Kyle Quit The Band.

30 03 2008

www.rollingstone.com/…/my_list_tenacious_d
From the 5th Beatle to Sting and the Police, the oftentimes tumultuous relationship between band mates lead to emotional and costly breakups. The media picks up on the break ups and, depending on the notoriety of your band, an inter-band fight can be great fodder for tabloids. Embarrassing exposes on Inside Edition aside, a band member leaving your band can have a long standing an sometimes devastating effect on your career and your future in the business.

A majority of bands form when friends or acquaintances get together and discover that they sound better with an additional instrument or vocal than they do on their own armed only with a suped up Casio. An informal understanding of togetherness is usually solidified when you and your buddies pick a kick-ass name for your newly formed band. A parent’s garage then becomes a high school dance which may lead to an opening act at the local pub. Pretty soon, if things continue to go well, you start lining up gigs out of town that maybe, just maybe, cover more than gas and beer money.

At this point, things usually move fast. Labels might start snooping around. Maybe you have been smart with your gig money and have saved enough to produce your own album. All potentially great stuff. Maybe you add a percussionist, a couple of back up singers, maybe you want to be like Arcade Fire and bring on an expert accordion player. Question is, who owns what and who is really in the band and not just a hired hand that is needed to play the cow bell on one of the 48 songs that is currently in your band’s repertoire?

Do you really want this guy “in” the band?

If you have read any of my past rants, I have raved about the wonder that is the limited liability company (“LLC“). Well, here again, it comes in handy. The true owners of the band, the guys and gals that were there at the beginning are probably going to be the members or owners of your LLC. Gene Frenkel (pictured above) should not be considered an “owner” of your band. If he leaves because the rest of your songs do not feature the cow bell, the band is not going to break up. Problem is, if you don’t have anything in writing, there isn’t anything to prevent Gene or the flutist you hired cause you thought she would “sound cool, like Jethro Tull” from arguing that they are part owners of the band as a whole and therefore entitled to money that the band makes regardless of their involvement.

I’m definitely not saying that you should limit your bands’ musical horizons for fear of a rouge tambourine player. What I am suggesting is that you make sure that your one and done contributors get treated as independent contractors. They should sign an agreement that defines their role as a hired hand that is being engaged by your band to do one (or more) task and for that task will be paid a set amount. You could pay a musician a set sum for his participation or maybe a percentage of your royalties earned in connection with the song or album on which he has contributed. The musician gets paid, gets her credit on the liner page and then moves on to the next project.

Maybe you are like Kanye West and hired a string section to go on tour with you. Each musician in that string section should sign an agreement that will set forth the amount he or she is going to get paid for his or her help on the tour. Once the tour is over, their engagement with your band is also over. They quit without any fear or trepidation of a potential lawsuit.

Treat your band like you would any other business. Protect the ownership of it right up front. Making it known who’s band it is will not only save you from embarrassing moments and nasty fights, but may also save you a boat load of money.

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Categories : Law, Music and Business Law

360 Deals…Its Gonna Be a Great Year!

16 03 2008
The Author and Lawyer Buddy at South by Southwest

While most people were out enjoying amazing music, free beer (if you had a pass) and great weather, my lawyer buddies and I were huddled in a chilly windowless convention center discussing the future of music recording contracts. And it was….Awesome!
Seriously though, 360 deals were the hot topic amongst the industry and legal types at SXSW and there are many reasons why. Due to the tremendous drop in physical sales of music, labels are scrambling to find new and inventive ways to share in the money that musicians earn. Enter the 360 deal.
Essentially a 360 recording agreement means that the label who signs or invests in an artist shares in all the income derived from a band or musician; merchandise, licensing, touring, record sales (then the REAL interesting sharing begins). acting or tv/movie appearances, book deals or works of non-fiction written by or with the artist, commercial appearances, endorsements and on and and on. The best example of what 360 deal is and how it could be disastrous for an artist is to look at our buddy Will Smith again.

http://www.warnerbros.co.uk/television/freshprince/index2.html

Let me preface this by saying that in a lot of ways, I think 360 deals are a good idea and can give a lot of flexibility and opportunity to artists. However, just as with any other agreement you enter into, think it through from start to finish before you jump all over the deal. Will Smith started out as the Fresh Prince with his buddy DJ Jazzy Jeff. As was discussed at one of the panel meetings this weekend, one of the first deals Will aka the Fresh Prince entered into was roughly a 360 deal. The label he prematurely signed with had the rights to income from absolutely anything and everything Will ever did. Even after the label was bought out on the music side of Will’s career, the label crept back in when Will made the leap to the silver screen. Litigation was the only way that Will could get out of the deal or his first label would have had the rights to a large percentage of his income from Men in Black.
Obviously there are not a lot of Will Smith’s out there. Yet, the point remains, you must think ahead and negotiate to achieve a fair result. There is something to be said for a label who takes a relative unknown, shells out tens of thousands of dollars on a huge media campaign and turns the unknown artist into a commercial commodity a-la Pink or Eve or, dare I say it, Britney. If that artist will make money through various streams of income and not primarily through traditional record sales, the investor, or in this case the label, believes that it should share in the wealth.
If written correctly and skewed toward a partnership rather than a free-for-all by the label/investor, a 360 deal may offer the artist the big break they have been dying for and the label a well balanced stream of revenue. To take it the next step, it may open the seemingly stapled shut eyes of the industry to the fact that a musician is not just means to sell music; rather a musician in today’s ever changing and increasingly interchangeable global market is a brand. If the focus is put on selling the brand rather than CD’s at Wal-Mart, everyone benefits.

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Categories : Uncategorized

Does Gnarls Barkley Have A LLC?

11 03 2008
http://www.gnarlsbarkley.com/downloads.php

I have no idea, but they should. I know I have previously blogged about the importance of setting up a limited liability company for your band or even for yourself, if you are on your own. But it is important enough for me to expand on my previous message and give you some more examples of why it works so well for new or rising artists.

A LLC protects the owners of a company from being personally liable for the business debts of the company. In addition, unlike a corporation, a LLC avoids double taxation for its members (a member of an LLC is the same thing as an owner). All that stuff is great, but what the real gravy is, is the flexibility that a LLC gives you.

Let’s say you need a good deal of cash to produce your next album but you have already tapped your mom, your dad, your uncle and your fourth cousin twice removed. You have no credit so the bank is a definite no. Time to sell an organ? Not yet.

You can approach your family, your well-to-do neighbors, or a friend of a friend and offer them something better than a loan with a promise to pay it back. You can give them ownership in your music’s business. I know its scary to think of a stranger or even worse, your parents, having any sort of control of your business, but hear me out.

If you set it up the right way and document everything properly, you can give away ownership in your LLC while retaining 100% control of the business. For example: Your dad buys 10% of your LLC for $10,000. That does not mean that he gets a vote worth 10% or that he gets to sign contracts for you or that he can sell his 10% to anyone he wants. A LLC with the proper operating agreement can control all of this. You can limit your dad’s return to a maximum return on his investment of, let’s say 115%. That means, once your dad gets his $10,000 back plus another $1,150 he could be kicked out of the LLC. Keep in mind, as a member of the LLC he only gets any money back if the business does well and there is enough money to pass around.

This also works for band members. Maybe you use a sax player on one album, but only for that album. Chances are you don’t want to make him an owner of the business. The solution is to make him an independent contractor of the LLC and pay him just for the work he completes on that one album. On the other hand, lets say Thom Yorke leaves Radiohead and wants “in” to your new upstart project. You probably don’t have the scratch sitting around to sign Thom. Solution: offer him 25% ownership of the LLC. Most likely the new band featuring Thom will be successful and he will get paid through all the revenue that the LLC (which owns the band) earns.

Make sense? Let me know. I could go on and on

I’m off to South by Southwest where the independent artists reign supreme.

http://www.sxsw.com/


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Categories : Uncategorized

SHOW ME THE MONEY! Stop Waiting on a Label.

3 03 2008

Rod Tidwell Knows.

Everyone remembers Cuba Gooding Jr’s famous quote. No not the one from Radio or Snow Dogs. His famous rant to his agent, Jerry Maquire: “SHOW ME THE MONEY!” As a musician, you may be waiting for the opportunity to ask a label exec to do the exact same thing. Problem is, (a) labels don’t have much money to throw at new talent and (b) getting an audience with an A&R guy is not exactly easy for most performers.

Musicians just starting out may not have that much in the way of overhead. Instruments, gas money, food and booze costs and perhaps an occassional Holiday Inn tab. But as with most businesses a plateau is reached; a band has to spend money to actually make more money. Recording studios don’t come cheap, neither do managers, lawyers, PR firms, booking agents, etc (I know, Debbie Downer moment). While it is possible for bands to self-promote, utilize myspace and the internet, travel on the cheap and record in your buddy’s uncle’s improvised studio/trailer, it takes some serious cash to take the next step.

So what’s a band to do? Well, you could keep plowing away and playing as many shows in as many places as you possibly can while only eating Taco Bell and Ramens; all the while hoping and praying that Clive Davis happens to be in Witchita, Kansas at the Stumble Inn when you hit the stage, waiting for the end of your set to hand you a huge bag of cash. Or you could come up with an actual business plan for your band and try to get cash from a more traditional source for businesses.

As I’m sure you have been a loyal reader to my past blogs (see http://www.lawyer4musicians.com/2007/11/why-do-you-need-to-set-up-llc.html), the first step for an artist who is actually serious about making a living in the music business is to treat her music like a business. Set up a corporate entity. A limited liability company (“LLC”) is the most flexible option out there and is usually a good way to get the protection you need while not being pinned by corporate formalities. In addition to the benefit of protecting your personal assets, setting up a corporate entity will show people and entities with money (investors, banks, venture capitalists, etc.) that you are legitimate. Your music business will be eligible to open a bank account, use a business credit card, and build your businesses’ creditworthiness.

Just like any other business, a musician’s company may eligible to qualify for loans from lending institutions. Check out the Small Business Administration at http://www.sba.gov/. There are a lot of major lenders, like Chase and Citibank, who work with the SBA and specialize in loans for small businesses of all types. A lender will take a look at your individual credit as well as your corporate entity’s credit in determining whether you qualify for a loan. It helps for your LLC or corporation to be in business for two years or more or, if your credit isn’t so hot, to have someone who is willing to co-sign the loan.

There are other resources out there as well. Rich people are always looking to invest in something. Just think of all the rich folks who invested in the XFL. What an awesome idea! Seriously, there are people known as venture capitalists or others known as angel investors who, when presented with a legitimate business plan hand over cash to those asking for it. Obviously, these are not the easiest people to find and you better have a really serious business model in place which identifies how much you are going to earn with the money they are about to hand over to you. But the point is, they exist and surrounding yourself with a team of people who know how to reach potential investors is a big step in the right direction.

Finally, there are other groups in each state that are designed to help small businesses, specifically minority owned businesses. Check out some of these links: www.commerce.state.il.us/dceo/, www.business.illinois.gov/women or http://www.mbda.gov/. There are a ton of programs out there set up to actually give money away to qualified businesses. Keep in mind, however, that if you don’t have your business together, you aren’t going to get very far with any of them. So organize first, then try to get the green.

My point is this: Labels are not doing so hot right now. The ones that are still out there don’t have money to just hand out to new talent. Artists have to be responsible and treat their music as a multi-facted brand and money maker. A band who never signs a record deal, but licenses its self-recorded music to television and movies can make serious money. Becoming self sufficient, tapping into all avaiable resources and following a legitimate business plan can not only make a music label obsolete, but make your dream of being a full-time musician a possibility.


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Categories : Banks, Law, Loans, Music and Business


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