The Music Business is Massively Confusing

Are you a little dazed and a lot confused?

As a lawyer I am supposed to know the answers to all of my client’s questions. When there is a dispute amongst band members or a license deal that doesn’t quite make sense or a slimy industry type not living up to his promises, my clients are trained to do the following: call Josh. For the most part I am happy to say that I can usually answer the question in a relatively short amount of time (primarily because I am a Nerd but also because that is what I get paid to do). But here is the problem: I can explain complex copyright law or a contract uplift provision or a mechanical royalty schedule to another lawyer and she will most likely understand it; but when I try to do the same to the bass player of a Viking Metal band, I tend to get blank stares. The reason for this is because lawyers designed the system, not musicians.
So with that I would like to take this opportunity to provide musicians (primarily new musicians and bands) with some simple terminology to help them decipher what it is their lawyer is trying to tell them.
Let’s start with a LLC. I often recommend that a new band or musician form a LLC as one of the moves to make when a hobby becomes a profession. LLC stands for limited liability company. A limited liability company limits the personal liability of the people who own that company. That means if your company does something wrong (and not you personally) the person you wronged will not be able to go after you personally. The owners of a LLC are referred to as Members. A Member of an LLC is not the same thing as a band member. Members can be people in your band or they can be your aunt Regina who invested in your band so you gave her some ownership.

A LLC can either be Member run (where the owners are responsible for the day to day decisions of the company) or Manager run. A Manager of a LLC is not Hank, your current band manager. A Manager can either be one or more of the Members or somebody or something totally different. A Manager of a LLC runs the company but is NOT what you probably think of when someone mentions Manager and music in the same sentence.

Here’s an example: your band started with 2 people, you and Stewie. You formed an LLC and you and Stewie own the band name and the copyrights of the music in the name of the LLC making you and Stewie the two Members of the LLC. You both act as Managers, sharing responsibility for the day to day business of the LLC. Jerry comes on board as the third band member, but he’s not an owner of the LLC. Jerry gets paid out through the LLC based on your and Stewies decision.

Make sense? Just remember the double meanings of Members and Managers when you are talking about a LLC and you should be ok.

Ready for the next eye opener? Let’s go to the wonderful world of licensing. If your song is lucky enough to be chosen by Charmin to launch their next commercial campaign, they will send you two license agreements for your signature. The first license request will be a mechanical license and the second will be a synchronization license. They can’t license your music with your permission for both licenses. But what the hell are they?

A mechanical license is something that you, as the song writer or copyright holder, give to Charmin. The mechanical license grants Charmin permission to make copies of or reproduce your song. The mechanical license sheds light on the importance of registering your sound recording (song) with the copyright office. By doing so, Charmin and the rest of the world are on notice that if they want to use your song, they have to first obtain a mechanical license from you or your band (or your publishing company if you have hired one).
A synchronization license (sync if you want to sound cool) is the license that you, as the song writer or copyright holder, give to Charmin to allow them to place your song into another medium. Translation: it allows Charmin to take your song and sync it with their commercial.
Both licenses will have similar terms with respect to the length of time, what type of medium will be used (video game, commercial, dvd) and how much you are going to get paid for both (usually the same amount for both licenses). Some keys to look for are: is the license exclusive (you don’t want this), do they get to modify the song (you don’t want this either) and when do you get paid (you do want this).
I am pretty sure that the music industry, and entertainment in general, was set up by the same people who drafted the US tax code. It is intentionally confusing. In order to limit the times that you get taken advantage of you not only need a solid attorney, but you, as the artist, also should know the fundamentals.
I think I like this format. I guess that doesn’t matter so much. Let me know if you like it and I’ll keep going with some more fundamentals of a completely and utterly confusing industry.
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