Artist Development Plan 8

Legal Issues

by John Latimer

Part eight of the Artist Development Plan involves the legal issues that the Artist will face during their career.  It’s good practice to begin thinking about the legal aspects early.

The legal part of any Artist career is of utmost priority.  You may have heard stories of an unscrupulous manager, publisher or agent who “stole” an Artist’s work.  It’s my contention that the Artist did not review the legal agreements properly.  Had they, I doubt there would as many stories.

First of all, when getting into any agreement always hire a qualified attorney to review the documents and consult for legal opinions. Musicians and Artists should hire a lawyer who specializes in the music industry.  These attorneys know what’s missing in the fine print.  Remember, a contract is not always about what is in the agreement but also, what is not included.

Other than an agreement with a qualified attorney, the first agreement that an Artist will need is that of a band member agreement.  If management is a part of the Artist’s team, the Artist is going to need an Artist management agreement. In addition, Artists should also be prepared to enter publishing agreements as well as production agreements and performance agreements.

Band agreements may define the issues related to running the artist’s career as a business as well as how artists will work with people within the band and those on their team.

Artists Agreements

Who are the writers? Is there an agreement between them? What is the agreement between the members of the group? Who owns what? Does the band own a trademark is it owned by an individual member? What happens if the band breaks up? If there is a solo singer-songwriter, certainly there is no agreement unless he or she is co-writing with another writer.  Every music professional that the Artist works with will want to know who the Artist has an agreement with, if any.  Record company executives and publishers will want to make sure that those agreements are completed.

Collaborator Agreements

Now really, after the agreement between the band members, The Artist should begin to understand potential agreements with their producer, their manager, their agent, their publicist, etc.  The entertainment business is full of agreements.

After the artists have completed their own personal agreements amongst themselves, then they can begin thinking about recording agreements, producer agreements, performance agreements or other types.

The music business is very fond of contracts.  The record, publishing, merchandising, and management sides of the industry are contract crazy.  In the performance arena, there are indeed contracts, but in the beginning they are usually either a verbal agreement or a handshake.  As an Artist get more established, they can almost guarantee that written contracts will become the norm. This doesn’t mean that a beginning act shouldn’t try to get something in writing.

Note that the detail in a contract can be changed to suit an Artist’s needs. Artists should not hesitate to propose changes to any of the details.

Artist / Producer Agreements

The Artist / Producer agreement is for services in producing Master Recordings for and of the recording artist(s).

Recording sessions for the Masters are conducted by a Producer at times and places as mutually designated by Artist and Producer.  All the individuals who render services in connection with the recording of Masters is usually subject to Artist’s approval.  Each Master embodies the performance by the Artist of a musical composition designated by the Artist, and is subject to the Producers approval for the manufacture, broadcast and sale of the recordings, Sometimes the Producer will re-record any musical compositions or other selections until a Master technically satisfactory.

With this agreement, the Producer delivers to the Artist a recording suitable for duplication and manufacture of phonorecords for each Master.  All the original session tapes, rough mixes and any derivatives or reproductions are also delivered to the Artist,

All Masters produced from the recording are owned by the Artists.  However, depending on the deal, some producers may reverse this clause.

Depending on the scenario, upon the Producer’s full performance of all the terms and provisions of their agreement, the Artist will pay the Producer a previously agreed amount.  Usually this is upon the delivery to the Artist of the Master.  Many times the producer is paid a percentage of sales based on the suggested retail price of the recording.

Many times, the Producer will agree to assist Artist in presenting the Master recording to a record company in pursuit of a record production agreement.  There are many possibilities with this clause including that the Producer will not be Artists exclusive representative or that the producer agrees to notify the Artist prior to making any formal contact with representatives of any record company on the Artists behalf.

Confidentiality Agreements

Confidentiality Agreements are between an owner of information or data and where it is shared with another person or entity. This could be song ideas, project ideas such as a recording or tour.  It could also mean business ideas such as growth plans, sales incentives or market penetration. In these agreements, the owner proposes to disclose certain of its confidential and proprietary information to a Recipient. Confidential Information usually includes all data, materials, products, technology, computer programs, specifications, manuals, business plans, software, marketing plans, business ideas, financial information, and other information disclosed or submitted.

The Recipient will agree that the Confidential Information is to be considered confidential and proprietary to the Owner and that the Recipient shall hold the information in confidence and will not use the Confidential Information other than for the purposes of its business with Owner.  The Recipient usually may disclose it only to its officers, directors, or employees with a specific need to know.

Confidential Information furnished in tangible form by the Owner may not be duplicated by the Recipient except for purposes of their Agreement.  Upon the request of Owner, Recipient must return all Confidential Information.

As with most agreements, there is usually a time limit placed on the confidentiality.

It must also be explained, that a confidentially agreement is nothing more than that. All further agreements should be granted under a separate contract.

Consignment Agreements

Consignment Agreements are made when a Consignee appoints a Consignor as an agent for the works of artwork / craftwork / compact discs, etc for the purposes of exhibition and sale.  The Consignor is not permitted any other purpose of the Merchandise without the written consent of the Consignee.

The Consignee accepts Merchandise which will be listed on an Inventory Sheet which is supplied from the Artist.  This usually happens at the merch table or retailer.

The initial term of a consignment is negotiable. It may be for one evening at one performance venue or it may be 12 months at a retail establishment. The packing and shipping charges, insurance costs, other handling expenses, and risk of loss or damage incurred in the delivery of Merchandise from the Consignee to Consignor, and in their return to the Consignee, is the responsibility of the Consignee.

The Consignor is responsible for the safekeeping of all consigned Merchandise while they are in its custody.  Consignor is liable to the Consignee for their loss or damage (except for damage resulting from flaws inherent in the Merchandise), to the full amount the Consignee would have received from Consignor if the Merchandise had been sold.

Title to each of the Merchandise remains with the Consignee until the Consignee has been paid the full amount owed; title then passes directly to the purchaser.  All proceeds from the sale of the Merchandise are held in trust for the Consignee. Consignors pay amounts due the Consignee before any proceeds of sales are made available to creditors of the Consignor.  During the agreement, the Consignor regularly sends to the Consignee, a Sales and Inventory statement listing any and all consigned items covered by the agreement.

The Consignor sells the Merchandise only at the Retail Price specified in the Inventory section of the agreement and the commission is to be a percentage or flat fee regardless of the retail price.  The Consignee and Consignor must agree to any change in the Retail Price, or in Consignor’s commission, in advance.

The Consignor uses its best efforts to promote the sale of the Merchandise and the Consignor will provide adequate display material of the Merchandise, and to undertake other promotional activities on the Consignee’s behalf.

Distribution Agreements

The Distribution Agreement is for the distribution (either exclusive or non-exclusive) of certain Master Recordings and the performances embodied on them:

The Licensor is usually a record label. If an Artist releases their own material then the artist should keep in mind that they are now performing the functions of a record label. The record label will represents and warrant that they are the sole owner of the master recordings and that they have the right to give distribution rights.  Many record labels are owned by an Artist, so an Artists needs to evaluate this type of agreement as well.

Record labels agree to “drop ship” an initial shipment of recorded units and to continue to supply the distributor with recordings when demand from retail outlets so warrants.

The term “recordings”, mean all transcriptions, duplications, encoding or any other method used to duplicate the performance including, but not limited to, phonograph records, digital audio tapes, DVDs, and/or compact discs.

Many distributors will want exclusive rights and will require the record label to assign, transfer and grant to the distributor the entire right to distribute without any limitation.  However, many distributors cover only certain geographic locations and the agreement will state the areas of the world where they are active.

In consideration of the rights granted to the distributor, the distributor will agree to pay the record label a pre-determined sum for each record sold and paid for in the territory.

For the distributor to accept the license from the record label, they will want a guarantee that all necessary mechanical licenses have been secured from the copyright owners of the compositions. The Licensor also is solely responsible for all royalties and will indemnify the distributor against any losses, damages, costs or claims of any parties resulting from the services of the artists and musicians whose performances are embodied on said Master recordings.

Download Agreements

Download agreements are between the record label or Artist and a consumer wishing to download the copyrighted material from the World Wide Web.  The agreement is usually a button on a website that the consumer clicks to agree to the terms.

Usually, for consumers to legally download a recordings from the web, they agree that they will not try to sell the downloaded file, or copy, reproduce, distribute, publish, display, publicly perform, modify, create derivative works, transmit, or in any way exploit any recording  which they download.

In addition, the consumer usually agrees to download the recording only for their own personal, non-commercial use and will make only one machine readable copy.

Mechanical License Agreements

Mechanical Licenses are granted by a copyright owner to a Licensee the right to record, reproduce, market and sell a musical composition.  In this agreement, the Licensor (songwriter or publisher) warrants and represents that it is the sole and exclusive owner of a valid copyright or license in a particular musical composition.

The Licensor grants to the Licensee the non-exclusive right, privilege and license to use the composition, and to make and/or use arrangements in the manufacture and sale to reproduce the composition.

The Licensee pays royalties to the Owner on all copies containing the musical composition that is recorded, manufactured, sold and paid during the term of the composition’s copyright and all renewals and extensions.

The License is for each phonorecord recorded, manufactured, sold, and paid for, and the Licensee pays the Owner a set amount for each.

The term “phonorecord(s)”  or “records” means any and all methods of mechanically reproducing the musical Composition including, but not limited to, digital copies, MP3s, phonograph records, digital audio tapes, DVDs,  compact discs and any and all methods of reproducing the Composition, now known or which may come into existence.

The Licensee will agree to render to Owner quarterly statements, and payments of all royalties payable within 45 days after March 31st, June 30, September 30, and December 31, for each quarter for which any royalties accrue.

Music Licensing Agreements

Music License Agreements are made between a Licensor and a Licensee where a Licensor is an authorized person or entity who owns the copyright in and to a sound recording (“Master”) and, the underlying musical composition (“Work”).

A Licensee is the party who seeks to license the tracks for a production and wishes to license the tracks for use in connection with a project, including use in connection with the production, exhibition and exploitation of the project that may be used in the project’s promotion.

The Licensor will grant to Licensee a non-exclusive and non-assignable license to use the tracks and the approved name and likeness and biography of the Artist and/or producer, writer and composer of the Tracks.

The Licensee may designate the Licensor to collect Internet Performance Royalties.  The Licensor grants a license to publicly perform the tracks in connection with the exhibition of the Licensee’s project.  The license will be limited to only the authorized tracks.

The Licensee pays the Licensor a license fee at the time of execution of the Agreement. The license is valid only after the Licensee has made payment in full to the Licensor.

Many times the Licensee may request for permission to shorten the length of the tracks or remix the tracks as necessary for its use in the project.

Online Music Distribution Agreements

If an Artist is planning to release their recordings then they are wearing the “hat” of a record company. Hence, depending on the business of the Artist, a separate agreement may be needed between the members of the Artist’s team for such an arrangement. Otherwise, a record label releasing material online anywhere but on their own website, they will need to enter an agreement with and Online Music Distributor (OMD).

An Online Music Distributor operates a website and allows customers to download electronic music recordings for a fee. The agreement with an OMD defines how much money of their sale goes to the record label and then, hence, the Artist.

For this type of agreement, the record label solely owns all copyright in the sound recordings

The license grants the OMD a worldwide license to:

(a)       Make copies of the recordings

(b)       Assist in the marketing and distribution of the Recordings through their Website

(c)        Allow their customers and potential customers to download and stream copies of the Recordings from their Website

(d)       Allow their customers and potential customers to make copies of the recordings onto their computers, CDs, DVDs, MP3 players and other digital and electronic formats and devices for their personal use.

Upon execution of their agreement, the record label will deliver a copy of the current recordings in MP3 format or mastered CD to the Online Music Distributor.

The OMD will set the prices they charge their customers to download and stream copies of the Recordings.

The OMD will pay the record label royalties quarterly, in the amount of a percentage of the gross revenues received from the sale of downloads.

Record Label / Artist Agreements

Ahhh… the infamous record label contract.  This agreement is between a record label and an artist for tendering of personal services in connection with the production of commercial sound recordings.

This agreement usually has a term limit of time or number of recordings.

The artist grants to the record label the right to manufacture, advertise, sell, lease, license or otherwise use or dispose recordings embodying their performances to be recorded upon terms and conditions as the record label may approve.  In addition, the artist grants the record label the right to use their name likeness and photographs, in connection with the exploitation of the recordings.

In return, the record label pays the artists for the rights granted and the services to be rendered, a royalty for each recording manufactured and sold throughout the world.

Payments of accrued royalties are made semi-annually, however, the record label usually reserves the right to deduct from the amount of any expenses or royalties previously paid or recordings returned, either as defective or on exchange.

Record labels may require that artists agree that during the period of the Agreement, they will not perform for any other person, firm or corporation, for the purpose of producing commercial sound records.  In addition, the record label may require, that after the expiration of the Agreement, the artist will not record for anyone else any of the musical selections recorded.

In this agreement, the Artist will warrant that they have no oral or written obligations contracts, or agreements entered into prior to the signing of the agreement which would in any way interfere with carrying out the agreement with the record label to its full intent and purpose.

Many times, the record label may have an option to extend the Agreement for a period equal to the terms of the original Agreement by giving the artist notice in writing of its option.

Session Player Agreements

Many times a record label will hire session players to perform in the recording studio on track(s) of specific songs where the record label is desirous of acquiring all rights in the Assigned Work.  The musician (session player) is usually a work-for-hire and assigns, transfers, conveys, and sells to the record label all of their rights, title and interest throughout the universe, in the works. Many times Artist have no say in the decision by the record label to hire session musicians.

Studio Agreements

Studios have agreements too.  These agreements may be with the artist, a producer or a record label when they engage the use of a studio’s recording facility.

The agreement will state the name of the name of the studio, the name of the artist, or producer or record label, a project name, number of tracks to be recorded and the hourly fee for use of the studio.

The estimated Total Cost for the project should include a qualified engineer, tracking, mixing, and editing.

There are many factors involved in completing a project in a studio, some of which are impossible to predict in advance and are beyond the control of the studio.  These factors may affect the amount of time it takes to complete the project. Consequently, please be advised that the final amount due for the project may vary from the estimated Total Cost may have been previously approved.

Many times the studio may want to use the artist as a promotion tool to attract new customers. Studios may want a non-exclusive worldwide right to use the artist’s name, likeness, other identification, and biographical material.  In addition, they may also want the right to include any Masters recorded to be placed on the studio’s web site at no charge for promotional purposes. These issues need to be addresses when negotiating the contract.

Vocalist Agreements

Record labels regularly hire personal services of vocalists for the purpose of making phonograph recordings and a vocalist agreement is commonplace.  The record label will schedule recording sessions and need to ensure that vocalists perform as agreed.

Recordings are made at recording sessions in studios at times and places with musicians and other performers as designated by the record label.   Sometimes a minimum number of songs will be recorded and additional recordings may be necessary.  Each recording is subject to approval as satisfactory for manufacture and sale.

Many times a record label may require the vocalist to be exclusive to them.  The vocalist agreement may state that the vocalist may not perform for the purpose of making phonograph records for any person, firm or corporation, and that the vocalist may not perform the same composition at a later date.

It is usually agreed that the vocalist will be prepared with acceptable preparation of the material to be recorded.  Many times the producer of the recording will have rehearsals for the musicians and vocalists during the pre-production phase of the project.  The record label will require the vocalist to record to the label’s satisfaction and to have the vocalist repeat and re-record as many times as may be required.

The record label will require the vocalist to grant the right to manufacture, advertise, sell, lease, license or otherwise use or dispose of in any and all fields of use throughout the world, or any part of the recording embodying their performances. In addition, the vocalist will grant the right to the record label to use their name and likeness and biographical material.

The record label will want the right to use, and to allow others to use, the vocalist’s name, likeness and biographical material for advertising and the purposes of trade and sale of the product

Payment to the vocalist for services may be completed in a few ways.  Sometimes, the vocalist is paid a flat fee as a work-for-hire.  Other times, the vocalist is compensated by a percentage of sales generated by the final product.

Record Labels – 360 Deals

In the music industry, a 360 deal is a business relationship between an artist and a music industry company.  The company agrees to provide financial support for the artist, including direct advances as well as funds for marketing, promotion and touring, as an investment to the artist’s lucrative potential.  The artist agrees to give the company a percentage of all of their interests, including sales of recorded music, live performances, publishing merchandising and any other income.

The business arrangement is an alternative to the traditional recording contract.  During the first decade of the 21st century, revenues from recorded music fell dramatically and the profit margins traditionally associated with the record industry disappeared.  The 360 deal reflects the idea that the artist’s team is consolidated and more likely to use synergy from all aspects of the artist’s brand, including recorded music, as well as live performances and merchandise.

Performance Agreements

The verbal contract between a promoter and an artist may simply be an agreement that the artist will perform on a certain date, at a certain time, for an agreed upon length of time, with what specific other act, and how much will be paid.  Many promoters require some kind of written confirmation of a verbal agreement made over the phone.

Here’s the information needed to complete a live performance contract:

* Name of Promoter, Purchaser or Buyer

* Name of Artist

* Terms of the Deal: The deal you accepted and the amount of money being paid.

Here are the four most common deals you will encounter:

Flat or Guarantee Example: $ 300

Versus Example: $ 300 versus 30% door   (which ever is higher)

Plus Example: $ 300 plus 30% door

Points/Split Example: 50/30/20 of Net

* Date of Event

* Sets (length and number of)

* Deposit (if any)

* Payment (by whom, how much, and when)

* Admission Fee (ticket price)

* Capacity of the Venue

* Act of Nature (force majeure)

* Cancellation Fees

* Recording Possibilities or by Permission

* Promotional Commitment

* Merchandising requirements

Both parties should always be absolutely clear about what deal is being negotiated.  What are the expectations? Be clear about dates and times, about responsibilities and logistics. Use a confirmation letter if possible, and don’t delay in confirming any arrangements or contracts.

The Musicians Union has a number of specimen contracts which cover most types of appearances. These are available from the Musician Union offices and it would be wise to be familiar with the types of contracts that an Artist might be asked to agree.