Four agreements: client tips for navigating music industry contracts

Originally published by Lindsay Stafford Mader.

Musicians, songwriters, and producers packed the room for this South by Southwest session titled “Four Agreements Every Artist Needs to Understand.” The goal was to give audience members a better understanding of the music industry’s legal issues so that they don’t fall victim to bad deals and disputes down the line. Panelists—including entertainment attorneys Steve Gordon, Robert Celestin, Wallace Collins, and Jennifer Newman Sharpe—focused on the following four agreements.

1) Band member agreements

• When two or more people get together to do business, they’re a partnership under the law whether they know it or not. Under this setup, all partners are equal and the partnership lasts until the band breaks up or welcomes new members.
• If several people write a song together and there’s no written agreement stating otherwise, the law deems it equally divided.
• It is best to set up an LLC or have a written contract to avoid conflicts and protect against liability (debt collectors can go after an LLC but not individual members of the LLC).
• The LLC or written contract can specify levels of ownership.
• U2 gave all of its band members equal ownership even though the bass player and drummer didn’t write any songs (Bono thought this would keep the band together).
• The Beatles were a “reverse democracy” where each member had veto power over decisions.

2) Management agreements

• A lot of artists rush through choosing management, but they should be thoughtful and picky because it’s a close relationship that can last for years.
• Discuss and outline what the manager’s services will include (a manager is not an agent whose job is to book gigs—which is illegal in some states).
• Typically a manager should be paid on commission (usually ranging from 15 to 20 percent).
• It is OK to pay a manager a set monthly fee if it is clearly set out and the person has a great reputation.
• Clearly define what constitutes “revenue” (commissioned managers shouldn’t get a cut of money that is earmarked for recording funds, advances, etc.).
• Set the duration of agreement based on time (every two years) or on album cycles and build in options that allow a manager to extend the term and the artists to protect themselves with contingencies tied to economic goals.
• Be aware of post-term clauses that allow for things like managers continuing to collect for work that happened during the time they were employed (make this definition narrow if you are an artist and broad if you are a manager). Consider sunset clauses that gradually decrease the manager’s percentage.
• Include a “key-man clause” stating that if the manager stops providing services for a specified amount of time, you can end the agreement.

3) Record and production deals

• Include an initial contract period and then an option to do another album or single.
• Include an exit clause that depends on goals being met.
• Advances/royalties will typically be split on a percentage (the label usually gives the advance to a production company and then the production company splits it with the artist).
• The production company often will claim 50-50 partnership, and this is commonly 50 percent of net proceeds.
• The artist should negotiate an in-pocket minimum amount, such as $30,000.
• Keep track of what the production company spends on you, such as paying for recording engineers, studio time, etc. because this will have to be reimbursed.
• Be careful of language on things that will be taken out of artist’s share; make sure royalty is calculated off the top.
• Try to get the production company to pay you 100 percent publishing royalties.
• Minimize the production company’s share of non-record revenue (touring, etc.) and don’t give more than 10 percent (labels will ask for a cut but you can say that what the label gets has to come from the production company’s percentage).
• Production companies will often want 50-50 on merchandise income, but artists can shoot for giving them 20 percent by saying that they’re getting some of the non-record revenue.

4) Publisher deals

• Know the difference between rights for recording (the sound recording of a song) and rights for publishing (the song itself).
• Songwriters receive royalties for public performances of their songs and can also receive mechanical royalties (the inclusion of a song on a record) as well as sync fees (the inclusion of a song in a movie or TV show).
• Artists and their publishers use performing rights organizations (such as ASCAP) to patrol radio, TV, and the internet for performances of their songs and to collect royalties (the organizations take a small fee for the service).
• Publishers collect the income from the performing rights organizations and, after taking from 25 to 50 percent, distribute it to the songwriter.
• Publisher agreements are very negotiable and can include single song agreements, time limits (usually 18 months to three years), etc.
• Publishers also register songs with the U.S. Copyright Office and publishing rights organizations abroad and typically also try to market the writer’s songs to generate more income.
• Emerging artists will commonly use sync rep companies to shop their music around to films, TV shows, and video games in exchange for a portion of sync fees (50 percent is not unusual, but you can find better deals at 20 to 25 percent). Avoid giving all the rights in a song (such as those for radio play) to these companies.

Curated by Texas Bar Today. Follow us on Twitter @texasbartoday.

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