Manage for Success: Business Affairs, Part 2
(Newsletter #8, December 2001)

Business Affairs, Part Two

Last month in Part One we dealt with Artist Contracts. In this issue we'll discuss other legal-related aspects of running a record label.

Lawyers:
Many large labels have a full-time attorney or business affairs person on their staff. Smaller labels usually don't. This function is frequently handled by the CEO or general manager, with the help of a trusted assistant. But whoever does this will have to deal with all the minutiae of legal matters, in conjunction with outside counsel.

It's important to have a good attorney -- particularly one with extensive music industry experience. If part of a large firm he or she may bill at a fairly high rate, so you might request that a less-expensive associate or skilled paralegal deal with less important matters, as long as your attorney promises to review all documents and activities.

Keeping Track of Option Pick-ups and Key Dates:
Most artist and other license agreements have an option clause that states that the label must exercise its option within a certain time frame. In order to manage this properly it's important that you put together a "tickler" or "suspense" file with all of the dates that apply. I suggest you set up your calendar program (if you have one) so that you receive an alert 30 to 45 days before the option is due to be picked up. This will remind you to make a decision in sufficient time.

Mechanical Licenses:
You are obligated to request mechanical licenses from the publishers of the written composition for every recording you release s. Do this many months in advance of the release date of the record. This is so that publishing credits can be obtained and listed in the CD notes or recording credits as appropriate. It's the information in the license agreements that your accounting department will use in paying the correct mechanical royalty amounts each quarter. If you're making use of a controlled composition clause it'll be necessary for you to indicate as such when you apply for the license, supplying a copy of the pertinent clause as written in the artist's contract.

Licenses With Other Labels:
If you're a label who is licensing masters from others, you will need to develop a standard form agreement that works for you. Any boilerplate might be in the main part with a separate "terms" page defining the details that make it specific to the project at hand. You'll need to keep track of these agreements, and of any renewal options, in your suspense or tickler file.

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Solutions Unlimited is very familiar with business affairs matters of the music industry, even though we are not lawyers. So call on us to discuss these types of problems, or any other aspects of running your label. We supply management solutions and advice tailored to your particular need.

And feel free to email topics for discussion in future newsletters. We welcome your suggestions.

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Ancillary Usage Licenses:
Significant income can be achieved through the licensing of your music for use in feature films, TV shows, documentaries, etc. Most large labels have someone on staff who sends sample CDs to music supervisors, producers, directors and so forth, contacting them with suggested usage. But this is a time intensive job requiring considerable follow-up, so some labels prefer to use an outside party to handle this on their behalf.

Two licenses are involved in the use of music in film, TV, etc.: a "synchronization" license, which is between the production company and the publisher of the music for use of the written copyright; plus a separate "master use" license, which is between the production entity and the record label for the use of the recorded performance. Most production companies will want to use their own agreement, so be sure your music business attorney reviews it carefully.

The film or TV production company will indicate what they're willing to pay for the use of your music, and of course they'll always want to pay less than you wish to receive. However, you can frequently negotiate a better deal.

The first few times you encounter this kind of deal it's advisable for you to use your lawyer to negotiate on your behalf. But once you've had some experience dealing with it, you may wish to bring these negotiations back in house.

Contract Summaries:
I find that brief summaries of all contracts, particularly artist contracts, are extremely handy. For example, you decide that you want to make a deal similar to one you've already made with another artist. Glancing at a well-drafted, single page summary, will give you all the key facts of the terms of the deal (such as royalty points, territories, etc.) without having to slog through 25 to 100 pages of detail.

SR Forms:
You will need to file an SR Form in order to copyright your artist's unique musical performance and the CD's artwork. This is what the circle (P) and the year of first publication, followed by your label's name (and address,) stand for. The form should be filed as soon as possible after the initial release of the record with the United States Copyright Office in the Library of Congress. Send three copies of the recorded work and a $30 filing fee, payable to the Register of Copyrights, to accompany each form. Forms may be obtained at their web site:
http://www.loc.gov/copyright/forms.

This is just a brief look at some of the many aspects of Business Affairs. Neglect or inattention to these legal matters will result in poor relations with your artists, and even worse, potential law suits. Your various agreements must be drafted carefully, and maintained regularly, in order to protect you.

Some reference materials you might look into include:

"All You Need to Know About the Music Business" by Donald Passman (Simon & Shuster, 2000) This is a wittily written book chock full of excellent, up-to-date information about all legal aspects of the music business.

"Music, Money, and Success" by Jeffrey Brabek and Todd Brabek (Schirmer Trade Books, 2000) This suggestion from a colleague has good information, but is oriented more toward musicians and songwriters.

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Copyright 2001 Keith Holzman, Solutions Unlimited. All rights reserved.