NARIP’s Music Merchandise Deal Mock Negotiation made a stop in San Francisco last week and featured BandMerch’s Director of A&R, Jeff Spellmeyer (from Los Angeles), Creative Industry Law Group’s Founding Partner Lizbeth Hasse, Esq. and of course Team NARIP San Francisco’s Executive Director Tamra Engle and Director Nate Beats. Important deal points in a music merch deal were on the agenda, including these from Hasse’s Lawyer’s Perspective on an Artist-Client’s Merch Deal.
Program audio available in NARIP’s online shop (including MCLE version for attorneys), just click here now.
NARIP’s Music Merch Mock Negotiation Photo Gallery
Lawyer’s Perspective On An Artist-Client’s Merchandising Deal by Lizbeth Hasse, Esq.
Is this part of a “360” deal or a modified “360” deal with a record label seeking to control all recording rights, live performance, publishing, merchandising, endorsements and tour income? Does the entity seeking to license rights have the wherewithal and experience to exploit the rights well? There are issues with so-called “360” deals and versions of them that are often concerns with any merchandising deal:
- An artist’s lawyer must be very careful that the artist is not paying out more in income from non-recording activities than the record label (or other licensee) invested in making the record.
- Be aware of clauses that would force the artist to continue paying the label a percentage of tour and merchandising income after the record deal has ended.
- To what extent does the artist retain some creative control over the use of the artist’s name, likeness and branding in the merchandising.
- Be wary of assigning publishing rights, as part of any “360” or other deal, because this could foreclose the artist from taking advantage of a post-record publishing deal.
- It is in the best interest of the artist to diversify his/her assignees and licensors, so that if something goes awry with the label, the artist has other options.
- The deal should explicitly state whether the label is taking an active or passive role, that is, whether the label itself is going to handle merchandising, or whether the label will have passive participation of income an artist may receive through merchandising.
- What happens to the label’s merchandising rights after the label stops producing records for the artist must be clear.
- The calculation of royalties varies by deal, some pay traditional royalties (percentage of net retail or wholesale sales price or other formula), and some create a partnership-type agreement split of earnings.
- If other income streams or rights are being acquired, are additional advances being paid, and if they are being paid, are they being paid in separate non-cross-collateralized accounts?
Notable Differences Between Tour And Retail Merchandising
- Generally, retail merchandising agreements are between an artist and a manufacturer who sells the merchandise to retail stores, while a tour merchandising agreement is between an artist and a manufacturer which has the right to sell merchandise at concerts.
- In retail merchandising agreements, the artist or his/her representative is not present to oversee the distribution and sale of the merchandise, while in tour merchandising, the artist already will know the number of people attending the concert and can calculate the per capita sales easily. Therefore, the artist must trust the retail merchandiser more than it needs to rely on the tour merchandiser.
- In retail merchandising, because the licensee does not sell the merchandise, the artist has little control over the sale avenues used, therefore the artist is generally relinquishing control over methods used to sell retail products embodying the artists’ name or likeness.
- The artist generally receives more in royalty payments from tour merchandising than the artist receives from retail merchandising, partly because the tour merchandisers profit margins are greater and partly because there are fewer intermediaries to pay in the tour merchandising scenario.
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Sources for more information:
Creative Industry Law Group
The information contained in this document is provided solely for educational and general information purposes and shall not be deemed legal advice or counsel. As such, NARIP shall not be liable for any damages resulting from the use of such information contained in these materials. The information provided in the foregoing document may not reflect the most current developments in the law and is general in nature and, accordingly, said information should not be relied upon or construed as legal advice and is not a substitute for obtaining legal advice from an attorney licensed in your state. You should hire an attorney before entering into any agreement or contract.