BASIC LEGAL TIPS FOR RECORD PRODUCERS

     These days the recorded music business is producer-driven more so than ever before. Producers not only create the sound bed and make the singer or rapper sound great performing over it, but producers also discover and develop new talent. It is important as a record producer to understand that each situation is unique, and the relationship between the record producer and the artist varies greatly depending on the arrangement between the parties as well as the genre of music. Producers have traditionally been paid for their services as employees or as independent contractors and their contributions to the creation of the sound recording in the studio are generally contractually deemed to be a work-for-hire for the artist or record label under the copyright law. As such, the copyright in the sound recordings is owned by the artist or the record label. 

     Sometimes a producer may be paid a flat fee for his services in the studio, but more frequently the producer is paid a fee that is deemed an advance against future producer royalties based on sales of the recordings. However, the paradigm keeps changing and has evolved over the years. Recorded music is more producer-driven than ever before. Producers now sometimes not only help capture the sound in the studio and use the available technology to mold the sound to be as commercially acceptable as possible, but more and more producers these days are finding and discovering new talent and developing the artist’s sound and even, in some cases, collaborating as a co-writer of the artist's songs.

     When dealing with recorded music there are two copyrights that may come into play under the copyright law: (1) one in the sound recording or the fixation of sound and (2) one in the underlying  music and lyrics, the musical composition or song. Copyright vests in the creator as soon as the idea is “fixed in a tangible medium”, so as soon as the author writes it down or the creator records it the copyright is created. In general the creation of the sound recording in the studio is separate from the writing of the song. This is usually true in most cases (e.g., in the rock, country and folk genres) where the artist usually comes into the studio with the song already completed or taking shape and the producer will then just assist in creating a recording of the song. In other cases, however, the producer's involvement may cover both copyrights. For example, a producer may create the musical bed or track (often before any artist, singer or rapper is even involved) so he also becomes a songwriting collaborator with the artist who writes the lyric and performs the vocals in the recording studio. In such a situation, the producer and artist become joint owners not only in the copyright in the sound recording but also, by current custom in the industry, in the underlying musical composition. It is also true that in today's top pop music world many of the producers actually co-write the songs with the artists in the process of creating the hit record (and sometimes numerous other songwriters as well).

   It is generally standard operating procedure when dealing with an artist, particularly one signed to a major record label, for a producer to be asked to sign a contract to transfer any claim of rights the producer might have in the sound recording copyright to the artist or label in exchange for an advance and a producer royalty. The amount of an advance, which is recoupable against the producer's royalties later, can range widely, and may or may not include the studio costs along with the producer's compensation depending on how the budget is structured. Producers generally earn royalties from the sale of the sound recording (and may also earn mechanical royalties and performance royalties under circumstances where the producer is also deemed a co-author of the music composition. Producer royalties are often referred to as "points" which simply means percentage points deducted out of the artist's percentage share of royalties. For example, a typical producer royalty in the physical era might have been "3 points" which would, essentially, be 3 percentage points out of the artist's 12-15% royalty rate under the artist's record contract (i.e., approximately 20-25% of what the artist earns, which is how many producer agreements delineate the producer royalty now in the digital streaming era). In addition, the producer should earn a pro rata share of royalty income from any use and exploitation of the sound recording just as the artist does, whether from synchronization licenses for film and TV use, from social media, and from streaming digital streaming services like YouTube and Spotify).

      Keep in mind that it may, in fact, be in your best interest to "get it in writing" if you have an arrangement with someone. This is especially true in collaborative situations. Otherwise, you run the risk of a disagreement later over the actual terms of the oral agreement, and it becomes your word against that of the other party. That is not to say that an oral agreement is not a binding contract, but a written contract is easier to prove since the terms of the arrangement are in a  signed writing. A simple contract should set forth the basic details of your arrangement (i.e., who is paying how much, and for what? advance/fee, royalty, producer credit, etc.) and then be signed by all parties to the agreement. 

      At the end of the day, if you believe in yourself and your talents, give yourself the benefit of the doubt, and invest in good legal representation - all the successful producers do. Your lawyer can "translate" the deal and explain its terms to you, and then help negotiate more favorable terms for you as appropriate. My advice: never sign anything - other than an autograph - without having your entertainment lawyer review it first.

Wallace Collins is an entertainment lawyer and intellectual property attorney based in New York with over 35 years’ experience in music, film, television and emerging technology, and he handles many current digital media matters including issues that arise with AI. He was a songwriter and recording artist for Epic Records before receiving his law degree from Fordham Law School. Tel: (212) 661-3656; Website: http://www.wallacecollins.com 

 

SONGWRITER COLLABORATION AND CO-WRITER AGREEMENTS: WHAT THEY MEAN AND HOW THEY WORK

            Under the US copyright law, an author or creator owns a copyright in his or her work the moment it is “fixed in a tangible medium” (i.e., the moment the expression of an idea is written down or recorded in some manner). When it comes to the recorded music business there are two primary copyrights of interest: one in the musical composition or song; another in the sound recording of that song. A copyright extends for the life of an author plus 70 years, and in the case of collaborators on a copyright it extends for the life of the last surviving collaborator plus 70 years.

            This article will focus on the collaboration between and among the co-writers of the musical composition or song which is generally comprised of the music (e.g., melody, harmony, chords, rhythm, etc.) and the lyrics (i.e., the words). The essence of collaboration is working together to create a single work regardless of how or what each party contributes. Collaborators may work together in the same room at the same time, or not. The creative contribution of each co-author may be equal in quality or quantity, or not. Both authors may work together on the music and lyrics or one might write just music and the other lyrics. The long history of collaboration has shown that there are endless combinations. Co-authors do not need to have a written agreement concerning their joint work, but it is probably a good idea to do so given the myriad issues that can arise and become a problem under such circumstances.

            Co-writers can divide copyright ownership in whatever proportion they determine, and that ownership concerns both rights (ownership and control) and revenues (income generated). In the absence of a written agreement, under current case law concerning both copyright and partnership law two or more collaborators are generally deemed to share equally on a pro rata basis. This might be so even if it is clear that the contributions of the authors were not equal since the Courts generally prefer not to make decisions about the value of each author’s contribution to a copyright and simply divide it by the number of authors (and we probably prefer that Courts not be making decisions about whether the hook or chorus lyric has more or less value than the chorus melody, etc.). Therefore, without a written agreement two songwriters would be deemed to own the song fifty-fifty, three songwriters one-third each, etc. A typical music business guideline for dividing ownership has been to designate the music as 50% and the lyric 50% of the song copyright. Under this scenario, if one person creates the music and two others write the lyrics, they may agree to divide the ownership 50% to the music creator and 25% to each of the lyricists. However, this concept does not have any legal significance so if there is no written collaboration agreement then under this scenario each author would own 1/3^rd of the song copyright.

            Beyond the issue of just dividing the income there arises the issue of copyright ownership and control (sometimes referred to as the administration right). Many songwriters prefer that there be separate administration among the various writers and their respective publishing companies, if any. In other words, each author retains control over its respective share of the copyright. In this way each writer retains some control over what happens with the song, the scope of the licenses and how much is charged. Under US copyright law, each joint copyright owner can exploit the song and also grant non-exclusive licenses to third parties subject to the duty to account to the co-writers for any money that is generated. Each writer could also transfer some or all of their respective share of the copyright (e.g., to a publishing company) without affecting the ownership interests of the any other co-writer’s share in the copyright (although no one writer can grant an exclusive license nor transfer copyright ownership in the entire song without the written permission of each co-writer).

            All of these issues can be addressed in a written collaboration agreement. There are endless variations depending on the circumstances. Each author may retain his or her share of revenues and ownership but grant the administration rights to one party (e.g., the artist/co-writer and/or its label) so that the artist would have the right to record and exploit the song and grant third party licenses. Particularly in the world of synchronization licenses (i.e., using the audio with visual images such as in film, television or video games), it is usually more convenient for one party to have the right to grant licenses and to collect and divide all the income. Licensing can become complicated when a licensee has to seek the approval of, and document permission from, multiple writers and their respective publishers. However, each different scenario and the co-writers involved will need to determine and negotiate what arrangement works best for themselves in that particular situation.

            A collaboration agreement can be as simple as a pie chart drawing made on a napkin at the dinner after the writing session or as complicated as a writer’s publishing company dictates that it be. Over the years there have been many stories of writers agreeing, however reluctantly, to acknowledge a “co-writer” who did not even make a contribution to a song (e.g., featured artists, producers, record executives, band members, etc.). The exact contribution to a song is always a somewhat subjective measurement and if the price of getting a song on the record of a multi-platinum artist is to share writing credit then this pressure can be difficult, if not impossible, to resist. However, keep in mind that once a “co-writer” is acknowledged in writing it can be very difficult to undo. Most successful songwriters rarely, if ever, share credit in this context and every writer should try to follow this practice.

            At the end of the day, if you believe in yourself and your talents, give yourself the benefit of the doubt, and invest in good legal representation - all the successful songwriters do. Your lawyer can create a fair collaboration agreement for you to use or "translate" the documentation presented to you and explain its terms and then help negotiate more favorable terms for you as appropriate. My advice: never sign anything - other than an autograph - without having your entertainment lawyer review it first.

            Wallace Collins is an entertainment lawyer and intellectual property attorney. He was a songwriter and recording artist for Epic Records before receiving his law degree from Fordham Law School. T: (212) 661-3656; www.wallacecollins.com

BEWARE THE "CONTROLLED COMPOSITION" CLAUSE IN RECORD CONTRACTS

Under U.S. Copyright law, Congress has seen fit to legislate a minimum statutory mechanical royalty rate for songwriters and their publishers.  Based on an upward-sliding scale tied to a cost-of-living index, the mechanical royalty rate is set by the Copyright Royalty Tribunal on a per song per record basis. The current rate in effective is $.091 per song.  However, most record companies use their substantial leverage over fledgling recording artists to cause them to enter into record contracts which purport to reduce this minimum rate pursuant to the "controlled composition" clause - and this provision might also be made to apply to producers and songwriters who do work for those artists.

The controlled composition clause is one of the most insidious of a plethora of royalty-reducing provisions in any record contract. It reduces the mechanical rate for a songwriter/recording artist and its publisher on songs written or otherwise "controlled" by the artist.  Most such clauses not only reduce the payment per song, but may also put a limit on the total number of songs on which such payment will be made and may fix the point in time at which such calculation will be made (thereby circumventing the cost of living index increase). This is an issue not only for the songwriter/recording artist but for the producer/songwriter and for non-contractual songwriters who may chose to collaborate with an artist who is signed to a recording agreement with a controlled composition clause.

A full analysis of a controlled composition clause is beyond the scope of this article.  However, for a simplified example of how it works, lets assume a typical clause where the songwriter/artist will receive 3/4 of the minimum statutory mechanical rate (assuming the minimum rate is 6 cents per song at the time) on a maximum of 10 songs per LP. The mechanical royalty on the artist's entire LP usually has a "cap" of 68.25 cents (3/4 of $.091x 10 songs) so that, even if the songwriter/artist writes 12 songs for its own album, the artist's publishing is not worth $1.09 per album ($.091 x 12 songs) but only 68.25 cents.

To further illustrate, assume the 12 song album has 6 songs written by the artist and 6 songs from outside publishers. Unless otherwise agreed, the outside publishers are not subject to the artist's 3/4 rate so the 6 outside songs get the full rate and are entitled to a total of 51 cents. Since the mechanical royalty on the entire LP has a "cap" of 68.25 cents, the songwriter/recording artist is limited to applying the remaining 13 cents to the songwriter/artist's 6 songs, so that the artist's publishing is worth a little more than 2 cents per song. And keep in mind, if the artist's producer agreement has language tying the record producer to the artist's controlled rate or an outside songwriter's mechanical license has similar language, then both the producer and the outside writer would also be subject to the reduced rate and the "cap."

To take it one step further, imagine a case where 8 of the 12 songs on the LP were from outside publishers. The outside publishers would be entitled to at least 72 cents in mechanical royalties ($.091 x 8 songs).  Since the artist's contractual cap is 68.25 cents, then for each LP sold the songwriter/record artist would actually lose mechanical royalties and owe its record company a few cents for each record that sells which would be deducted out of the songwriter/artist's recording royalties. The net effect is that the songwriter/artist's own 4 songs receive no mechanical royalties at all.

A controlled composition clause may also contain language which further reduces the mechanical rate on mid-priced and budget sales, etc., providing for a 3/4 rate on the 3/4 rate.  In addition, record contracts often contain several subparagraphs that eliminate royalty payments for free goods and records sold below wholesale price, etc.  Several of these categories would ordinarily be subject to mechanical royalties absent the controlled composition clause.  Moreover, although this provision reduces mechanical royalties on the artist's publishing, it does not reduce payments to outside publishers since they are not subject to the clause.

The most treacherous dilemma for the songwriter/artist is that, even if the record company does not acquire the artist's publishing in its contract, the value of the artist's publishing may so greatly be reduced by the controlled composition clause that the artist may find it difficult to get a publishing deal elsewhere.  This is especially true if the mechanical royalties are cross-collateralized with the artist royalties since, until the artist is recouped, no mechanical royalties will be payable to the songwriter/recording artist or its publisher.

The foregoing scenarios raise numerous legal issues including antitrust, interference with prospective financial advantage and restraint of trade.  Another issue raised is whether, under partnership law (where one partner can bind the partnership), a co-writer who is not actually a signatory to the record contract is subject to the 3/4 rate by virtue of being a "partner" in the song's creation.

These days almost every record contract contains a controlled composition clause.  Although certain aspects of a controlled composition clause can be made less onerous by some persistent negotiation (such as escalations of the rate based on sales thresholds), record companies are generally inflexible in their insistence *on this provision and their position can only be tempered by their desire to sign a particular artist or by an artist's importance and stature. This provision should be reviewed very carefully by an artist and his lawyer; any artist's lawyer who failed to discuss this clause and explain its ramifications to the client (under the assumption that it is "standard" in every record contract) would certainly be inadequately representing the client, and may suffer the consequences when the actual effect of the provision is eventually revealed to the artist.

In fairness to record companies, with the exorbitant cost and high risk of the record business, record companies need to cut costs where they can to try to make a profit on the few artists who do succeed.  However, the question is one of whether devaluing the artist's publishing is a fair way of doing it.  Record companies contend that, since they are financing the production and marketing of the artist's recordings, the artist should give them a break on the publishing royalties they would otherwise have to pay.

By way of analogy, imagine a particular record company, in order to cut costs, decided that, despite the Federally mandated minimum wage, any employee who wanted to work for that label would have to accept three-quarters of the minimum wage.  It is unlikely such a preposterous policy would hold up in court.  When it was tried by calling in an "internship program" the Courts did now permit it. Whether the contractual reduction by a record company of a Congressionally legislated minimum royalty rate would hold up in a court of law has yet to be tested.

Wallace Collins is an entertainment and intellectual property lawyer with more than 30 years of experience based in New York. He was a recording artist for Epic Records before receiving his law degree from Fordham Law School. Tel: (212) 661-3656; www.wallacecollins.com 

BASIC LEGAL TIPS FOR RECORD PRODUCERS

     Producers should be aware of their legal rights when it comes to working with recording artists in the studio. These days the music business, particularly the pop and urban markets, is producer-driven more so than ever before. Producers not only help capture the sound in the studio and use the available technology to mold it to be as commercially acceptable as possible, but more and more producers are finding and discovering new talent and developing the artist’s sound and even co-writing the songs with the artists.

     As a producer there are two copyrights that come into play in your business under the copyright law: one in the sound recording and one in the underlying musical composition or song. I usually suggest to my producer clients that they file a copyright registration with a Form SR covering both copyrights as soon as they begin to circulate a finished track (whether passing it around or posting it on a website or social media). The filing of a copyright registration in Washington D.C. gives you additional protection in so far as it establishes evidence of the existence of such copyright and gives you the presumption of validity in the event of a lawsuit. Registration also allows for lawsuits to be commenced in Federal court and, under Federal law, allows an award of attorneys’ fees to the prevailing party. Forms are available at www.loc.gov.

     Under copyright law, when a producer and an artist work together to create a sound recording in the studio they become co-authors in the work. The producer and the artist become joint owners of the copyright in the sound recording. In urban and hip-hop music, the producer who creates the musical bed or track becomes a collaborator with the artist who writes the lyric and performs the vocals in the recording studio so that the producer and artist become joint owners not only in the copyright in the sound recording but also, by current custom in the industry, in the underlying musical composition. Copyright vests in the creator as soon as the idea is “fixed in a tangible medium”, so as soon as you write it down or record it the copyright is created. Under the copyright law, although a non-exclusive license can be verbal, you can only transfer your right in the copyright by signing a written agreement to transfer them - so be careful what you sign.

    

     Although it is generally standard operating procedure when dealing with the major record labels to be asked to sign contracts to transfer your sound recording copyright to the label in exchange for an advance and royalties, you must be cautious with any agreement you are asked to sign whether by the artist or the record company. In addition, the underlying song copyright and the related “publishing rights” have an important value that the producer should know how to monetize whether through a publishing deal or acting as his own publisher. Producer contracts address numerous issues and the language can be a minefield - it is best to have an experienced entertainment lawyer navigate your way through that minefield.

      Producers earn revenues from advances and royalties paid for the sale of the sound recording, and may also earn mechanical royalties and performance monies (e.g., ASCAP, BMI, SESAC) if the producer is deemed a co-author of the musical composition. In addition, the producer should earn income from all use and exploitation of the record just as the artist does, whether from synchronization licenses for film and TV use, from social media, and from streaming services like YouTube and Spotify. Producer agreements should also provide for payment to the producer of SoundExchange revenues. Most of these issues are dealt with in the producer contact. In the absence of paperwork concerning the producer’s work in the studio and the producer’s share of income, then the producer and artist are joint owners of the sound recording copyright and the issue is then how to divide the revenues that may arise from the use and exploitation of the recording.

     Never sign anything - other than an autograph - without having your entertainment lawyer review it first. Do not rely on anyone else (or even their lawyer) to tell you what your contract says. And never let anyone rush you or pressure you into signing any agreement. There is really no such thing as a standard "form" contract. Any such contract was drafted by that party's attorney to protect that party's interests. Your lawyer can "translate" the deal and explain its terms to you, and then help negotiate more favorable terms for you.

     Keep in mind that it may, in fact, be in your best interest to "get it in writing" if you have an arrangement with someone. This is especially true in collaborative situations. Otherwise, you run the risk of a disagreement later over the actual terms of the oral agreement, and it becomes your word against that of the other party. That is not to say that an oral agreement is not a binding contract, but a contract is easier to prove if the terms of the arrangement are in writing. A simple contract may not necessarily require extensive involvement by lawyers. A contract can be as basic as a letter describing the details of your arrangement which is signed by both parties to the agreement. However, at the end of the day, if you believe in yourself and your talents, give yourself the benefit of the doubt, and invest in good legal representation - all the successful producers do.

Wallace Collins is an entertainment and intellectual property lawyer with more than 30 years of experience based in New York. He was a recording artist for Epic Records before receiving his law degree from Fordham Law School. Tel: (212) 661-3656; www.wallacecollins.com

What Is A Music Publishing Deal? - and Do I Really Need One?

    Sometimes I hear songwriters talk about wanting a "publishing deal" without even really understanding what that means. Depending on the circumstances of each writer and the terms of the particular contract, sometimes no publishing deal is better than the wrong publishing deal.

    The term "publishing", most simply, means the business of song copyrights.  Under US copyright law, a songwriter owns 100% of his song copyright and all the related publishing rights until the songwriter signs those rights away. Under the law, a copyright (literally, the right to make and sell copies) automatically vests in the author or creator of a work the moment the expression of an idea is "fixed in a tangible medium." (i.e., the moment it is written down or recorded on tape.)  With respect to recorded music, there are really two copyrights: the copyright in the musical composition owned by the songwriter and the copyright in the sound of the recording owned by the recording artist (but usually transferred to the record company when a record deal is signed).

     A writer owns the copyright in his or her work the moment he or she writes it down or records it, and by law can only transfer those rights by signing a written agreement to transfer them. Therefore, a songwriter must be wary of any agreement he or she is asked to sign. Although it is not necessary, it is advisable to place a notice of copyright on all copies of the work. This consists of the symbol "c" or the word "copyright", the author's name, and the year in which the work was created, for example: "(c) John Doe 2020."

     The filing of a copyright registration form in Washington D.C. provides additional protection in so far as it establishes a record of the existence of such copyright and gives the creator the presumption of validity in the event of a lawsuit. Registration also allows for lawsuits to be commenced in Federal court and, under Federal law, allows an award of attorneys fees to the prevailing party.  To order forms and for additional information on copyright registration go to www.loc.gov\copyrights. These days, a songwriter can register for a copyright on line.

     As defined by the copyright law, the word "publish" most simply means "distribution of copies of a work to the public by sale or other transfer of ownership, or by rental lease, or lending". As a practical matter, the music publishing business consists primarily of all administrative duties, exploitation of copyrights, and collection of monies generated from the exploitation of those copyrights. If a writer makes a publishing deal and a publisher takes on these responsibilities then that publisher "administers" the compositions. Administrative duties range from filing all the necessary registrations (i.e., copyright forms) to answering inquiries regarding the musical compositions.

     One important function of a music publisher is exploitation of a composition or "plugging" a song. Exploitation simply means seeking out different uses for musical compositions. Sometimes a music publisher will have professional quality demos prepared and send them to artists and producers to try to secure recordings of the songs. They may also use these tapes to secure usage in the television, film and advertising industries (known as a "synchronization" use).

     Equally important as exploitation is the collection of monies earned by these musical usages. Particularly in in the digital age, when transactions amount to billions and payments to fractions of pennies, the administration of song copyrights and the collection of revenues can be a complicated and massive undertaking. There are two primary sources of income for a music publisher: earnings that come from record sales (i.e., mechanical royalties from both physical and digital copies) and revenues that come from broadcast performances (i.e., performance royalties).  Mechanical royalties are collected directly from the record companies and paid to the publisher. Performance royalties are collected by performing rights organizations (e.g., ASCAP, BMI, and SESAC in the United States and different entities in each other country) and then distributed proportionately to the publisher and to the songwriter. In addition to plugging and administrative functions, it is also important to know that there is a creative side to music publishing. Since producing hit songs is in the best interest of both the writer and the publisher, good music publishers have whole departments devoted to helping writers grow and develop. The creative staff finds and signs new writers, works with them to improve their songs, pairs them up creatively with co-writers and hopes the outcome will be hit records.

     A publishing deal concerns rights and revenues. If a writer decides to do a publishing deal then the main issue for negotiation is going to be the language pertaining to the calculation and division of the rights in the copyright and division of the monies earned. In the old days, most deals were 100% copyright to the publisher and 50/50 share of the revenues because there was a concept that the "writer's share" was 50% and the "publisher's share" was 50%. This, of course, was an invention of the publishers. Legally, these terms have no such inherent meaning but their calculation is defined in each individual agreement. Most modern publishing deals, however, are referred to as "co-publishing" deals where the copyrights are co-owned 50/50 and the monies are usually calculated at around 75/25 meaning the writer gets 100% of the 50% writer's share and 50% of the publisher's 50% share for a total of 75%. It is best for the writer to insist that all calculations be made "at source" so that there are not too many charges and fees deducted off-the-top before the 75% calculation is made. Keep in mind, however, that the advance paid to the writer by the publisher is later recouped by the publisher out of the writer's share of income from the song. So, the net business effect is that the publisher pays the writer with the writer's own money to buy a share of the copyright (and the right to future income) from the writer.

     Although a writer can be his own publisher and retain 100% of the money, the larger publishers in the music business usually pay substantial advance payments to writers in order to induce them to sign a portion of their publishing rights to the publisher - and this can be a good thing for the writer. Although a deal for a single song may be done with little or no advance payment (provided there is a reversion of the song to the writer if no recording is released within a year or two), there should be a substantial advance paid ($5,000-$100,000+) to a writer for any publishing deal with a longer term (e.g., 3-5 years or more). Moreover, sometimes the length of an agreement is more than just a function of time, it might also be determined based on the number of songs delivered by the writer or, even more difficult to calculate, based on the number of songs that get recorded and released on a major label (something neither the writer nor the publisher may have any control over). 

     Publishing deals have to do with more than just the money though. Since every music publisher is different, it is important for the songwriter to assess both the business and the creative sides of a music publisher before signing any deal. Ultimately, the songwriter is trading a share of something the writer already owns 100% of (the song copyright) so it is important to be mindful of what it is exchanged for by way of services and money.

Wallace Collins is an entertainment and intellectual property lawyer. He was a recording artist for Epic Records before receiving his law degree from Fordham Law School. Tel: (212) 661-3656; www.wallacecollins.com 

THE IMPORTANCE OF CREATING AN INTERNAL BAND CONTRACT

     Over the years there have been many lawsuits between and among the members of various musical bands. These lawsuits have concerned everything from disputes over the distribution of money to the right of departing members to use (or not to use) the band name in connection with ongoing endeavors. In most cases, it would have been better to be safe than sorry, and get the understandings of the band members in writing when everyone was in agreement just so all the parties remember what they agreed to at the start. Disputes over copyrights and trademarks as well as money could be avoided with a properly drafted "pre-nup" for the band.

     The internal group member contract between the members of a band is fundamentally important, but many musical groups ignore this crucial early step. When two or more people associate for the purpose doing business they create a partnership in the eyes of the law. General partnership law applies to the association unless a written agreement states otherwise. General partnership law provides, among other things, that all partners equally own partnership property and share in profits and losses, that any partner can contractually bind the partnership and that each partner is fully liable for the debts of the partnership. In the case of most musical groups, a written agreement setting forth the arrangement between and among the group members as partners is preferable to general partnership law.

     A band agreement can address issues such as who owns the group name (and whether and in what capacity a leaving member can use the group name), who owns what property (including not only sound equipment but intangible property such as recording agreements and intellectual property such as the songs and the recordings created by the group), and how profits and losses are divided. Since it almost goes without saying that members of a band inevitably leave and groups inevitably disband, it is important to structure an inter-band agreement in the early stages of a career. It will function in a sense like a prenuptial agreement when matters start to disintegrate, and it can make the break-up process less painful.

     Some bands may deal with this agreement among themselves and some bands may have a lawyer prepare a basic inter-band agreement. If it is a fairly equal partnership where all members are writing and performing and sharing equally, it is a fairly simple process. However, where some members are songwriters and others are not and/or where one member claims ownership in the name or another makes significantly larger financial contributions than the others, it can become a complicated process. If the band cannot work it out among themselves, they can either sign a conflict waiver permitting the one attorney to act solely as scribe (and not as advisor) on behalf of the group, or each member of the group may need to get his or her own lawyer to protect each respective member's interests. Like it or not, as artistic and creative as forming a band can be, this is a business and it is wise to recognize that and deal with it. These inter-band issues are better dealt with at the beginning when everyone is optimistic and excited rather than later when tempers flare and bitterness pervades as egos clash.

     A typical band contract will address certain fundamental group issues. One important issue is who owns the group name if one member leaves or if a group dissolves which group of members are entitled to use the name. Under partnership law the partners would be the joint owners of the name and any member would probably be permitted to use the name (or maybe no members would be allowed to use the name once the partnership is deemed dissolved). Trademark rights are determined based on the "use" of a mark (not on who thought of the name) so each of the members of the group would be an equal co-owner of the group name under trademark law. The end result under either partnership law or trademark law might be impractical.

     In most cases, the band agreement will state that if a particular founding member was the creator of the group name then only a group comprised of that member and at least one other member can use the name. This will apply whether one other member leaves or if the group disbands and only the founding member and one other reform the group. There are as many different ways this provision can be drafted as there are different group names. When a group member leaves, the remaining members are going to want to keep the group name and are not going to want the leaving member to dilute its value or confuse the public by using it in any way. The band agreement provision may say that a leaving member cannot use the name at all or that the leaving member can only mention that he was "formerly" a member of the group (provided that such credit is printed smaller than the member's name or his new group's name, etc.).

         

     Rights in the group name may also concern revenues generated in addition to rights, specifically as they concern the sale of merchandise (e.g., hats, t-shirts, calendars and other products and paraphernalia). The band agreement should have a "Buy-Out/Pay Out" provision which would deal with this financial aspect of the group name.

     The band agreement will need to contain provisions regarding the sharing of profits and losses. One provision may pertain to revenues earned during the term while each member is in the group and another may pertain after the departure of a member or the demise of the group. In most cases, a group just starting out will have a provision that all profits from the group are shared equally between all members with an exclusion for songwriting monies (which each of the respective songwriter members would keep for themselves). Where an established group adds a new member, the provision may provide that the new member gets a smaller percentage than the founding members.

     However, in most cases, during the term there is not a problem determining appropriate revenue shares. The more complicated problem of revenue division arises after a member departs. The agreement may provide that the leaving member is entitled to his full partnership share of profits earned during his tenure but a reduced percentage (or no percentage) of profits derived from activities after his departure - or the agreement may provide for a reduced percentage for a short period of time after departure (e.g., 90 days) and then nothing thereafter. This is an easier issue to remedy as it relates to live performances and sales of merchandise during those performances than it is as it relates to record royalties. The group needs to determine what happens, for example, when a group member performs on 3 albums but leaves before the fourth album is recorded. Although it might be acceptable to refuse to pay the leaving member any royalties on the fourth and future albums recorded by the group under the record contract the leaving member signed as part of the group, it might not be fair to refuse to pay that leaving member his share of royalties from the 3 albums that he did record with the band. Of course, this might vary in the agreement depending on whether the leaving member quit or was fired.  

     Another important financial issue is the question of the leaving member's share of partnership property such as band recording equipment or a group sound system. Again, the agreement might specify a monetary payout to the leaving member if he is terminated but forfeiture if the leaving member quits. If merchandise with the leaving members name and likeness still in inventory is sold after the member leaves, a decision will have to be made about whether and how much the departed member might receive for the use of his name and likeness.

     The issue of control is also very important to deal with in inter-band contract. In most cases, each member will have an equal vote and a majority will rule. However, there are as many variations as there are bands. For example, some acts might require unanimous agreement or an important member may have two (2) votes and/or the band’s manager may have a tie-breaking vote. The agreement may also provide that certain matters such as requiring financial contributions from group members or incurring debts on behalf of the band require a unanimous vote. Again, there are endless variations including situations where a particular member makes all of the decisions or where new members do not have a vote on band business. One interesting inter-band arrangement was that of The Beatles.  In answer to that age-old question, "no", Ringo did not get less. In fact, my understanding of their arrangement was that it was what might be called a reverse democracy: each member had one vote but if any member voted against doing something then the band would not do it. In other words, their arrangement required unanimous consent to proceed with an activity.

     Another issue of control that must be decided for the band agreement concerns the hiring and firing of band members: how votes are calculated (e.g., will each member get one vote or will a particular member's vote count double) and how many votes are needed (e.g., a majority or a unanimous vote) to fire a group member and/or hire a new member. In most cases, a new member voted into the group will then be required to sign on to the internal group contract. It must also be decided how to vote on any amendments to the band agreement since this may materially effect the relationship between the members after the group has started. In most cases, a majority vote will be deemed determinative but some members may prefer a unanimous vote on such things as amending the agreement (as well as hiring or firing). This will have to be decided between and among the members of the group.

     Finally, the group’s internal agreement should contain a comprehensive Buy-out/Pay-out provision that deals with departing members. In most cases, whether the leaving member quits or is fired the agreement will provide that the leaving member waives all rights in the intangible assets of the partnership (e.g., the group name, the group contracts, etc.). If the member quits, he might waive any right to and benefit derived from the hard assets such as band sound equipment. If the leaving member is fired, the agreement might provide that he or she is entitled to the pro rata percentage of the current value of the hard assets. With respect to this payout, the band agreement may provide that if the valuation exceeds a certain amount (e.g., $25,000.00) or would put the band partnership in financial distress, the payout would be in a certain number of equal monthly installments (e.g., over 12 months).

     Again, this Buy-out/Pay-out provision can be as simple or as complicated as the band members deem necessary. There are as many variations in this as there are differences in personalities between the members of a group. Each member and each group must find its own balance.

     Inter-band issues and disputes are many and varied. Recently, a member of the Eagles sued the remaining members saying he was forced out of the Eagles’ corporation by the other shareholders (and invoked provisions of the California corporate law pertaining to minority shareholders in close corporations). Years ago an ex-member of The Black Crowes sued his former band mates claiming that he was entitled to an equal share of all the money they made after they threw him out of the band. His contract claim was based on nothing more than a pie chart drawn on a napkin. Legend has it that, years before while eating at a diner after a band rehearsal, each member had signed his name on his slice of the "pie" drawn on the napkin allegedly agreeing that they would stay together and share all of the money equally come what may. Of course, when circumstances changed the fired member used that napkin to assert his rights.

     It is difficult to form a good band and to achieve a successful career in the music business. Any group of two or more musicians working together would be well-advised to create and sign a good Internal Band Contract so that the band does not later self-destruct over money and ego issues and forfeit its hard-earned career success. In a perfect world, each member could afford its own lawyer to quickly and inexpensively prepare and sign such an agreement. In the real world, that may not be the case. In any event, some kind of basic band agreement is a good starting point for any new band.

Wallace Collins is a New York lawyer specializing in entertainment, copyright, trademark and internet law. He was a songwriter and recording artist for Epic Records before attending Fordham Law School. Tel:(212) 661-3656 / wallacecollins@gmail.com / www.wallacecollins.com