifty percent (50%) of the “mechanical income” (CDs, Downloads), fifty percent (50%) of the “synch income” (song used in motion picture or television show), and fifty percent (50%) of the print income (printed or digital sheet music).

The listed percentages are fairly standard and are applicable to most exclusive publishing deals. Nevertheless, it is prudent to at least attempt to negotiate for higher percentages or better provisions; ultimately, the publisher may not agree to any increase.

Writer warrants he is a writer member and publishing member in good standing of ASCAP, BMI or SESAC. In the event that Writer is in breach of Writer’s warranty of being a member in good standing of ASCAP, BMI or SESAC, Writer hereby warrants he will become a member in good standing of ASCAP, BMI or SESAC. 

In addition to the above listed clauses, most standard publishing deals require the songwriter to be a member in good standing with their respective country’s P.R.O. This is typically due to the publisher requiring the P.R.O.’s assistance in collecting the public performance royalties due for the licensing of compositions. If a writer is not in good standing or is not a member of a P.R.O. at all, it could potentially cause issues in the publisher receiving payments, which they want to avoid. The above language helps obviate the issue by requiring that the songwriter warrant they are in good standing with their P.R.O. and will stay as such.

OPTION TO PURCHASE – In the event that Writer desires to grant, sell, license or otherwise transfer any right, title or interest in or to any of the Compositions, for a period of thirty (30) days, Writer hereby agrees to negotiate in good faith exclusively with Publisher, and to exert best efforts to reach an agreement with Publisher for Publisher’s acquisition of such rights in and to the Compositions. In the event that Publisher and Writer fail to finalize the terms of such agreement by the end of the thirty (30) day period, then Writer shall thereafter be free to negotiate with any third party for the sale, license or other transfer of such rights, but only on terms and conditions that are no less favorable to Writer than those last offered by Publisher. Furthermore, if Writer receives an offer from a third-party at any time (the “Third Party Offer”) to purchase all or any portion of Writer’s interest in the Compositions, or any one of them, and Writer desires to sell such interest, Writer agrees to first offer in writing to sell such interest to Publisher (the “First Offer”).

The First Offer must specify all of the terms and conditions of the Third Party Offer. In the event Publisher does not agree to match the First Offer within fifteen (15) days after Publisher’s receipt thereof, then Writer will have the right to accept the Third Party Offer. However, any sale to such third party must be consummated upon terms no less favorable to Publisher as those contained in the First Offer. If such sale is not so consummated, Writer will not sell all or any portion of Writer’s interest in the Composition(s) or any one of them without again offering such interest to Publisher as provided hereinabove. 

One way a publishing company ensures that they can potentially retain rights to lucrative materials after the expiration of the agreement is through a right of first refusal or a “matching right.” As described above, a right of first refusal provides the publishing company with the option to purchase a composition and/or all of the compositions, if the writer is attempting to sell the rights to the material. This language provides the publisher with a proscribed time period (30 days) where the writer must present any third-party offer they receive for the material to the original publisher.

The publisher then has a specified time period (15 days) to either match the third-party offer or to pass. If the publisher matches the offer, then a deal will be finalized on those terms; however, if the publisher fails to match the third-party offer, the writer is free to enter into a new arrangement with the third-party on the same terms as those presented to the original publisher. The above specific language requires that the deal must be consummated no later than a specified period of time (15 days). If the deal with the third-party is not finalized by the end of this time period, the original publisher has an additional opportunity to purchase the composition(s) for the same terms as those offered by the third-party to the writer.

Since “publishing” money is one of the most lucrative and consistent streams of income in the music business and music publishers are the top facilitators of licensing in this space, it is prudent to fully understand how they function and the best way to approach them. Overall, most standard deals are negotiable and should be viewed as so.

This article is not intended as legal advice, as an attorney specializing in the field should be consulted. Some of the clauses have been condensed and/or edited for content purposes, so none of these clauses should be used verbatim nor do they act as any form of legal advice or counseling.

An Examination of the Songwriter & Music Publisher Relationship [PART 1]

[Editors Note: This is a guest blog written by Justin M. Jacobson, Esq. Justin is an entertainment and media attorney for The Jacobson Firm, P.C. in New York City. He also runs Label 55 and teaches music business at the Institute of Audio Research.]

 

UPDATE: Read Part 2 of this series here!

We will now examine the music publisher and its exclusive publishing agreement with a songwriter. In addition to the standard exclusive publishing agreement explored below, there are other types of related agreements a songwriter could potentially sign with a music publisher, including a co-publishing, sub-publishing or administration arrangement; however, these will not be explored in this article.

Music publishers, which include Sony/ATV Publishing, Universal Music Publishing and Warner Music Publishing, are companies that manage a songwriter’s rights in a track. This may be typically referred to as an “administration” right in the composition. This provides the publisher with the right to license the music to others as well as to collect payments from any third-party for their uses of the songwriter’s work. The publishing company also handles the “paperwork” associated with the composition, including registering the copyrights in the songs, indexing the track with the appropriate Performing Rights Organization, as well as accounting and distributing the collected funds. A publisher may also “shop” a songwriter’s tracks in order to obtain licensable placements for its signed talent. An individual responsible for this task is sometimes referred to as a “song plugger.”

In most instances, the songwriter and publishing company equally split all of the proverbial “publishing monies.” In reality, this means that fifty (50%) percent of the total amount earned is allotted for the “writer’s share” of the composition and the remaining fifty (50%) percent is allocated for the “publisher share” of the composition. Since a single track can have several co-writers, this means that several publishing companies and other individuals may also be entitled to a part of the “writer” or “publisher” share of the track. For instance, if a song has two co-writers, the “writer’s share” of the composition could be split equally with each writer receiving fifty (50%) percent of the entire track’s “writer” share.

The streams of income generally subject to an exclusive publishing agreement include mechanical royalties, public performance royalties, synchronization fees and print incomes. Mechanical royalties are paid for the use of a musical composition on CDs, vinyl, cassettes and as MP3 downloads. In the United States, the Harry Fox Agency is generally responsible for collecting and distributing mechanical royalties. Print Income is also subject to these agreements and applies to any funds earned from the sale of the printed musical work, such as in lyric and musical score folios, individual sheet music and when the same is displayed or sold as sheet music on the Internet.

Public performance royalties are also subject to a publishing agreement. This income is due when a musical composition is publicly performed, including when it is played on the radio, at a nightclub, a concert hall, or a stadium. These funds are collected by Performing Rights Organizations (P.R.O.). In the United States, the P.R.O.s are ASCAP, BMI and SESAC. A songwriter must become a member of a P.R.O. in order to receive their public performance royalties. Additionally, each country has their own P.R.O., so a foreign citizen should become a member of the organization in their country of citizenship.

Finally, synchronization income, referred to as “synch” monies, are subject to the same publishing deal. This income is paid when a composition is displayed with a visual image, such as in a motion picture, in a television program, in a music video or in a video game. There is income here that may also be collected by the owner’s respective P.R.O.

As is standard with most exclusive recording agreements, the deal is usually cross-collateralized with any other agreements between the same parties. Again, this means that any advance and any other funds expended on behalf of the writer, whether under a recording contract or a publishing contract, are recouped against any royalties earned from either agreement. If possible, it is prudent to limit or prevent the cross-collateralization of the agreements; however, most companies will not permit this.

In addition, some publishing companies attempt to cross-collateralize the royalties earned by one co-writer in a composition with that of any other co-writers of the same track. This permits the publisher to credit any royalties earned by any co-writer of a composition toward the outstanding royalty balance of any other co-writers of a song, even if they are not attributable to this particular co-written song. If it is cross-collateralized, the publisher is permitted to credit any royalties earned by any co-writer of a composition, even if they are not attributable to this particular co-written song, toward the outstanding royalty balance of any other co-writers of a song. It is prudent to ensure that each writer’s royalty account is not cross-collateralized with any other co-writers of a track by ensuring that only tracks written by one writer are credited toward that writer’s outstanding balance without permitting the cross-collateralization of accounts with any other co-writers.

Another point to be aware of is that an artist should try to ensure that if they are signed to both a recording and publishing agreement with the company; and, if the company wants to extend one of the deals, the other deal is also not automatically extended. This prevents the artist from being dropped from the label while still being signed to the publishing company.

One final matter that should be addressed in this arrangement is the songwriter’s creative control and approval for the uses of its compositions. In particular, a writer should try to include a limitation on the types of works that their composition can be licensed to or included in. For instance, a “kid friendly” pop star may not want their composition featured in a commercial that contains drug, alcohol or tobacco use, features sexual content, or violence. In addition, an artist should have a right to approve any changes to their finished music. This includes ensuring that any song or lyric alterations conform to the artist’s “mood” or “style” of music. For example, a publisher should not be able to take a dance track created by a dance artist and edit it so that it is now a heavy metal record.

We will now examine a few standard clauses included in an exclusive songwriter publishing agreement.

SERVICES – During the Term, Writer shall furnish to Publisher, Writer’s exclusive services as a songwriter and composer and shall deliver to Publisher, for exclusive exploitation hereunder, all of Writer’s interest in and to all of the Compositions. 

(a) New Compositions – Musical works that are written, composed, created, owned and/or acquired, during the Term, by Writer, alone or in collaboration with another or others (hereinafter referred to individually and collectively as “New Compositions”) 

(b) Old Compositions – Musical works that are written, composed, created, conceived, owned, controlled and/or acquired, in whole or in part, prior to the Term, by Writer, alone or in collaboration with another or others (hereinafter referred to individually and collectively as “Old Compositions”). The New Compositions and the Old Compositions are individually and collectively referred to as the “Compositions.” 

As described above, the publishing agreement usually signs the writer to an exclusive agreement for their publishing rights in all of their Compositions. This means that the agreement applies to any existing compositions that the writer has created and owns as well as any new material they create or acquire during the term of this agreement. It may be advisable to attempt to exclude certain existing tracks from the agreement in an effort to prevent the publisher from receiving income from those compositions. This is especially true, if those tracks are already under a prior exclusive publishing deal. This is not the easiest goal to achieve as most of the time; the artist is only receiving the publishing deal due to an interest in all of their existing material as well as any new material they create going forward.

GRANT OF RIGHTS

(a) Writer hereby irrevocably assigns and grants to Publisher and its successors, all rights and interests of every kind and nature in and to the results of Writer’s songwriting and composing services, including, the Compositions, the copyrights therein and any and all renewals and/or extensions thereof throughout the Territory, all for the full term of copyright protection and all extensions and renewals thereof throughout the Territory. 

(b) Administration – Publisher shall have the sole and exclusive right to administer one hundred percent (100%) of Publisher’s and Writer’s respective interests in and to the Compositions, whether now in existence or hereafter created, including the following: 

(i) To perform the Compositions publicly, by means of public or private performance, radio broadcasting, television, or any and all other means, whether now known or which may hereafter come into existence. 

(ii) To substitute a new title or titles for the Compositions, and to make any adaptation or translation of the Compositions, in whole or in part, and to add new music or lyrics to the music of any Composition. 

(iii) To make and to license others to make, master records, tapes, compact discs, and any other mechanical or other reproductions of the Compositions, including the right to synchronize the same with sound motion pictures, radio broadcast, television, tapes, compact discs and any and all other means or devices, whether now known or which may hereafter come into existence. 

(iv) To print, publish and sell, and to license others to print, publish and sell, sheet music, orchestrations, arrangements, including, without limitation, the inclusion of any or all of the Compositions in song folios, song books or lyric magazines. 

(v) To collect all monies earned during the Term with respect to the Compositions. 

The above language explores the various rights granted to the publisher by the songwriter in the agreement. The clause affords the publisher with the exclusive right to administer one hundred (100%) percent of the song’s publishing. Under this provision, the publisher has the right to license the work for inclusions on CDs, as MP3 downloads and as sheet music. They also have the right to collect all the monies earned on the contracted for compositions.

Additionally, the publisher has the right to license the work on the radio, on television, in motion pictures and by “. . . all other means or devices, whether now known or which may hereafter come into existence.” This language permits the publisher to apply its current publishing deal to any new technology or means of distributing music that may come into existence at a later date. Furthermore, the publisher is granted the right to translate into another language as well as adding new lyrics to any composition created by the songwriter.

In our next installment, we will continue our discussion on a music publisher’s exclusive publishing agreement with a songwriter.

This article is not intended as legal advice, as an attorney specializing in the field should be consulted. Some of the clauses have been condensed and/or edited for content purposes, so none of these clauses should be used verbatim nor do they act as any form of legal advice or counseling. 

A Look At 360 Agreements: “Multiple Rights Deals” [PART 2]

[Editors Note: This is a guest blog written by Justin M. Jacobson, Esq. Justin is an entertainment and media attorney for The Jacobson Firm, P.C. in New York City. It’s the second in a two-part series – read Part One here.]

We will now continue our examination of some of the pros and cons of entering into a “multiple rights” agreement as well as look at some other clauses utilized in these agreements that are rarely seen elsewhere within the music industry.

Another common agreement that is part of the “multiple rights” a label acquires is one that covers the artist’s “collateral” or “ancillary” entertainment activities. This clause applies to any stream of income not covered by the other existing agreements between the parties.

Typical language stating this is as follows:

Artist hereby grants Label the right to participate financially in the results and proceeds of the Ancillary Entertainment Activities. “Ancillary Entertainment Activities” refers to Artist’s activities in and throughout the media industry as a performer, singer, musician, writer, composer, author, lyricist, producer, engineer, mixer, DJ, or otherwise in connection with the Artist’s songwriting and music publishing, exploitation of merchandise and fan clubs relating to the Artist, but excluding Recordings exploited by Label pursuant to a Recording Agreement with Artist.

As discussed above, this paragraph entitles the label to a percentage of all entertainment related activities that the label is currently not already entitled to under any existing agreements. Typically, the percentages earned by the label for non-record income ranges from 10% to 25% of gross or net income, depending on the specific agreement and specific source of income. However, under some agreements, the percentage can be as much as 50% of the net income from each and every source of revenue.

One final “right” included in a standard “multiple rights” deal is an artist’s merchandise right. A typical clause granting the label rights to the artist’s merchandise is displayed below.

Merchandise – Artist grants to Label the exclusive rights throughout the universe (“Territory”) to utilize the Artist’s Identification Materials, in connection with the manufacture, advertisement, merchandising, promotion, distribution and sale and/or license of any Merchandise bearing Artist’s name and/or likeness. Artist grants the Label the exclusive right to sell Merchandise to wholesalers and retailers, including internet-based wholesalers and retailers, for resale. Artist grants the Label the exclusive right to sell Merchandise directly to consumers through the Internet, mail order sales, and CD inserts. Artist grants the Label the exclusive right to enter into License Agreements for Merchandise. “Artist’s Identification Materials” include: posters, stickers, patches, lighters, buttons, keychains, novelty items, souvenir tour merchandise, toys, dolls, lunchboxes, t-shirts, jerseys, sweatshirts, hats, and other apparel bearing Artist’s name and/or likeness.

This clause provides the label with the exclusive right to sell the artist’s merchandise to physical and digital retailers and whole-sellers as well as selling the items directly to consumers (“D2C”) through the Internet or “CD” insert offerings. It also grants the label the exclusive right to enter into third-party licensing agreements for the sale of the merchandise. It also lists the various artist branded apparel items subject to the merchandise agreement.

Merchandising income is often calculated in a variety of ways. Sometimes, the label receives a flat percentage, such as 15-25% of any and all merchandise income. In other instances, as shown below, the different items sold by the record label entitle the talent to different percentages.

Royalties – Label shall pay to Artist the following royalties on Net Sales of Merchandise:
(1) Wholesale/RetailSales

1. 22% of Net Retail Receipts for t-shirts;

2. 20% of Net Retail Receipts for hoodies and sweatshirts;

3. 15% of Net Retail Receipts for headwear and other items.

(2) Direct To Consumer Sales (“D2C”)

a. 25% of Net Receipts

(3) LicensingIncome

a. 60% of Net Licensing Receipts.

As depicted above, the amount the artist is entitled to vary based on the type of items and channels through which they are sold. This difference could be due to the associated production, manufacturing and/or distribution costs associated with each item. In these instances, a musician should try to negotiate the highest percentages they can in order to ensure they receive most of the monies grossed from the sale of their merchandise.

One final clause that provides protection for the artist is the inclusion of a “sell-off” period at the expiration of the merchandise agreement. An example of this type of clause is listed below.

Sell-Off Period – Label shall be entitled for a period of six (6) months after the expiration or termination of the Merchandise Agreement (“Sell-Off Period”) to continue to sell, on a non- exclusive basis, any already existing Merchandise in Label’s possession. Label will not manufacture quantities of the Merchandise in excess of the amount Label reasonably expects to sell during the Sell-Off Period. Label shall pay Artist in accordance with the terms and conditions of this Agreement during the Sell-Off period.

This clause permits the label to sell off any remaining merchandise it has in inventory after the expiration of the agreement. It also limits the amount of new merchandise the label can manufacture. An artist should try to limit the time frame that the label’s “sell-off” period lasts for. In addition, the musician should try to ensure that the label does not sell the merchandise at a substantially reduced rate as to undercut any sales efforts taken by the artist after their exclusive merchandise deal ended.

There are a variety of reasons that an artist may or may not accept a “multiple rights” deal with an entertainment entity. The biggest reason for these extensive arrangements is to create a “partnership” between the label and artist. Since the label is now much more invested in the artist, due to the extensive financial investments (separate advances for each agreement) and all the potential avenues of possible return; the label may see the benefits of having a dedicated staff or representative(s) committed to collect monies generated by the artist, to actively pitch and market the songs to publications and music supervisors for potential placements in movies, television and video games. If the label is not as invested in the artist and does not foresee substantial returns, it may be hard for the label to dedicate their limited resources and time to build such an artist.

In contrast, there are several drawbacks to entering into such extensive agreements. One is that the label typically has extensive control and approval over the artist’s career, including the artist’s “image,” selection of songs, appearances and sponsorships. Another negative aspect is that although the label takes a cut of all a musician earns, most labels have begun paying much smaller advances than in prior years. They have also down-sized personnel, so they do not have sufficient staff to actively and vigorously work on behalf of all its signed artists. In an effort to balance this, an artist should work to acquire some sort of creative control over the label’s use of the artist’s name and likeness as well as who the music can be licensed to.

The music business has undergone a monumental shift caused by the decline in recorded music sales and aided by an increase in music streaming and illegal music downloading. In an effort to alleviate some of the traditional record label’s losses, they crafted new “multiple rights” agreements. These agreements have benefits and drawbacks; but, are here to stay.

This article is not intended as legal advice, as an attorney specializing in the field should be consulted. Some of the clauses have been condensed and/or edited for content purposes, so none of these clauses should be used verbatim nor do they act as any form of legal advice or counseling.

A Look At 360 Agreements: “Multiple Rights Deals” [PART 1]

[Editors Note: This is a guest blog written by Justin M. Jacobson, Esq. Justin is an entertainment and media attorney for The Jacobson Firm, P.C. in New York City. He also runs Label 55 and teaches music business at the Institute of Audio Research.]

 

UPDATE: Read Part Two of this series here!

With physical music sales evaporating and an overall decline in total earnings across the entire music business throughout the last decade; many music distributors have begun entering into more extensive arrangements with the talent they sign. There has been a shift from traditional record distributors “signing” artists solely to a recording agreement to now signing artists to much more elaborate contracts. These new agreements are commonly referred to as “multiple rights deals” and are also known as “360 degree deals.” We will examine some of the pros and cons of entering into a “multiple rights” agreement as well as look at some clauses utilized in these agreements that are rarely seen elsewhere within the music industry.

This new breed of music distribution deal provided by many labels is characterized as a “multiple rights” deal. They are also referred to as a “360° deal”, a “270° deal” or a “180°deal”, depending on which rights are contracted for. For example, a typical “360° deal” entitles the label to receive a set percentage from four of the artist’s revenues streams. These would include a portion of the artist’s record sales, touring and personal appearance income, as well as publishing income, and the merchandise revenues. A “270°” or a “180°” multiple-rights deal may only cover two or three streams of an artist’s income, such as the label solely receiving a percentage from the musician’s record sales and publishing monies (180°) or a percentage from the artist’s record sales, publishing and touring incomes (270°).

Additionally, some agreements include “catch-all” clauses, which entitle the label to a portion of the musician’s “collateral” or “ancillary” entertainment activities. Essentially, this means the label is entitled to a percentage of income generated from anything related to the musician’s entertainment career that does not fit into one of the above categories (touring, publishing, record sales, merchandise, etc.). Thus, the record company will not only be entitled to their traditional stream of revenue from recorded music (CDs, MP3s, Vinyl); but, they will also be entitled to percentages of all of the artist’s entertainment related revenues. This could include portions of the artist’s merchandise sales, endorsement and sponsorship fees, motion picture and television appearance fees, digital sales and music streaming royalties, tour and live performance revenues, songwriting and publishing revenues, ringtone and ring-back sales in addition to fan clubs. In a nutshell, the label receives a portion of anything and everything related to the signed talent’s entertainment career.

Generally, in these situations, an artist enters into a few separate agreements with separate contractual “advances” that encompass the entire “360°” arrangement. Similar to the recording agreements we looked at in a prior installment, all of these agreements are usually cross-collateralized with each other. This means that any income earned from the different revenue streams (i.e. recording, publishing, touring, etc.) can be used to recoup any advance provided by the label to the artist as opposed to the label solely utilizing the publishing revenues to recoup the publishing agreement advance and so on. It is advisable for an artist to attempt to negotiate that the different streams are not cross-collateralized. However, this is a hard sell, as most labels will not accept such an accommodation, as they want ample opportunity to recoup their full investment from as many income sources as possible.

Another important negotiation consideration is whether the company has an “active” or “passive” interest. A “passive” interest exists when a label merely earns their set percentage under the agreement without having any control over the rights involved. This means that the artist is free to enter into any deal, such as a publishing or merchandising agreement that they desire as long as they ensure the record label receives their compensation.

Conversely, an “active” interest is one where the company has rights over the work, which permits the label to insist that an artist signs with their publishing or merchandise company. In these instances, a musician should try to negotiate a smaller percentage for the particular stream of income that the label is “active” in. For example, if an artist is obligated to sign with a label’s publishing company, the artist should try to reduce the percentage the label receives under the “360°” deal from publishing revenues as the label would essentially be getting paid twice (once as a publisher of the song and once through the label’s “multiple rights” deal) for the same material.

While there are many benefits as well as drawbacks to these extensive “multiple rights” deals, it has become the norm for many major labels and entertainment companies. Since there have been many more unsuccessful artists than commercially successful ones throughout history, the labels started seeking new ways to attempt to best recoup the funds they expend. Robbie Williams is an example of one of the first artists to sign a “multiple rights” deal. Additionally, in recent years, top artists such as Jay-Z and Madonna have signed similar “multiple rights” deal with the “tour company” Live Nation. These entities justify the new agreements and the increased ability to earn from the artist’s non- recording revenues in a variety of ways. For instance, the record label feels that they take all the risks with minimal chances of recouping their investment.

This is true as a label generally issues a non-refundable advance of the recording costs to the artist. The artist does not need to pay back the advance(s) to the record distributor, even if the musician’s work fails to generate any income for them. The company would then end up losing all of the funds advanced to the artist without any recourse against them. The label typically supplies all of the upfront recording costs necessary to create the music through the recording costs “advance.” These advanced funds are then utilized by the artist to pay for studio time, production, mixing and mastering costs, which the artist typically would otherwise not be able to afford on their own.

Furthermore, the label may also provide “tour support” to an artist to cover any deficient touring costs to ensure that the talent can adequately perform as they envision. The label also expends substantial funds to market, promote and manage the artist’s released music, including on radio promotion and press. Since the label invests so much upfront money and the potential return from the traditional record sales has bottomed-out; they justify these new more extensive agreements as a way to recoup the expenses they invested in the artists they sign. In these instances, the label may envision functioning as a pseudo-manager by looking after and assisting in building the artist’s entire career rather than only focusing on selling records.

We have already discussed the recording agreement and we will explore publishing agreements in latter articles; so, we will now examine the additional agreements and clauses included in some of these new “multiple rights” agreements.

One common agreement included in the “multiple rights” deal provided by most traditional record labels covers the formation and operation of an artist’s official “fan club.” Standard language, such as that listed below, discusses the label’s right to run a fan club on behalf of a signed artist.

Fan ClubLabel shall have the exclusive right throughout the Territory to establish, register, maintain, control, administer, promote, and monetize the Fan Club, including the right to create, update and manage website(s) related to the Fan Club and to sell, advertise and promote the Fan Club and products and services offered for sale by the Fan Club on behalf of the Artist. A “Fan Club” shall mean any Artist-based subscription or registration-based subscription services.

Artist shall have prior approval over the so-called “look and feel” of the Fan Club. The parties contemplate that the Fan Club shall include but not be limited to a home page, message board, early ticket purchasing opportunities, exclusive merchandise, contests, unreleased recordings, interviews and VIP Fan Experience packages.

This paragraph means that the label has the right to create and monetize an artist’s official fan club; however, the artist shall have prior approval over the “look and feel” of the club. Therefore, the artist will have some creative input over the marketing and promotional materials created to advertise the club as well as the designs of any websites or other publicly distributed materials bearing the artist’s name. In addition, the clause mentions some of the fan club offerings such as exclusive merchandise, contests and early ticket purchasing opportunities.

Fan Club ObligationsArtist shall provide Label with timely information regarding Artist’s entertainment-related activities (including public appearances, endorsements, advertisements sponsorship, and performances). Artist shall provide Label with materials as Label reasonably requests for use in connection with the Fan Club, including but not limited to Artist Identification Assets, Special Greetings, audio and audio-visual messages. Artist shall also make itself reasonably available for a reasonable number of Fan Club interviews and to make personal appearances and participate in “Meet and greets” in connection with the Fan Club. Artist shall be responsible for answering fan mail; however, all reasonable out-of-pocket costs (e.g. cost of Fan Club stationary, postage, photos of Artist) shall be reimbursed pursuant to a mutually agreed budget.

As indicated above, the label imposes a variety of obligations on the artist. One such obligation is to inform the company of any upcoming appearances or tours, in order that the label can create contests or other “fan club” exclusive promotions tailored to those appearances. It is advisable to limit the number of appearances and “meet and greets” in connection with the fan club’s promotion. In addition, similar to the reimbursement of the artist’s “out-of-pocket” expenses in responding to fan mail; an artist should try to request some sort of budget to cover or mitigate some of their expenses in complying with the label’s other requests such as creating an audio-visual greeting or attending a fan “meet and greet.”

In addition to the artist’s obligations to the fan club, the artist and label typically have an equal 50/50 split on any income earned from the operation of the club. In these instances, it might be advisable for an artist to attempt to negotiate a larger percentage of the revenues earned due to all the obligations the artist has undertaken. Conversely, since the label normally advances most of the costs to run the fan club, it may be a hard sell to increase the artist’s percentage.

In our next installment, we will continue our discussion on additional agreements included in a “multiple rights” deal.

This article is not intended as legal advice, as an attorney specializing in the field should be consulted. Some of the clauses have been condensed and/or edited for content purposes, so none of these clauses should be used verbatim nor do they act as any form of legal advice or counseling.

10 Things You Should Legally Do As An Entertainer

[Editors Note: This is a guest blog written by Justin M. Jacobson, Esq. Justin is an entertainment and media attorney for The Jacobson Firm, P.C. in New York City. He also runs Label 55 and teaches music business at the Institute of Audio Research.]

 

While there are no real bright line rules that an entertainer must follow, there are some essential strategies that a musician should take into account when conducting their music business in the new year. As we have already explored, a musician should approach their career as a business, which includes following the applicable state and federal laws, to ensure they adequately and properly exploit their works and receive the full intended benefit from them.

With that said, we have compiled a few guiding resolutions that an entertainer should take to heart and implement this new year.

1. Always consult an entertainment attorney prior to signing anything. When you sign something, it will generally bind you to the terms of the contract, whether you understand them or not.

While this might seem obvious and straight forward, many individuals simply sign what they are presented without fully understanding the nature of the document and what the terms actually mean in a practical sense. A musician also may fail to realize that most agreements are negotiable; so, a first offer isn’t usually a “take it or leave it” arrangement, as most situations should permit the discussion and negotiation of some important points prior to the signing. If it is presented as a “take it or leave it” proposition, that is an indication that an artist might want to avoid the deal. Hard sell salesmen usually indicate that an artist should run. An artist should always have time to consider the deal after “the heat” of the moment has passed.

This is also an important resolution as sometimes an entertainer may just search the Internet to obtain some standard template or form in an attempt to feel that they are properly secure. In theory, this might be good and might work fine; but, an attorney specializing in the field will bring an expertise and understanding that ensures you have the proper terms and the agreement you sign actually operates as you intended it to. An artist’s worst nightmare is signing something that doesn’t provide the artist with the rights they thought they had. This mistake prevents them from fully realizing their work’s worth. If the cost of obtaining an attorney is too high, there are many volunteer organizations, such Volunteer Lawyers For The Arts, that provide cost-free or reduced fee legal guidance to creators.

2. Always obtain a license to use a “sample,” i.e., anything used in a recording that isn’t yours and is somebody else’s. Failure to clear a “sample” can cause more liability on a potential hit to the sample’s owners than the hit makes.

This is a fairly straight-forward resolution as utilizing something that doesn’t belong to an artist can subject them to liability. It is essential to ensure that an artist has rights to whatever they use. A simple motto is that, if this isn’t the artist’s, then the artist should not use it without first obtaining rights. This will save an artist many headaches and potentially thousands of dollars. An artist who creates their own beats and samples can also reduce the issues. We explored “sampling” basics in more detail in a prior installment.

3. If you’re a songwriter, make sure to sign up as a writer with a performing right society and index your songs. In America, they are: A.S.C.A.P., B.M.I., and S.E.S.A.C.

If an individual is a songwriter, they are entitled to various streams of income when their works are publicly performed. In order to obtain some of this income, the songwriter must “sign-up” with a performing rights society. These societies collect public performance royalties on behalf of their songwriters. In order to be properly paid by these organizations, the songwriter’s works must be completely indexed. This means that the songwriter’s compositions are properly listed in the performance rights society’s databases with all the appropriate ownership information. To sign-up and index a songwriter’s music, visit ASCAP, BMI or SESAC. My further discussion on “Publishing” monies is available on Hypebot.

4. Always file your federal and state income taxes, and consult with a tax professional to ensure you are in compliance with all state, city and federal tax laws.

This resolution is one that an artist should already be complying with in their personal life. In addition, if an individual started their own corporate entity to create their music empire, they must ensure that their yearly corporate taxes are also filed. An accountant should be consulted to make sure that all appropriate state, federal and/or city corporate taxes are properly filed. We explored corporate and tax matters as they related to the music business in prior articles.

5. Always register your copyright in a work with the U.S. Copyright Office because failure to register a copyright will prevent the recovery of certain damages for infringement, including attorneys’ fees.

While a creator can simply mail themselves a created work without opening it as a way to prove copyright, this procedure does not afford the creator with all the rights a registered copyright confers. Although the Berne Convention provides for a “copyright” in a work upon the creation and fixing of it in a tangible medium of expression, the lack of federal registration limits an owner’s available recourse if their work is infringed. My further discussion on why an artist should register their “copyrighted” work is available on Hypebot.

6. Always do a trademark search prior to selecting a company or entertainment name, and have a qualified attorney do so.

Before embarking on this wonderful voyage called “music,” an artist should ensure that the name and corresponding social media and website domains are available prior to creating and marketing works under a particular name. The worst situation is building a following with a certain name to only receive a “cease and desist” letter from another similarly named artist demanding that an artist stop utilizing this name. Ensuring that a name is clear prior to using it will save the artist from a significant amount of headaches and potential costly legal bills.

7. If you’re in a band or a group, make sure to have a signed band agreement that details the members’ rights and responsibilities.

Band members should resolve to ensure that all applicable band members’ matters and procedures are discussed and agreed to in a writing signed by all the members. This is necessary to avoid any misunderstandings. This document should list the proper mechanisms to ensure the continued profitability of a band, especially if certain internal situations or relationships begin to deteriorate. My further discussion on what should be included in a band member agreement is available on Hypebot.

8. If you have a manager, make sure you have a signed agreement with them.

In most situations, an artist’s first manager, or sometimes only manager, is their friend, family member or significant other. While, familiarity and trust may exist in these relationships; when money and in particular, substantial sums are involved, it is prudent to have a signed agreement. That document would outline who is entitled to what and under what circumstances. Since this is business, it is vital that all the parties understand the nature of the relationship and that all parties are adequately protected. Having an executed agreement listing all of the agreed upon matters ensures that a neutral arbitrator (the document) exists to hopefully resolve any differences that may arise.

9. If you are a performer or producer of a recording, always make sure you register with SoundExchange and the Alliance of Artists and Recording Companies to ensure you receive all the royalties you are entitled to.

All artists should resolve to ensure that they receive all the funds they are entitled to, including certain royalties they may not be aware of. Two of these royalty streams that many artist’s neglect to properly manage are SoundExchange and D.A.R.T. royalties from the Alliance Of Artists and Recording Companies (A.A.R.C.). These entities exist to obtain royalties on behalf of an artist that signs up with them. An artist signs up with these entities enabling these companies to collect royalties on the artist’s behalf. My further discussion on why you should sign-up for SoundExchange is available on Hypebot and for additional information on A.A.R.C., visit my prior article available  and their official website.

10. If you are working on a recording with a producer or a performer that isn’t you, then you need an agreement with that person to clarify ownership of the recording.

An artist should always remember that if a contribution isn’t theirs, then the artist cannot use it unless they have rights from the creator to utilize it. This applies to any beat, vocals or other material that the artist didn’t personally perform and is included in a final sound recording. An artist should make a resolution to obtain an agreement with every individual they work with to ensure they have all the rights to utilize the finished material. We explored the need for an agreement with a producer of a “beat” and for any co-creator or co-writer.

As 2017 begins, an artist should remember that following these simple resolutions will be a great start to getting their music business house in order and running properly.

This article is not intended as legal advice, as an attorney specializing in the field should be consulted.