360 Deals – The Basics

This is the first part of a series of articles looking at 360 deals. Part 2 will look at the issues an artist should consider when offered a 360 deal. Part 3 provides a summary of the range of commercial terms that are available. Part 4 examines some of the alternatives.

The Basics

Under a traditional recording agreement, the record label would pay you a royalty (or a share of profits) from sales of your records. With a 360 deal, the record label will additionally want to take a share of your income from all other sources within the entertainment industry. So, typically, this may include a share of all or part of your publishing, live work, merchandising and sponsorship.

What’s The Rationale?

The record labels claim that the traditional form of recording agreement is no longer financially viable. The labels say that their revenues are falling and, at the same time, it is becoming harder, and more expensive, to successfully promote and market artists. On top of this, there is a significant increase in the supply of music onto the market. This means that the ‘hit rate’ of the record labels developing a ‘successful’ artist is falling.

The labels go on to say that because of the above factors, receiving income from record sales alone will simply not pay the bills!

Do I Have To Accept A 360 deal?

It depends! If your record deal is from a US record label then you almost certainly will have to accept a 360 deal. 360 deals have now been used in the US market for several years, and the position of record companies has become entrenched. That doesn’t mean you can’t still negotiate a good deal with your US record label – just that you will have to accept that 360 rights will form part of the deal is some way, shape or form.

In the UK, my experience is that many record labels simply do not ask for 360 deals. Those record labels that do ask for these rights will readily give them up if pushed hard enough. There are some exceptions – with a relatively small number of labels insisting on 360 rights on a ‘deal or no-deal’ basis. Even then, most UK record labels will not insist that your songwriting income (or publishing rights) be part of the deal.

What Are These Deals Worth To The Labels?

The BPI recently reported that almost £76m was generated in 2011 from 360 deals with artists – an increase of 14% on the previous year. By comparison, the retail value of record sales (physical and digital) reduced by 0.5% between 2012 and 2013 from £1,048.4m to £1,043m. Income from 360 deals is therefore an attractive growth area for the labels.

Finally…

There have been a number of high profile railings against 360 deals. Neil Warnock, CEO of The Agency recently described 360 deals as ‘immoral’, stating that “No company should own everything that an artist does.”.

Alan McGee, former Creation Records boss has also stated in his Guardian music blog that

It was trailblazers such as Peter Grant here in the UK and Shep Gordon in the States who fought for artists, winning them a percentage of the door at gigs. They pulled artists out of the slavery of 1970s deals. Didn’t we all applaud that? Wasn’t it great when the Beatles started their own label?

In a 360-degree deal, this is what the records company is doing: ripping off the door at the gig. Let’s call it like it is. Where is the morality in that? The cops would bust someone for stealing at the door. And everyone would applaud. So what’s going on here?

Because music is free and the traditional record industry model obsolete it doesn’t give the industry the right to move into the business of promoters and merchandisers.

Many new artists will not have the profile or negotiating position to refuse a 360 deal – particularly if it is the only contract on the table. There are alternatives though. These are identified in Part 4. In the meantime, if you are forced to negotiate a 360 deal, then head over to Part 2 to read about how to make a 360 deal work for you.

If you need help negotiating your 360 deal then please call me, Mark Roberts, on 0161 826 9309.

Image copyright © Peat Bakke. Licensed under a Creative Commons License.

Clearing music samples

A common question asked by musicians and producers is whether they need to obtain approval for the inclusion of a pre-existing piece of music or ‘sample’ in any new recording. If approval is required, then what process will they have to go through to obtain clearance? For the uninitiated, the term ‘clearing a sample’ refers to obtaining the legal rights to use music, lyrics and/or recordings that are owned by someone else. Continue reading “Clearing music samples”

6 Reasons Why Your Band Needs a Band Agreement

Breakdowns and splits between band members are legendary. At the last count, Manchester band The Fall had 64 different line-ups since its formation in 1976. The detail of the Pink Floyd split is the thing of legend. Whilst a band agreement will help you deal with the fall-out from similar disputes, there are sound commercial reasons for protecting your band with a formal band agreement.

  1. Doing nothing is not an option: If you do nothing and simply run your band without any formal agreement in place then an archaic piece of law (the Partnership Act 1890 – yes – 1890!) says that the relationship between the band members is a legal partnership. The Partnership Act 1890 gives rights but also imposes obligations on the band members in the partnership. This can have severe, unintended consequences. For example in the event of a split, no band member can use the band name without the consent of the other band members (which is unlikely to be provided!). Neither can the majority of band members ‘oust’ another band member from the group.The good news is that a relatively simply band agreement can amend the terms imposed by the Partnership Act 1890 so that you have an agreement that works for you.
  2. No time like the present: Right now the band is doing great. It’s hard work, but you’re starting to get some great feedback and managers and labels are showing interest. A band agreement is the last thing you need – right? Wrong! Now is the best time to put together a band agreement – whilst you’re all still talking and getting on fine.  Getting a lawyer to draft an agreement needn’t be costly either. At Sound Counsel we offer a free one hour consultation, will fix a price with you for completing a band agreement, and will only expect payment once you start receiving income. So have a simple agreement drafted now. That way you can get on with the business of making music, safe in the knowledge that many key issues have been put to bed.
  3. Protecting your assets: Your band already owns some valuable assets – your band name, your MySpace & webpage and all the goodwill that you have been built up playing gigs – not to mention the band’s PA system and other equipment.
    A band agreement allows you to protect these assets by providing answers to questions such as
    “Who owns the band name?”
    “What happens to the band name if we split?”
    “Can we stop a departing band member posting to the band’s MySpace page?”
    “What are my options if I choose to leave the band?”
    “Who owns the PA?”
    “Can I take my guitar with me if I leave?”
  4. Knowing where the money goes: A band agreement will specify what happens to the income received by the band. The question is particularly relevant to songwriting income where disputes can be particularly bitter. What works for you will depend on your own situation. For example, does one band member tend to write all material, or does each band member contribute? There are various solutions to this issue. For example, it is reported that Blur share all income equally, though Graham Coxon and Damon Albarn as key composers, receive a 30 and 40 per cent share respectively.
    The agreement will also identify what expenses are band expenses and what expenses are personal expenses. Most importantly, the agreement will set out how the band will authorise expenditure on equipment. Typically, group expenses are deducted from the group’s income before any payment is made to the band members.
  5. Smooth management of departures and new arrivals! There are 101 different reasons why band members may wish to leave – from family reasons to relocation to a breakdown in relationships within the band. Likewise, there are as many reasons why a band may wish to dismiss one of it’s members. Consider the sad and well documented fall from grace of Guns N’ Roses’ drummer Steven Adler. But the fact is that you can’t have a drummer that can’t drum!
    A well drafted band agreement will provide for what happens if a member wants to leave. For example, whether the member be entitled to receive income on recordings made during his or her time with the band?
    It will also provide an agreed process by which a band member can be dismissed if needs be. The agreement will often provide examples of behaviour that is considered unacceptable and which will, if not corrected, ultimately result in dismissal.
    Finally, the agreement will provide an agreed process for bringing in new band or replacement members. Here, the agreement would typically provide that the band must reach a unanimous agreement so as to avoid the scenario where several band members are unhappy about the new appointment but have been forced to accept the new arrival by the majority. This would otherwise provide a harmful source of resentment and ill-feeling within the new line-up.
  6. Look professional: I always think that a band that has covered all the commercial bases demonstrates their commitment to the music business. The band looks professional and other advisers and suitors will recognise this. In any event a record label will almost certainly insist on the band having an agreement so as to protect their investmnet in the band. I’m not promising that a band agreement will result in a management or record deal – just that it’s one more box ticked on the commercial side that leaves you free to concentrate on the creative side of the band’s business!

Should you wish you discus any of the issues raised above, or talk through your need for a band agreement, then please call me, Mark Roberts, on 0161 826 9309 for a free, without obligation chat.

Top 5 Tips to Maximise Earnings from Collection Societies

Collection societies provide a range of valuable services to artists. They provide a ‘bridge’ between the artist and music user by granting licences to use your music. As part of this service, collection societies recover licence fees from music users and distribute these fees to the artist. In the UK we are fortunate to be home to PRS for Music – one of the world’s leading collecting societies.

Here are our top tips for maximising your revenue from collection societies:

  • Register with your collecting society. You can register with PRS for Music by clicking here. Once registered, you will start to receive royalty payments from your collection society. Different societies pay in different ways but, with PRS for Music, royalties are divided between the writer and publisher in accordance with the publishing agreement. If your publishing agreement does not specify the division of royalties, 50% will be paid to the writer and 50% to the publisher. For mechanical rights, PRS for Music will pay 100% of the royalties to the publisher on publication of the music. If the music is unpublished, 100% of the royalties is paid to the writer.
  • Manage your relationship. Whilst many collection societies have good working relationships with other societies in other countries, the system is far from perfect. So, if you are aware that your work is receiving substantial airplay in, say, France, but you are not being paid for this use, then let your collection society know this. It is preferable to be able to state where and when your work is being used so that your collection society can relay this information to their overseas counterpart.
  • Consider other collection organisations. In many countries the law recognises a range of rights in a song. In the UK, for example, there is copyright in the lyrics, in the music, and in any performance of the work. If you are registered with PRS for Music then this will ensure that you are paid for your songwriting, composing and publishing. However, you would also need to register with PPL who collect licence fees on behalf of performers and their record companies.
  • Make a back dated claim. Many collection societies are more than happy to assist you in making a back dated claim for royalties. For example, PRS for Music will allow you to back date a claim up to three years – provided you were a member during this time.
  • Make use of special schemes. Many societies provide special schemes to allow you to recover royalties in special situations. A good example is PRS for Music’s Gigs and Clubs scheme where, if an artist has performed a gig at a pub, club or bar they can submit a typical set list. PRS for Music then pay the songwriters and publishers of the works performed. The scheme benefits touring performers, resident performers and DJs alike.

If you have any questions about any of the matters discussed above, then please feel welcome to call Mark Roberts of Legality Solicitors on 0161 826 9309.

Five Types of Record Deal

There are currently five main types of record deal. There are also a number of hybrids which take various elements from each type of deal.

Which deal is best for the artist or the record company will vary depending on the circumstances. In this article, we look at the benefits of each.

1. The Licence Deal
Under a licence deal the artist will licence the record label to use the recordings made by the artist. The licence would usually permit the record company to manufacture, distribute and sell named recordings. A licence deal might be appropriate where the support required of the record label is limited, e.g. where the artist has already made a recording.

In recognition of the fact that the record company undertakes less work under a licence deal, the record company generally accepts a reduced royalty rate and reduced packaging deductions are payable.

2.  The Exclusive Recording Contract
Under this type of deal the artist exclusively appoints the record label to manage the music recorded by the artist during the length of the contract. An exclusive recording contract typically lasts for 1 year, but provides the label with the right to renew the contract for further periods of time. The label will generally require the artist to record one album during the contract term.

In return for exclusivity, the artist can expect a significant investment of time and resources from the label. This could extend to include the recording of videos and marketing and promotion costs.

3.  The Development Deal
The development deal is a hybrid of the exclusive recording contract. However, rather than require the artist to record an album’s worth of material, the deal is that the artist will record a number of demos or singles. The label can then make a decision to extend or terminate the relationship with the artist on a ‘suck it and see’ basis.

The fees payable to the artist under a development deal are limited and may only cover recording costs. However, the development deal provides an artist with an opportunity to impress the label. In theory, the label gets to see the creative best from an artist who will be hoping to secure a full, exclusive recording contract.

4. The Production Deal
The production deal is another hybrid of the exclusive recording contract. In a production deal, the artist does not contract directly with the record label, but with a business that makes recordings. The recording company then licenses or assigns those recordings to a label. Typically, the record label is an offshoot business of the recording company.

The production company will generally expect exclusivity from the artist for as long as copyright in the recordings is available. During the term of the contract, the production company will look to develop the artist by recording several tracks and will then ‘tout’ their artists to the bigger labels in the expectation that the production company’s rights will be acquired either through a licensing deal or assignment.

The advantage to an artist in signing up with a production deal is that the artist may enjoy greater creative freedom and benefit from a greater degree of focus from the owners of the production company. However, the down side is that most production deals are 50:50 net profit deals – where the artist only receives 50% of net profits. This is minimal when compared with the royalties that are potentially payable under an exclusive recording contract.

5. The 360 Deal
A typical exclusive recording contract will allow the record label to make money from selling the recordings of the artist. Under a 360 deal the artist agrees that the record label can make benefit from all areas of activity in which the artist is involved. This could include royalties received from areas such as merchandising  and ticket sales. More importantly, the 360 deal may also extend to cover monies received through other areas of an artist’s life, such as acting, writing or promotions.

An alternative to the 360 deal is a 270 deal which is the same as a 360 deal but excludes publishing.

To discuss any queries regarding record deals on an informal basis and without obligation, please call Mark Roberts on 0161 826 9309.