Negotiating Key Deal Points In An Artist Management Contract

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Negotiating Key Deal Points In An Artist Management Contract

This article will address some of the key terms or “deal points” in artist personal management contracts.  Whether you are the artist or the manager, your ability to negotiate these terms in your favor will depend (as it always does) on your relative bargaining power.  If you are a superstar artist contemplating a change in managers you will be able to get almost anything you want, and at that level it is not uncommon for the artist and manager to have no contract at all, but simply a verbal agreement that the manager gets a 10% commission and the artist can terminate the relationship at any time.  But for the vast majority of artists and managers, we deal in the world of contracts and negotiation leverage.  If you are an up-and-coming artist that has caught the attention of an “a-list” manager, you are not likely to be able to negotiate any major changes in the management contract.  The manager knows their status and feels you should consider yourself lucky to work with them, and you should.  Or not - here is my caveat on relative differences in career level between artists and managers:  if you are a little fish in a big managers pond you are more likely to get overlooked in favor of their more high-profile clients and less likely to get the hands-on attention you need; conversely, if you have a mid-level or “newbie” manager, they may have the ability to give you all kinds of time and attention, but will lack the experience, connections and clout of an established, respected and well-known manager.  Sometimes it is best for an artist to find a manager that is near the same level, career-wise, and hopefully the careers of both rise together.  Also, understand that no matter how good your entertainment attorney is, there is only so much they can do if your relative bargaining power is low in relation to the other party.

The key terms that everyone focuses on in management contracts include the length of the agreement, the manager’s commission, post-term commissions, and to a lesser degree exclusivity and the scope of the services provided.  Let’s take a closer look:

Length of the agreement:  The length of a management agreement is generally referred to as “the term” or “the term of the agreement.”  The term determines how long the manager and artist are committed to work with each other.  The manager will want a longer term to hang on to the artist, at a set commission, for as long as they can.  The artist will want a shorter term so they can get out of the relationship early if it isn’t working, or to be able to negotiate a more favorable commission sooner if they become very successful.  There is justification for both positions.  A manager taking on a relatively new artist faces a tremendous amount of work to “break” the artist at a time in the artist’s career when they are earning very little money, and therefore the manager is earning very little in commissions.  Obviously, the manager wants to be rewarded for their efforts and doesn’t want to be bounced out the door in favor of a more established manager when they come sniffing around as soon as the artist’s career starts to take off.  Similarly, an artist working with a new or mid-level manager is not going to want to commit to a lengthy term until the manager proves that they can be effective for the artist.

Crafting the term of the agreement is limited only by the creativity of the attorneys.  Typically, there is an initial term of one to three years, with a number of “option periods” to extend the term of the contract.  For example, the term may be an initial period of two years, with three one-year options.  Whether the options are exercisable by only by the manager, or by mutual agreement, is often negotiated.  Also, it is not uncommon to create financial or other benchmarks that have to be met in order for the option periods to be triggered.  Conditions allowing for early termination, such as bankruptcy of the manager, are also often included.

Commissions:  A manager’s commission is typically fifteen to twenty percent.  It is extremely rare (and usually ill-advised) for a manager’s commission to exceed twenty percent.  It is also extremely rare for a manager’s commission to be as low as ten percent, although as noted above, superstars can command lower commission rates.  This is often counter-intuitive to newer managers and artists who assume that the more successful the artist becomes the higher the manager’s commission should be.  The opposite is true.  A manager can justify a higher commission from a new artist because there is very little money coming in to commission, but the manager is doing just as much or more work than required of an established artist.  When an artist is successful, then even at a lower commission rate, in absolute dollars the manager is doing quite well relative to the hours they have to put in.  Commissions can be structured on a sliding scale where the percentages decrease either at certain financial benchmarks or after a certain amount of time.  For an artist, structured commissions become more important the longer the term of the contract.  Another factor in considering the commission rate is the other members of the artist’s team that are being paid on a percentage basis.  In addition to personal manager a moderately successful artist may have a business manager (typically 5%), a booking agent (typically 10% of tour guarantees), and occasionally an attorney working on a percentage-of-gross retainer (typically 5%).  These percentages can add up to a substantial portion of the artist’s gross income.

Post-Term Commissions:   Post-term commissions are typically referred to as a “sunset clause.”  These are commissions paid to the manager after they are no longer managing the artist.  The key considerations are the length of the sunset period, the sunset commission rate, and the revenues to which it applies.  For the artist, ideally there is no sunset clause.  The manager will want the longest sunset they can get away with, applicable to the most revenue sources possible, at the highest rate.  Typically, a sunset clause lasts one to five years, and the sunset commission drops in each year.  For example, a management contract having an in-term commission at twenty percent may have a sunset clause that pays fifteen percent in the first post-term year, ten percent in the second year, five percent in the third year, and then stops.  A sunset clause can apply to only revenue sources established during the term, or also any renewals or extension of agreements establishing those revenue sources, or also include new revenue sources established during the sunset period.  In negotiating the sunset clause, it is important to consider that presumably the artist will have a new manager, and therefore between the two managers will be paying considerable management commissions during the sunset period.

Scope of Services/ Exclusivity:  Virtually all personal management agreements are exclusive, meaning that only the manager can manage the artist’s career and the artist cannot look to anyone else to provide any of the same services as the manager.  The scope of the services is usually broadly defined to encompass anything the artist does in the “entertainment industry,” throughout the world.  However, the artist should consider whether the manager is equipped to manage all aspects of the artists career.  If the artist is multi-talented and in addition to being a singer-songwriter performing musician is also an accomplished actor, but the manager’s expertise and connections are only in music, then the artist should consider a “carve-out” to allow them to have another manager specifically for their film and television career.

A comment on “boilerplate” clauses:  “Boilerplate” clauses are standard contract terms that are found in most contracts.  They address boring, mundane legalities such as the parties warranting that they have the legal capacity to enter into the contract, that if any part of the contract is found unenforceable the remainder of the contract will remain in force, and equally exciting stuff.  Most parties to the contract, and surprisingly often even their attorneys, gloss over these terms, barely reading them.  They focus only on the key terms discussed above.  This is a huge mistake.  In reality, there is no such thing as “boilerplate.”  These terms can be some of the most important in the contract.  Terms that establish the governing law for the contract, jurisdiction and venue for any disputes, prevailing party attorney fees, alternative dispute resolution, limitation of actions, assignability of the contract, and indemnification of the parties, among others, can have tremendous consequences if there is ever a dispute or litigation over the contract.

 

Thomas A. Player

"Wait...I Get Another Copyright?"

Sound Recording Copyrights

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You’ve written a great song, and, because you read my articles on “Songwriting Copyright Basics” and “What Happens When You Co-Write a Song,” you understand the fundamentals of the songwriting copyrights (you did read those articles, right?).  So, now what happens when you record the song?  You get another copyright!  Congratulations.

Although the sound recording contains the musical composition (your song), which has its own copyright, the sound recording of the musical composition is a separate artistic creation, with its own separate copyright.  Similar to the copyright in the musical composition, the copyright in the sound recording is created automatically when the recording is made (a sound recording is by necessity a “tangible” expression, so, unlike a song in your head that has to be written down or recorded to be tangible, and therefore protected by copyright, the copyright in the sound recording exists the minute you press the record button).

On a side note, I like to be precise in the words used to distinguish a musical composition from a sound recording.  In past articles, I have used the word “song” because it is a word familiar to most people.  But “song” can be confusing, because it can mean the musical composition, or the sound recording, or both.  When you are talking about things that have specific legal meanings, confusion is a really bad thing.  For that reason, the musical composition, meaning the lyrics and melody that are a “song” should be referred to as the “composition,” and the recording of the composition should be referred to as the “sound recording” or the “master.”  “Master” is generically used in the music biz to refer to the sound recording.  However, this term can also be a bit confusing, because technically a “master” is a final two-track mix of the sound recording which is reproduced for distribution.  There is also the process of “mastering” a two-track mix to equalize and balance the sound for optimal sound quality across all the possible devices on which people might listen.  Sound recording copyrights exists in all versions of the recording, throughout the recording process, from raw tracks, to rough mixes, to the final master.  But when you hear the term “master” know that it generally refers to the sound recording of the musical composition, and in future articles, if I say “composition” or “master” you’ll know what I mean.

The fact that a sound recording of a composition contains two copyrights (in the composition and the master) is the reason why, when someone wants to license a recorded composition (for example, to put in a movie or television show), they have to get two licenses; a synchronization license for the composition and a master-use license for the sound recording, and these copyrights are often owned by different people.  When the copyrights in the composition and the sound recording are owned by the same person (or people), the synchronization license and the master-use license are often combined in one agreement.  Also, the term “sync license” is often used in the music biz, rather imprecisely, to refer to licensing both the composition and the master, so make sure when someone uses the term “sync license” that you have a clear understanding of exactly what they mean.

So, who owns the masters?  One common misperception is that whoever pays for the recording, owns it.  Payment (to a producer or studio) may be a reason for having ownership, but payment in itself does not determine ownership.  Just as with a musical composition, in the absence of an agreement to the contrary, the law presumes that anyone who participated in creating the sound recording owns an equal share of the copyright.  This is usually much messier and more complicated that splitting up the copyright in the composition.  The reason is, there are usually many more people involved in creating the sound recording, and most of them are not intended by the songwriter or recording artist to have any ownership interest in the sound recording.The producer, sound engineers, mixers, featured artists, session musicians, and anyone else who has a hand in the recording can claim they own a share of the copyright in the masters (or even the composition).  And believe me, if a song becomes a big enough hit, those people will come out of the woodwork looking for a piece of your money.  For this reason, it is extremely important to have signed agreements with everyone, before you begin recording, that clearly state what they are entitled to for their participation.  Customarily, the contributions to the sound recording made by most of these people are “works made for hire” (which I will explain in more detail in another article).  A “work for hire” agreement is a written contract that says the person contributing to the recording gets paid in exchange for the person paying them having ownership of the copyright as if they had created the work themselves.

If the recording artist or band is signed to a record label, the record label typically owns the masters.  The artist or band is then paid, based on the terms of their record contract, for money the masters earn.  The featured artists performing on the recordings also earn a performance royalty for certain types of digital transmission of the masters (non-interactive streaming such as Pandora or SiriusXM) which are paid through SoundExchange.

Without sounding too self-serving, I cannot stress enough that locking down your rights in your sound recordings is complicated and not something you should attempt to do without the advice of counsel.

What Happens When You Co-write A Song?

Songwriting Copyright Basics  Part II

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If you haven’t read my “Songwriting Copyright Basics” blog post, I suggest you do so before reading this one.  Now, let’s say you co-wrote a song with someone else, or multiple someone-else’s.  What’s the deal with the copyrights then?  Let’s say you wrote the lyrics to a song and your songwriting partner wrote the music.  You might think that you own the copyright to the lyrics, and your co-writer owns the copyright to the music.  Actually, unless you agree otherwise, the law presumes that you each own an undivided equal share (in this case half) of the entire song – lyrics and music.  If you are in a band and five of you write a song together, then each of you owns 20% of the entire song, regardless of the individual contributions of each member.

 

There are two ways this can cause problems.  First, there can be a great deal of resentment and friction in a band if the individual songwriting contributions are not equal but the songwriting income is shared equally.  Second, because each writer has equal rights to the entire song, they can do whatever they want with the song, as long as they pay their co-writers their share of any money the song earns.  If one of the songwriters licenses the song for a hot dog commercial, and another songwriter is a steadfast vegan, there will be trouble.  Guaranteed.

 

Fortunately, both of these potential problems can be avoided by using a “copyright split and administration agreement” (which is actually two separate agreements, but often combined in a single document).  The legal presumption of equal ownership of the copyright by all the songwriters only applies if they have not agreed otherwise.  The songwriters can agree to divvy up ownership of the copyright any way they want.  So, for example, if one person is the principle songwriter, and writes all the lyrics and the main melody, which is usually the vocal melody or main riff and is called the “top line” melody, and the other songwriters build additional melodic and rhythmic elements that fill out the song, you might agree that the main songwriter gets 50% and the other songwriters split the remaining fifty percent.  You can even split the copyrights with non-writers.  For example, if the singer and guitar player write all of the songs, and the bass player and drummer don’t write at all, the writers may agree to give the non-writers part of the copyright as a matter of good faith.  This can also be important to keeping the peace in a band; if a song starts to be very successful, you can quickly find yourself in a situation where the songwriters are rolling in money and the non-writers still have to work their day jobs.  This can break a band up faster than you can say “royalty check.”

 

There is also an important distinction between songwriting and “arrangement.”  In my practice, I see a lot of confusion about even the basic concept of what makes a song.  In the simplest terms, a song (other than an instrumental or a cappella song) consists of lyrics and melody.  If one person creates the lyrics and melody, they’ve written the song.  Creating instrumental parts to go with the lyrics and melody is not “songwriting,” but merely arrangement.  I recently had a producer insist that he should get 50% of the copyright because my client had “only written the lyrics and melody,” and he had “written the music,” because he did the instrumentation on the recording of the song.  I had to explain to him that the “lyrics and melody” is the song, and that what he had none was merely a musical arrangement of the song.

 

Where you cross the line from “arrangement” to “songwriting” is not black and white.  At some point, additional contributions that fundamentally change or enhance existing lyrics and melody are contributions to the songwriting.  The issue of “who is a songwriter” is especially prevalent in the rap, hip hop, and EDM genres, where producers and beats-makers have a fundamental role in creating the music, and it is customary to give them significant splits in the songwriting.  Also, when a “featured artist” or remix version of an existing song is made, it is a derivative work, with its own copyright to be split up.  Depending on the clout and the contributions of the featured artist or remix producer, they can get anything from just a flat-fee and zero percent of the copyright to substantial up-front fees and a significant percentage of the copyright in the new version.

 

It is up to the people involved in the creative process to discuss their contributions and come to an agreement as to what they will receive for their efforts.  It can be anything you negotiate, but it is extremely important that you figure this out up front, while everyone is still around and happy with each other.  Trying to hunt people down and sort this stuff out months or years later is a nightmare, and it is way, way cheaper to just get it right, right then when you create the song, than to try to fix it later.

 

Now, back to the hot dogs and the vegan.  Just like you can have a copyright split agreement, you can also have an administration agreement that specifies who can control how the song is used.  Again, this can be whatever you can imagine, from a single songwriter controlling, to everyone having to agree on all uses, to everyone being able to administer the rights except as to certain “restricted uses” that everyone agrees are off limits or require unanimous approval, or any other arrangement.  But, just like with copyright splits, the time to decide who will have administration rights over the song is at the time you create the song.

 

Working out copyright splits and administration doesn’t have to be a big deal.  I know it’s difficult to think about “business” when you’re in the heat of creativity, but at some point in the process, like when you are finishing mixes and are sitting around the studio drinking beer and eating pizza, bring it up, talk it out, and write it down – I don’t care if you just scribble names and percentages on a cocktail napkin, but put it in writing.  Then you at least have something to take to your entertainment attorney who can then put it into a proper agreement for everyone to sign.

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Thomas A. Player

Entertainment Attorney

Do I Need To Copyright My Song?

Songwriting Copyright Basics

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… and by “basic,” I mean really, really basic.  So, please, I don’t want any industry pros giving me static for such a simplistic treatment of such a complex topic.  This article could easily be 300+ pages, but is intended to give the uninitiated a broad-brush-strokes overview within a reasonable word count.

Copyrights, and copyright law, is incredibly complex and one of the most confusing and misunderstood areas of the music business, particularly when you get into how, and how much, rights-holders get paid, which I will discuss in future articles.  Fortunately, there are plenty of great resources available for those who have the inclination to dig deeper and educate themselves.  I urge everyone who is serious about being in the music business, whether as a career or a hobby, to learn as much as they can about the business; if for no other reason, so that they can have an intelligent conversation with their entertainment attorney or manager and be in a better position to make informed decisions on the advice they receive.

How do you get a copyright?

So, you wrote a song, and you’re certain that it’s going to be the biggest smash hit since Robin Thicke’s “Blurred Lines.”  And of course, being responsible about your music career, you want to protect your brilliant creation.  But just how?  How do you get a copyright?  Well, if you sing your brand-new song in the shower, sing it to your cat, grab a guitar and sing and play it for your grandmother, or on a street corner – no copyright.  But … the instant you put your song in tangible form, meaning you write it down, or record it, or make a video of yourself performing it – congratulations, you’ve got a copyright in your song!  That’s it … there is nothing mystical about it.

Your copyright gives you, among other things, the exclusive right to reproduce and distribute the song, perform the song in public, and create derivative works from that song.  You have the exclusive right to record your song and put it out to earn money from sales, streaming, radio, live performances, etc.

The registration myth.

So, you may ask, “why do I always hear that I have to register my songs with the US Library of Congress to get a copyright?”  It’s a myth.  As noted above, your copyright springs to life the minute you put your song in tangible form.  But that doesn’t mean registering your copyright isn’t important.  First, it is worth noting that in many foreign countries, copyrights are created by registration.  But here in the good ‘ole USA, there is a distinction between the creation of the copyright, which is automatic, and registration.

So why register your copyright?

Registration of your copyrights is very important because it gives you several additional important rights.  First and foremost, it gives you the right to sue someone in federal court for copyright infringement if they steal your song (or any part of your song).  If you haven’t registered the copyright you cannot file suit (it’s actually more complicated than that, but the complexities are beyond the scope of this article; when in doubt, ask your attorney).  Second, registration of your copyright (as long as you don’t wait too long to register) creates a legal presumption that you are the valid copyright owner.  What this means is that if you sue, or are sued, for copyright infringement, the other party has to prove that you are not the rightful copyright owner, rather than you having to prove that you are (in law, we call this shifting the burden of proof, and it can be a big deal in determining how difficult it will be to win your case).  Finally, registration gives you the option, if you sue for infringement, of receiving statutory damages (pre-determined dollar amounts for infringement set by federal statute) rather than having to prove actual damages, which can be difficult to do.  Make sure you register your copyrights, you’ll thank me later if someone steals your song, or accuses you of stealing theirs.

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THOMAS ANDREW PLAYER, JD, MBA

Player Entertainment Law

 

Disclaimer:  This column is intended to give general information only, and should not be considered legal advice. Many situations or circumstances may appear similar, but in fact differ in ways that are legally significant. Always consult with an attorney about your specific circumstances.  Thomas Player, Player Entertainment Law, and the publisher assume no responsibility for actions taken by readers based on information provided in this article.

BAND NAME OR BRAND NAME? PROTECTING THE RIGHTS TO YOUR GROUP’S NAME

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BAND NAME OR BRAND NAME?

PROTECTING THE RIGHTS TO YOUR GROUP’S NAME

  One of the questions that I am asked most often by bands in the early stages of their careers is “how can we make sure we own our name? Can’t we “copyright” it or something so no one else can use it?”

  Well, the answer is “yes” and “no” (great, spoken like a true lawyer!); while there are many things your band can do to protect their interest in their name, there is nothing that can guarantee with certainty that they will never have a conflict with another band or entity with the same or similar name.  The reason for this is that in the United States, rights in a name are derived from use of that name, not from registration of the name (conversely, in many foreign countries rights are controlled by first registration rather than first use).  The “registration myth” is one of the most common misconceptions that I see among bands.  However, simply by using your name first, you have certain priority rights to the use of that name over a later user with the same or similar name, at least in the geographic area in which your band is known.

  This does not mean that you should not register your band’s name.  There are certain very important additional rights that are conferred by Federal service mark or trademark registration, and many states have similar registration procedures and protections. One of the prerequisites to Federal registration is that the name be used in interstate commerce.  This is fairly easy to do; simply playing an out of state show, or advertising an in-state show in another state, or selling your music or merchandise across state lines is sufficient.  Another prerequisite is that the name be unique, at least to the goods or services for which it will be used.  When the U.S. Patent and Trademark office receives an application, they search their records of current and pending registrations to look for conflicts.  The standard for determining a conflict is the “likelihood of confusion” by consumers as to what product or service they are purchasing.  Registrations are classified by use, using a standardized international classification system, and each classification must be listed separately, although they can be filed in a single application.  For most bands that perform, record, and sell music and related merchandise, this requires registration under at least three separate classification codes.

  The USPTO searches only their own records, and it is important that you do a diligent search to determine, as best you can, whether someone else is using your name.  A good place to start is with a through internet search, and a search of USPTO registrations, which can be done online for free.  There are several search companies that will do more comprehensive searches, for a fee, and it is advisable to use one of these services before you spend too much effort establishing a following and reputation with your name.

Be aware that this is a very complicated area of the law and you should seek the advice of an attorney before dealing with any issues related to your group name.

 
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Thomas Andrew Player, JD, MBA

Player Entertainment Law

 

Disclaimer:  This column is intended to give general information only, and should not be considered legal advice. Many situations or circumstances may appear similar, but in fact differ in ways that are legally significant. Always consult with an attorney about your specific circumstances.  Thomas Player, Player Entertainment Law, and the publisher assume no responsibility for actions taken by readers based on information provided in this article.