I am a big fan of Moses Avalon, the former record producer, writer and teacher who wrote the influential book “Confessions of a Record Producer.” I like the book so much I put it on a recommended reading list at the university where I teach Music Business Law.
However, I must take issue with something Avalon said in a recent blog. In a post called “The New Team” (8/3/09), he basically advised new artists that they no longer needed lawyers as part of their “team.” I found this advice fairly short-sighted. While it is true that there are no longer the sheer number of record deals and publishing deals out there, there is no shortage of people with their hands out looking to make a buck off of young artists. These range from the traditional allies like managers and booking agents to a vast array of “new model” promoters, consultants, etc. Artists need lawyers to counsel them as to how to best work with and compensate these people. We are also called on to advise about all sorts of new “services” for artists; these seem to appear every day, and they range from brilliant technological developments to glorified pyramid schemes. Additionally, artists still have to deal with the basic issues of figuring out what the revenue sources are in the music business (i.e., how to get paid) and how to structure their internal agreements and protect their intellectual property.
With all that in mind, and hoping that I still had a place on the new “team,” I recently attended a Nashville Bar Association Continuing Legal Education Seminar entitled:
Challenges for the Entertainment Lawyer in a “Do It Yourself” World.
While I was pleased with the program in general, I was a bit disappointed that they did not address the topic raised by the title of the seminar, nor did they confront Moses Avalon’s assertions head-on. However, I was impressed by my friend Lynn Morrow’s presentation “Legal Challenges for the Indie Artist” during which she listed eighteen separate legal issues an independent artist should consider before releasing a record (I would reproduce the list here but Lynn wisely copyrighted her work).
One of the points Lynn made in her presentation is that now more than ever, if we as lawyers are advising independent artists, we are advising them as small business people and I think this is a really important mission. Years ago, I was on a panel myself with a number of well-known lawyers and judges, and one of the questions that came up was how do you prepare yourself to be an entertainment attorney. I said, among other things, that I found it helpful to develop a background in the general practice of law (e.g., knowing a little about business formation, divorce, collection law, bankruptcy, wills and estates, even landlord/tenant law – which comes up a lot more often than one might think). One of the lawyers on the panel (who shall remain nameless) blasted me because he thought that spending time on general practice basics was a waste of time in dealing with the entertainment industry. I disagreed with him then and I still do. Of course, if he has an endless supply of major label clients with the ability and willingness to pay him for the deals he negotiates for them, then I see his point, but it’s not really like that out here in the less rarified air of the real world. Plus, I know that as lawyers, we get a lot of satisfaction from helping clients set up and run their business the right way. This is one way I believe entertainment lawyers can remain relevant and part of the team as this new model of the entertainment industry develops. We are also the first person who gets called when the team falls apart.
Tuesday, October 6, 2009
Monday, September 28, 2009
The Fray's Fray
I have been curious about the filing of a new lawsuit involving The Fray: King, Slade, Welsh and Wysocki v. Gregg Latterman and Gregg Alan Corp. in Federal Court in Colorado. The press reports made it seem as if the members of The Fray were suing their manager Gregg Latterman for somehow stealing all or part of their copyrights. However, after I reviewed the Complaint, I see that the cause of the action is much more subtle.
The manager in question is Gregg Latterman, a well-known entrepreneur, who, among other things, founded AWARE Records in 1993 and has been responsible for discovering and elevating a large number of talented artists over the past two decades. Apparently, Latterman had some sort of deal with EMI Music which gave him a share of EMI’s cut of income (and perhaps copyright interest) from any writer he brought to the company.
The suit alleges that Latterman entered into an oral management agreement with The Fray in November 2004 and helped sign the band to EMI in July of 2005. The suit claims that the oral management agreement was reduced to writing in 2007.
The suit DOES NOT claim that Latterman took any portion of the band’s publishing. Rather, it claims that as a manager, Latterman breached his fiduciary obligation to inform the band of his deal with EMI. The suit references a clause in the Management Agreement which prohibits the manager from commissioning any “engagement or agreement under which Artist is employed by or otherwise engaged by Manager or any firm or corporation owned by, controlled by or affiliated with Manager.”
As one would expect, the causes of action spelled out in the Complaint are fraud and misrepresentation, breach of fiduciary duty, unjust enrichment, fraud in the inducement and breach of contract.
As is often the case, I am sure the backstory is fascinating. It is rare that disputes break out in public involving people with profiles as high as this. I am sure that one of the real issues here is leverage. When The Fray entered into their agreement with Latterman in 2004, they had little bargaining power and were in need of someone connected enough to get them noticed by and then signed to a major label and major publisher. Once a certain level of success is reached, the dynamic often changes.
An interesting question raised by The Fray’s lawsuit is how much they really knew about the relationship between Latterman and EMI. In the pleadings, they claim they thought he was receiving a “finder’s fee” from the company, and that in fact may be the case, albeit a highly lucrative one. It does seem hard to believe that were not somehow on notice as to Latterman’s deal with EMI.
However, this is also a cautionary tale for managers who attempt to fill different roles in this new environment. Nearly every management agreement ever drafted contains the above-described language prohibiting “double dipping” and managers should not attempt to circumvent the effect of the clause; they should be upfront in disclosing these arrangements to their artists.
I am betting this case will settle quickly. But one never knows…
The manager in question is Gregg Latterman, a well-known entrepreneur, who, among other things, founded AWARE Records in 1993 and has been responsible for discovering and elevating a large number of talented artists over the past two decades. Apparently, Latterman had some sort of deal with EMI Music which gave him a share of EMI’s cut of income (and perhaps copyright interest) from any writer he brought to the company.
The suit alleges that Latterman entered into an oral management agreement with The Fray in November 2004 and helped sign the band to EMI in July of 2005. The suit claims that the oral management agreement was reduced to writing in 2007.
The suit DOES NOT claim that Latterman took any portion of the band’s publishing. Rather, it claims that as a manager, Latterman breached his fiduciary obligation to inform the band of his deal with EMI. The suit references a clause in the Management Agreement which prohibits the manager from commissioning any “engagement or agreement under which Artist is employed by or otherwise engaged by Manager or any firm or corporation owned by, controlled by or affiliated with Manager.”
As one would expect, the causes of action spelled out in the Complaint are fraud and misrepresentation, breach of fiduciary duty, unjust enrichment, fraud in the inducement and breach of contract.
As is often the case, I am sure the backstory is fascinating. It is rare that disputes break out in public involving people with profiles as high as this. I am sure that one of the real issues here is leverage. When The Fray entered into their agreement with Latterman in 2004, they had little bargaining power and were in need of someone connected enough to get them noticed by and then signed to a major label and major publisher. Once a certain level of success is reached, the dynamic often changes.
An interesting question raised by The Fray’s lawsuit is how much they really knew about the relationship between Latterman and EMI. In the pleadings, they claim they thought he was receiving a “finder’s fee” from the company, and that in fact may be the case, albeit a highly lucrative one. It does seem hard to believe that were not somehow on notice as to Latterman’s deal with EMI.
However, this is also a cautionary tale for managers who attempt to fill different roles in this new environment. Nearly every management agreement ever drafted contains the above-described language prohibiting “double dipping” and managers should not attempt to circumvent the effect of the clause; they should be upfront in disclosing these arrangements to their artists.
I am betting this case will settle quickly. But one never knows…
Wednesday, September 2, 2009
Songwriters and Bankruptcy
Back in June, Gary Roth, Head of Business Affairs at BMI, posted an article on the organization’s website explaining the potential ramifications of bankruptcy on songwriters and composers. This information is timely, especially in a state like Tennessee where we have the highest bankruptcy rates in the nation.
Many people do not realize that not only their copyright, but also their royalty income (i.e., public performance royalties, mechanical royalties, synchronization royalties, performance royalties, etc.) are considered “property” for bankruptcy purposes, just like any other piece of property, tangible or intangible. When a debtor files a Chapter 7 bankruptcy seeking liquidation of his debt, this property is subject to collection by the U.S. Bankruptcy Trustee, whose job is to try and use these assets to pay creditors. These assets can be sold by the Trustee, by auction or otherwise, to satisfy debts.
This is a very real probability.
I have represented both songwriters contemplating bankruptcy and publishers and other investors who have purchased these rights from the Trustee. In many cases I have learned that the songwriters were never even made aware that they could lose their copyrights and their rights to royalty income in bankruptcy. Either their bankruptcy attorneys never told them, or the writers never volunteered the information to their bankruptcy attorneys. Either way, they lost the rights to income from some significant copyrights and in some cases, the copyrights themselves.
One should always consider the risks of losing their rights to royalty income from their songs before filing a petition in bankruptcy.
Many people do not realize that not only their copyright, but also their royalty income (i.e., public performance royalties, mechanical royalties, synchronization royalties, performance royalties, etc.) are considered “property” for bankruptcy purposes, just like any other piece of property, tangible or intangible. When a debtor files a Chapter 7 bankruptcy seeking liquidation of his debt, this property is subject to collection by the U.S. Bankruptcy Trustee, whose job is to try and use these assets to pay creditors. These assets can be sold by the Trustee, by auction or otherwise, to satisfy debts.
This is a very real probability.
I have represented both songwriters contemplating bankruptcy and publishers and other investors who have purchased these rights from the Trustee. In many cases I have learned that the songwriters were never even made aware that they could lose their copyrights and their rights to royalty income in bankruptcy. Either their bankruptcy attorneys never told them, or the writers never volunteered the information to their bankruptcy attorneys. Either way, they lost the rights to income from some significant copyrights and in some cases, the copyrights themselves.
One should always consider the risks of losing their rights to royalty income from their songs before filing a petition in bankruptcy.
Monday, August 24, 2009
Steve McNair; Or How Not to Plan Your Estate
A year or so ago, I sent a letter to my clients with minor children advising them of the need to do some simple estate planning. It was something I felt strongly about.
Like every Nashvillian, I was shocked to learn of Steve McNair’s awful murder on the 4th of July. I was surprised but not exactly shocked to learn that he had died without a will, and that in addition to the children he had with his wife, Mechelle, he had children from previous relationships in Mississippi (Steven L. McNair, Jr. and Steven O’Brian Koran McNair).
McNair reportedly earned over $90 million during his tenure in the NFL and owned property and held investments in both Tennessee and Mississippi. That means that at least these two states will be involved in the probate of his estate. To leave his wife without any clear picture of how to handle this is inconceivable. Worse, an action between the heirs could literally pit brother against brother and put the widow in a terrible position. None of this contemplates the horrible estate tax consequences of leaving so much money and property unsheltered.
All these possible hellish family scenarios could have been avoided by some simple planning, as could have most of the estate tax consequences.
It will be interesting and instructive to see how this plays out, but it won’t be pretty. This is why if you have children or if you own any assets at all, you need to do some estate planning.
Like every Nashvillian, I was shocked to learn of Steve McNair’s awful murder on the 4th of July. I was surprised but not exactly shocked to learn that he had died without a will, and that in addition to the children he had with his wife, Mechelle, he had children from previous relationships in Mississippi (Steven L. McNair, Jr. and Steven O’Brian Koran McNair).
McNair reportedly earned over $90 million during his tenure in the NFL and owned property and held investments in both Tennessee and Mississippi. That means that at least these two states will be involved in the probate of his estate. To leave his wife without any clear picture of how to handle this is inconceivable. Worse, an action between the heirs could literally pit brother against brother and put the widow in a terrible position. None of this contemplates the horrible estate tax consequences of leaving so much money and property unsheltered.
All these possible hellish family scenarios could have been avoided by some simple planning, as could have most of the estate tax consequences.
It will be interesting and instructive to see how this plays out, but it won’t be pretty. This is why if you have children or if you own any assets at all, you need to do some estate planning.
Sunday, August 16, 2009
It's The End of The World as We Know it and I am Not Sure What to Think About It
"Next month Pearl Jam plans to release its new album simultaneously on CD and in Rock Band."
- from an article in today's New York Times magazine by Daniel Rudolph on the Beatles' new Rock Band game due out 9/9/9.
- from an article in today's New York Times magazine by Daniel Rudolph on the Beatles' new Rock Band game due out 9/9/9.
Sunday, August 2, 2009
Single Song Agreements
For some time now, I have been wanting to write a basic analysis of a single song agreement because this simple document is the backbone of the music publishing industry. It is also can be tremendously misunderstood.
First and foremost, a single song agreement is an assignment of copyright. Section 204 of the Copyright Act of 1976 says that any assignment of copyright must be in writing. Therefore, unlike certain verbal assignments that that occurred under the 1909 Copyright Act, you cannot assign your copyright in a musical composition unless you do so in writing. Also, except in very limited circumstances, you should never agree to assign your composition as a “work made for hire.”
Also, if there is more than one writer on a composition, and they are both/all assigning their copyright interest to the same publisher, the single song agreement is the document which details the writers’ percentages of the composition. It is important to note that the law presumes the splits to be equal unless specifically outlined. This split should be decided upon as near the date of creation as possible. I was once embroiled in a lengthy court battle over this very issue.
The next important part of the agreement is the warranty and indemnity provision. The writer must warrant that the work is original and will not infringe upon anyone else’s work. Remember that this does not apply to titles or ideas, although some writers apparently think otherwise.
The scope of the indemnity provision is extremely important to the writer. Unless he negotiates with the publisher to limit his liability against third party claims, he could end up on the line for all of the publisher’s legal fees, even if the underlying claim is frivolous. This is a very real possibility and should not be overlooked.
The next important section (and songwriter’s favorite portion, most likely) is the compensation section. Typically, the writer can expect to receive a portion of mechanical royalties, synchronization fees and royalties, public performance royalties (i.e., from airplay) and print royalties. The print royalty section is the most archaic section of the agreement and goes back to the days when music publishers were essentially print publishers who sold sheet music. Today, a songwriter would be lucky to have their work sold as a piece of sheet music. Mechanical royalties are the royalties that are generated from the sale of records (you remember records, don’t you?), compact discs and legal digital downloads. Synchronization royalties are the royalties generated from a “synchronization” of a song with a motion picture (movie, TV show, commercial, etc.).
Typically, a publisher splits all of this income with the writer under the terms of the single song agreement. Public performance income (radio, live performance, etc.) is paid directly to the writer by his or her PRO, or performance rights organization. The three PRO’s in the US are BMI, ASCAP and SESAC. Under a typical single song agreement, the writer has no claim to the publisher’s share of public performance income, or vice-versa.
The grant of rights provision can be critical to the writer. Usually, the writer will want to make sure that the publisher does not have permission to change the title, lyrics or music to a song without the writer’s consent. Also, the writer might want to limit the use of the work in certain kinds of films, commercials and/or political campaign. Without limiting language here, the writer has no control over these types of exploitations.
The next salient section is the accounting section. The writer wants to be sure that the publisher accounts to him (i.e., rendering a statement and a payment if applicable) at least twice a year. Additionally, most agreements allow the writer to object to the statement for up to one (1) year after receiving the statement. The writer should endeavor to increase that amount of time to at least two (2) to three (3) years. This period of time can fly by and you do not want to lose your contractual right to question a statement.
Another major issue in a standard single song agreement is demo costs. Some of these costs are almost always recoupable (that is, taken for reimbursement by the publisher from the writer’s share of royalties). The writer will want to be sure that he or she has a handle on what the costs will be. Understandably, keeping a handle on demo costs is also very important to the publisher.
Also, though this is rarely an issue, the writer will want to make sure the publisher cannot exploit the demo without approval from the writer.
Finally, this leaves the issue of a reversion clause. Most drafts of single song agreements omit the reversion clause, although, in my experience, the publisher will usually add this clause if requested. Essentially a reversion clause provides that if the publisher does not commercially exploit the composition within a certain amount of time, it reverts to the writer. This is fair, because in most single song agreements (as opposed to exclusive songwriting agreements) the publisher does not “buy” the song from the writer; his or her part of the deal is to get the song cut. Further, if the publisher cannot exploit the song, it is not really valuable to his or her catalog, yet it has intrinsic value to the writer.
It used to be easy to figure out the terms of a reversion. Exploitation used to mean that a song was recorded and released by an artist on a record label with national distribution or included in a film with some sort of synch fee. In the current environment, where anyone with an internet account can distribute nearly anything, this distinction becomes much more vague. The writer must pay special attention to this provision to ensure that he can live with its terms.
I hope this overview provides some insight into the workings of this document and proves there is no such thing a “just a standard single song agreement.” Although these agreements may seem similar in scope, each section of each agreement needs to be carefully reviewed.
First and foremost, a single song agreement is an assignment of copyright. Section 204 of the Copyright Act of 1976 says that any assignment of copyright must be in writing. Therefore, unlike certain verbal assignments that that occurred under the 1909 Copyright Act, you cannot assign your copyright in a musical composition unless you do so in writing. Also, except in very limited circumstances, you should never agree to assign your composition as a “work made for hire.”
Also, if there is more than one writer on a composition, and they are both/all assigning their copyright interest to the same publisher, the single song agreement is the document which details the writers’ percentages of the composition. It is important to note that the law presumes the splits to be equal unless specifically outlined. This split should be decided upon as near the date of creation as possible. I was once embroiled in a lengthy court battle over this very issue.
The next important part of the agreement is the warranty and indemnity provision. The writer must warrant that the work is original and will not infringe upon anyone else’s work. Remember that this does not apply to titles or ideas, although some writers apparently think otherwise.
The scope of the indemnity provision is extremely important to the writer. Unless he negotiates with the publisher to limit his liability against third party claims, he could end up on the line for all of the publisher’s legal fees, even if the underlying claim is frivolous. This is a very real possibility and should not be overlooked.
The next important section (and songwriter’s favorite portion, most likely) is the compensation section. Typically, the writer can expect to receive a portion of mechanical royalties, synchronization fees and royalties, public performance royalties (i.e., from airplay) and print royalties. The print royalty section is the most archaic section of the agreement and goes back to the days when music publishers were essentially print publishers who sold sheet music. Today, a songwriter would be lucky to have their work sold as a piece of sheet music. Mechanical royalties are the royalties that are generated from the sale of records (you remember records, don’t you?), compact discs and legal digital downloads. Synchronization royalties are the royalties generated from a “synchronization” of a song with a motion picture (movie, TV show, commercial, etc.).
Typically, a publisher splits all of this income with the writer under the terms of the single song agreement. Public performance income (radio, live performance, etc.) is paid directly to the writer by his or her PRO, or performance rights organization. The three PRO’s in the US are BMI, ASCAP and SESAC. Under a typical single song agreement, the writer has no claim to the publisher’s share of public performance income, or vice-versa.
The grant of rights provision can be critical to the writer. Usually, the writer will want to make sure that the publisher does not have permission to change the title, lyrics or music to a song without the writer’s consent. Also, the writer might want to limit the use of the work in certain kinds of films, commercials and/or political campaign. Without limiting language here, the writer has no control over these types of exploitations.
The next salient section is the accounting section. The writer wants to be sure that the publisher accounts to him (i.e., rendering a statement and a payment if applicable) at least twice a year. Additionally, most agreements allow the writer to object to the statement for up to one (1) year after receiving the statement. The writer should endeavor to increase that amount of time to at least two (2) to three (3) years. This period of time can fly by and you do not want to lose your contractual right to question a statement.
Another major issue in a standard single song agreement is demo costs. Some of these costs are almost always recoupable (that is, taken for reimbursement by the publisher from the writer’s share of royalties). The writer will want to be sure that he or she has a handle on what the costs will be. Understandably, keeping a handle on demo costs is also very important to the publisher.
Also, though this is rarely an issue, the writer will want to make sure the publisher cannot exploit the demo without approval from the writer.
Finally, this leaves the issue of a reversion clause. Most drafts of single song agreements omit the reversion clause, although, in my experience, the publisher will usually add this clause if requested. Essentially a reversion clause provides that if the publisher does not commercially exploit the composition within a certain amount of time, it reverts to the writer. This is fair, because in most single song agreements (as opposed to exclusive songwriting agreements) the publisher does not “buy” the song from the writer; his or her part of the deal is to get the song cut. Further, if the publisher cannot exploit the song, it is not really valuable to his or her catalog, yet it has intrinsic value to the writer.
It used to be easy to figure out the terms of a reversion. Exploitation used to mean that a song was recorded and released by an artist on a record label with national distribution or included in a film with some sort of synch fee. In the current environment, where anyone with an internet account can distribute nearly anything, this distinction becomes much more vague. The writer must pay special attention to this provision to ensure that he can live with its terms.
I hope this overview provides some insight into the workings of this document and proves there is no such thing a “just a standard single song agreement.” Although these agreements may seem similar in scope, each section of each agreement needs to be carefully reviewed.
Sunday, July 19, 2009
I've been away
I've been away on my first long trip in 12 years, as well as dealing with all the surprises and scheduling issues of summer. However, I have a lot to write about so, if you're so inclined..stay tuned.
Trip
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