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Key Clauses in Management Agreements Part 3: Sunset Commissions

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Categories: Articles, Business, Management, Music Contracts, Music Industry, Royalties, Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , ,

erin m jacobson, erin jacobson, music attorney, music lawyer, los angeles, music industry, managementLast time I discussed commissions in management agreements, but what may be a surprise is that management agreements often also have another kind of commission involved – one that remains after the term of the agreement is long over and the manager and artist are no longer working together.

Management agreements often have something we attorneys in the business call “sunset clauses,” which are provisions dictating that the artist must continue to pay a commission to the manager after the term of the agreement has ended. The purpose of this clause is actually for the benefit of the manager, to protect him or her from putting in a lot of work on certain projects, only to have the term end (or the agreement terminated) and not earn any commissions from those projects in which the manager invested a lot of time, effort, and possibly money. A sunset provision is not unfair in itself. If the manager has worked on certain projects for the artist, the manager should be able to share in the money earned from those projects. However like anything in life, there are limits and the sunset provision should be fair based on the circumstances.

Sunset commissions can range in the amount of the commission and the duration for which the sunset commission needs to be paid. Often management agreements dictate the sunset commission at the full rate (often 15- 20% as I explained here) and often lasting in perpetuity, which means forever. A good music attorney will negotiate this commission down both in percentage and in duration because an artist should not be paying a manager his/her full commission rate forever when the manager is not currently working for the artist anymore. Chances are the artist is probably also working with a new manager at this time and paying a full commission to that person as well. A good music attorney should also negotiate the circumstances around sunset provision and to what the commission applies.

The negotiated sunset commission may be a certain percentage for a certain period of years and then end, or start at a certain percentage for a certain period of time then reduce to a lower percentage for a certain period of time before finally ending. This is why it is called a sunset clause, because the commission tapers off and fades away just like an actual sunset. The percentage amounts, durations, and negotiated surrounding circumstances vary depending on the negotiating power of the parties and the attorneys involved, which is why you need a good music attorney experienced with negotiating management agreements.

The sunset clause often surprises artists because they aren’t familiar with the concept and become upset when they see it in the contract, or they sign a contract with a sunset provision that is longer and larger than it should be because the artist does not understand the agreement. I will reiterate, that the sunset itself provision is not unfair, and it is fair to compensate the manager on projects the manager helped to make a success. Again, having the contract drafted or reviewed by a good music lawyer experienced with management agreements is paramount to protecting one’s interests.

If you need a management agreement drafted or reviewed click here to contact me now.

If you need a DIY solution in the form of a template agreement, click here (non-CA residents click here).

 

Disclaimer: This article is for educational and informational purposes only and not for the purpose of providing legal advice. The content contained in this article is not legal advice or a legal opinion on any specific matter or matters. This article does not constitute or create an attorney-client relationship between Erin M. Jacobson, Esq. and you or any other user. The law may vary based on the facts or particular circumstances or the law in your state. You should not rely on, act, or fail to act, upon this information without seeking the professional counsel of an attorney licensed in your state.

If this article is considered an advertisement, it is general in nature and not directed towards any particular person or entity.

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May Music Legal and Business Roundup

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Categories: Articles, Business, Legal Disputes, Legal Issues, Music Industry, Tags: , , , , , , , , , , , , , ,

cowgirl, lasso, roundup

Image via freeimages.com

Here’s a recap of my article’s this month:

 

May was actually a little quiet on legal issues making the news.  However, the big news was really a tragic one.  The world lost another amazing artist, Prince.  His death was unexpected and shocked his fans and all of us in the industry.  A great artist who leaves a great legacy.

Here’s the other top stories in music legal and business:

 

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Key Clauses in Management Agreements Part 2: Commissions

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Categories: Articles, Business, Law, Management, Music, Music Contracts, Music Industry, Royalties, Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

erin m jacobson, erin jacobson, management commissions, management agreement, contract, music attorney, music lawyer, los angelesIn a recent article I explained the term of a management agreement, and in this article I’ll discuss management commissions; arguably the other most important clause of a management agreement.

The commission is the amount of money the artist will pay the manager under the contract. This is usually done as a percentage of the artist’s gross income. Standard percentages are usually 15-20%, with 15% being more common than 20%.  I have seen the percentages range from 10-25%, but with both extremes requiring special circumstances. Some more creative deals featuring other percentages have also crossed my desk, but again, these deals require other career aspects or services not typically included in management deals.

Aside from the percentage, it is important to know if the commission is being taken on gross or net income, and what gross or net income actually includes. Management agreements in the music industry typically have a list of exclusions on gross income that are specific to aspects of an artist’s career in the music business. This is different than management agreements in other areas of entertainment and in my experience, not all attorneys (even music attorneys) know what to exclude. It is also important to note when, if any, the manager is able to share in other income aside from the main commission.

It is also common for managers to take a commission after the term of the agreement has ended – and I’ll cover that in the next article on management agreements.

Contact me now to draft or review your management agreement.

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Key Clauses in Management Agreements Part 1: Term

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Categories: Articles, Management, Music Contracts, Music Industry, Tags: , , , , , , , , , , , , , , , , , , , , , , ,

Management Agreement Term Length The Music Industry Lawyer Attorney Erin M JacobsonThe artist-manager relationship is one of the most important relationships in an artist’s career. The manager has to “get” the artist and the artist’s artistic vision, but also needs to have the knowledge on how to translate that vision into something that will generate mass appeal and profits. The manager also has to have the business acumen and connections to generate opportunities for the artist so that his or her career can grow. An artist needs to be able to trust the manager, feeling that not only is the manager knowledgeable, connected, and in tune with the artist’s essence, but also that the manager is at all times acting in the artist’s best interests instead of serving the manager’s own needs.

Management agreements have several important aspects that need attention and often, negotiation.

The first of these aspects is the term of the management agreement. I explained what a contract term generally means here, and for purposes of this article the “term” will refer to the length of the relationship. Traditionally, management agreements have a term between three and five years. Managers typically would want four or five years because, as they often argue, it takes a long time to create the momentum needed for an artist to really start seeing success. From a manager’s perspective, this can be true and also gives the manager the opportunity to still be representing that artist when success comes; that way the manager can receive a full commission rate at the artist’s higher income level instead of earning a percentage of the low (or no) revenues artists usually earn at the start of their careers.

On the other side of this, artists usually want to sign with a manager for the shortest amount of time possible, which allows the artist to get out of the deal faster if the manager is not delivering on promises or things just aren’t working out. There is almost nothing worse for an artist than being stuck in a bad deal that hinders the artist’s career by blocking potential opportunities while the artist waits for the deal to end.

These days I have been seeing even shorter terms on management deals, often one or two year initial terms with at least one option period attached. Both parties really need at least a year to get enough momentum going to start seeing some increased success, but it seems the management deal is following the trend of all deals in the music business by shortening terms to try to reduce risk.

What people tend to forget when thinking about the length of an artist-manager relationship is that terms can always be renewed. If the contract term length is on the shorter side, the parties can always renew the agreement at the end of the term if they still desire to work together. The parties don’t have to part ways just because a piece of paper set a time limit at some point in the past. On the other hand, if the parties feel it is time to move on, they have the freedom to do that knowing they gave it a fair chance during the time period they originally allotted.

Part 2 of this series will cover management commissions.

Contact Erin now to draft, review, or negotiate your management agreement.

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New Interview on The GenY Success Show

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Categories: Interview, Music, Music Industry Interviews, Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , ,

Erin M Jacobson music attorney lawyer authority expert networking

I recently did an interview on the The Gen Y Success Show and this has been one of my favorite interviews!  It’s a little different than some of my interviews because it’s not about the music business — this interview is about my path in becoming a music attorney, my love of music (and a few examples of my favorite bands and concerts),  my tips on how to network effectively, and more!

“…[Erin Jacobson] established herself as an authority, not only as a lawyer, but within the music industry itself.”  ~ Jason D. Bay, host of the GenY Success Show

Listen here:  The Gen Y Success Show (Online / iTunes)

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What is a Contract Term?

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Categories: Articles, Law, Music Contracts, Music Industry, Music Publishing, Record Labels, Tags: , , , , , , , , , , , , , ,

By:  Erin M. Jacobson, Esq.

A “term” of a contract usually refers to the length of time an agreement covers. For example, two parties may decide to work together for a period of three years, thus the contract would have a “three year term.” Sometimes, the term is broken up into a firm amount of time, with the option to continue working together for longer.   This could look like an initial period of two years, with a one year option. If that option is exercised, then the total term of the contract would be three years. These options are often exercisable at the discretion of one party (like a manager or a record label), making that party obligated to initial period and only obligated to the option periods if they choose to exercise them. The other party (like the artist), however, would be obligated to the entire term (initial period plus options). In other types of agreements (like certain types of music library or publishing agreements) options may automatically renew on a yearly basis, making the contract last as long as the parties are willing to continue working together.

The other way the words “term” or “terms” are used in relation to contracts is to describe certain the actual provisions of the contract. People will say things like “according to the terms of the contract,” which means the provisions of that contract. They may also refer to a specific, singular term, meaning one provision in particular. You will usually know the difference of “the term” versus “a term” or “the terms” based on the context of the conversation.

Both the term length and actual terms are important due to the fact both could bind you to an agreement not ideal for your career. You could be stuck in a deal where the term length extends much longer than it should and prevents you from signing other deals, creating other projects, and stalls your career. In a situation like that, your career in music will effectively be over because without the ongoing momentum, people will forget about you and your music, newer artists will be on the scene, and you will be on a hamster wheel trying to play catch up while the industry moves forward without you.

If the other terms of the agreement aren’t ideal, you could also be broke by paying large amounts of commissions to those you work with without anything left over for you.   You could lose your copyrights and the right to continue profiting off of your work because someone else owns it. You could even lose the right to use your own name professionally, like one artist who told me her story of not being able to register her name as a URL, because she had unknowingly signed those rights away to someone else.

It is of the utmost importance to know what you are signing and have an experienced music attorney review your contract to make sure you do not become another music industry statistic of a promising young talent whose career was crushed by your own failure to hire the right person to protect you.

If you have been offered a deal, contact Erin now to have it reviewed.

Disclaimer: This article is for educational and informational purposes only and not for the purpose of providing legal advice. The content contained in this article is not legal advice or a legal opinion on any specific matter or matters. This article does not constitute or create an attorney-client relationship between Erin M. Jacobson, Esq. and you or any other user. The law may vary based on the facts or particular circumstances or the law in your state. You should not rely on, act, or fail to act, upon this information without seeking the professional counsel of an attorney licensed in your state.

If this article is considered an advertisement, it is general in nature and not directed towards any particular person or entity.

 

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A little press from USC

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Categories: Business, Speaking, Tags: , , , , , , , , , , , , , , , , , , ,

Erin Jacobson music attorney music lawyer los angeles randy jackson american idol

USC Music Career Night Panel: Left to Right: Guitarist Brady Cohan, music lawyer Erin Jacobson, producer and moderator Randy Jackson, flutist Gina Luciani, and agent Kevin Korn. (Photo/Tiffany Yu)

 

As previously posted, I participated in a panel at USC’s Thornton School of Music.  Thornton has done an article about the event, which you can read by clicking here.

Also, here is one of my Tweetable quotes from the night:

“If you’re networking just to get something, you’re doing it wrong.” 

Erin Jacobson music lawyer music attorney networking

 

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Contract Language Explained: “In all media now known or hereafter devised”

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Categories: Business, Digital Distribution, Law, Music, Music Contracts, Music Industry, Music Publishing, Record Labels, Tags: , , , , , , , , , , , , , , , ,

By:  Erin M. Jacobson, Esq.

music-791631_640It’s possible that you have seen or heard of the contract phrase “in all media now known or hereafter devised” or some similar variation.

In music contracts, this language is usually used to define in what media your music can be used.  This phrase allows a company that has the rights to your music to use the music in the formats currently used at the time the contract is signed, as well as any new formats that are invented in the future (and may or may not be known at the time of signing).

For example, pretend that this is 1995, the most popular music format is still CDs, and MP3s had not hit the scene yet.  If you signed a deal at that time that said the company had rights to your music “in all media now known or hereafter devised,” then that company also had the rights to start reproducing and distributing your music in MP3 format once that medium started being used circa 1998.

If you are signing a deal now with that language, the company can probably use your music on vinyl, cassette, CD, MP3/other digital file formats, and whatever they think of next.  So when they start implanting microchips with music, you can bet your music will probably be on that too.

Got questions on your contract?  Schedule a consultation now to get answers!

 

Disclaimer: This article is for educational and informational purposes only and not for the purpose of providing legal advice. The content contained in this article is not legal advice or a legal opinion on any specific matter or mattersThis article does not constitute or create an attorney-client relationship between Erin M. Jacobson, Esq. and you or any other user and Erin M. Jacobson, Esq. is not acting as your attorney or providing you with legal advice.   The law may vary based on the facts or particular circumstances or the law in your state. You should not rely on,act, or fail to act, upon this information without seeking the professional counsel of an attorney licensed in your state.

If this article is considered an advertisement, it is general in nature and not directed towards any particular person or entity.

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Musicians: If You Haven’t Registered With These 4 Services, You’re Missing Out on Your Money

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Categories: Music Industry, Royalties, Tags: , , , , , , , , , , , , , , , , , ,

There are several potential musician income streams that you’ll unfortunately never see if you don’t set yourself up to collect them. More established musicians have the same responsibility, but often have representatives taking care of these procedures for them, whereas independent musicians have to oversee royalty collection themselves. This means that many independent musicians are losing out on money they could otherwise be collecting because they either fail to register their songs properly, or they haven’t registered at all with the appropriate agencies that collect and pay out these royalties.

Are you properly registered with these four services? If not, you’re probably missing out on money you deserve!

Note: This article only focuses on royalty streams within the United States. It does not discuss international royalty streams.

1. Performing rights organizations

Performing rights organizations (PROs) collect performance royalties, which are royalties paid when musical compositions (not sound recordings) are played on terrestrial radio, digital radio, streamed online, heard on television, played in a live performance, or played in a public place like a bar or restaurant. If you aren’t registered properly or at all with a PRO, you won’t be getting paid for any of these uses of your music.

The three performance rights organizations in the United States are ASCAPBMI, and SESAC. ASCAP and BMI allow any songwriter to join, whereas SESAC requires a songwriter to be invited to join.

Songwriters need to register in three ways for a complete registration: as a writer, as a publisher, and for the individual compositions. Before elaborating on the necessities of registration, it’s important to note that performance royalties owed for a particular person’s contribution to a composition are split 50/50 between the writer and the publisher, known as the “writer’s share” and the “publisher’s share” respectively.

  • Writer: Every songwriter needs to register as a writer with a PRO in order to get paid the “writer’s share” of performance royalties, which is paid directly to the writer from the PRO. Writers can only register with one PRO at a time (not all three), although if you aren’t happy with your chosen PRO, there’s usually an opportunity to change your affiliation at a later date.
  • Publisher: If you aren’t signed with a music publisher, then you’re actually your own publisher, and you need to also register as such with the same performance rights organization to which you are registered as a writer in order to get paid the “publisher’s share” of performance royalties, which is paid by the PRO to the publisher of the composition. If you’re a songwriter who’s already signed with a publisher, you may not need to register as a publisher depending on your type of publishing deal.
  • Individual compositions: You have to register each individual composition that you write with your PRO. If you don’t register your compositions, your PRO will not pay performance royalties on those compositions because those compositions won’t be in the PRO’s database, and the PRO won’t know who’s supposed to be paid for those compositions.

2. SoundExchange

When it comes to copyrights and the practice of the music business, sound recordings are treated separately from musical compositions. In the United States, there’s currently only a performance royalty for sound recordings for digital performances, which are for uses like satellite radio and internet streaming. Registering for SoundExchange is free and will make sure you are receiving royalties when your recordings are streamed or otherwise digitally performed. As with compositions, it’s imperative that you register your individual sound recordings so that the recordings and the payment designee can both be recognized.

3. Harry Fox Agency

The Harry Fox Agency collects mechanical royalties, which are the royalties paid from the owner of the sound recording to the owner of the composition for the privilege of reproducing the composition onto the master recording. For physical CD sales and digital downloads, this is a statutory rate (i.e., set by the government) and is currently set at 9.1 cents for compositions lasting five minutes or less. There are also mechanical royalties paid for various online interactive streaming and subscription service uses (think Spotify) as well as mechanicals for ringtones, and the rates for these uses depend on the type of use.

If you’re a self-released artist who doesn’t write with anyone else, you’ll essentially be paying sales and download mechanical royalties to yourself, but it’s still important to register with Harry Fox to collect the other mechanical payments. If you have a relationship with a label or anyone else releasing your music (including co-writers where a song you contributed to as a writer appears on other artists’ albums), registration is important to collect all mechanical payments. If you don’t register and you aren’t diligent about collecting your mechanical royalties yourself, you’ll be missing out on income that could add up over time.

4. YouTube

The YouTube revenue system is slightly complicated, but it basically comes down to monetizing your videos by allowing YouTube to show ads before your video starts, and then you share in the revenue generated from those ads. The more views you get, the more the ad is seen, and the more money you make. For most people, the amount earned here might be minimal, but like finding change in the couch cushions, every little bit helps.

 

If you need assistance with signing up for these services, contact a music lawyer or use a service like Indie Artist Resource. Signing up for these services is the basic start to getting your music career set up correctly. Don’t lose easy money — it could pay back big time down the road.

 

Do you have questions that you’d like to get answered in an upcoming “Ask a Music Lawyer” article? Please send topic requests to askamusiclawyer@gmail.com. Please note that specific case advice cannot be given, and if you have questions pertaining to an issue you are personally experiencing, you should seek a consultation with a music attorney.

 

Erin M. Jacobson is a practicing music attorney, experienced deal negotiator, and seasoned advisor of intellectual property rights. Her clients range from Grammy and Emmy Award winners to independent artists, record labels, music publishers, and production companies. Ms. Jacobson also owns and oversees all operations for Indie Artist Resource, the independent musician’s resource for legal and business protection offering template contracts, consultations, and other services designed to meet the unique needs of independent musicians.

Originally published on Sonicbids.com.

Disclaimer: This article is for educational and informational purposes only and not for the purpose of providing legal advice. The content contained in this article is not legal advice or a legal opinion on any specific matter or matters. If this article is considered an advertisement, it is general in nature and not directed towards any particular person or entity. This article does not constitute or create a lawyer-client relationship between Erin M. Jacobson, Esq. and you or any other user. The law may vary based on the facts or particular circumstances or the law in your state. You should not act, or fail to act, upon this information without seeking the professional counsel of an attorney licensed in your state.

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Articles now on DrewProject.com

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Categories: Articles, Press, Tags: , , , , , , , , , ,

My articles are now also being syndicated on DrewProject.com — a site by my artist/producer/sound designer friend Drew.

On DrewProject.com “you will find music, gear reviews, and technical articles as well as general articles about music, music business, and the crazy environment a modern artist is tossed into every day.”

The Drew Project is based in Italy and has contributors from all over the world to provide a global perspective on the music industry.  Check out DrewProject.com to learn more.

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