Music Business Education - Lefsetz Misses the Point

I just finished reading Bob Lefsetz article entitled "Negotiation".  He begins the article by quoting Irving Azoff at the Pollstar Awards:  “There’s no one in this room I haven’t screwed.”  The implication being this is what you need to do to succeed in the music business - and that it is a good thing.  Lefsetz then engages in a rant about the uselessness of music business education.  His argument seems to based on the belief that all music industry students have a career goal of being top power brokers and entrepreneurs in the business.  Many do I imagine but probably not the majority.

Having been an entertainment attorney for 30 years and a music business educator early on, I believe it is an accurate statement to say that my students and the students I know today do not all aspire to be at the top business pinnacles of the music industry.  In fact a large portion aspire to continue their path on the creative side of the music business and major in music business in college to learn more about the business workings of their chosen creative career path—not to become a powerful entertainment attorney, manager or record executive.  Where else could a college student meet and hear speakers from the highest levels of all areas of the music industry?  Where else would a college student have so many opportunities to intern at major labels and management companies?

And as far as having a business career, I can attest to the fact that many of the top leaders in the music business here in Nashville are graduates of the music industry degree programs at Belmont University, Middle Tennessee State University and other universities around the country.

Many of the people Lefsetz lauds as the people all students should praise are not people most of the world would want to emulate.  And for those who do, then yes, I will agree that a music business education may not be the path.  One might be better off getting the degree in entrepreneurship – or no degree at all if you have found your passion (as Steve Jobs and others suggest).  But to think that everyone wants to be like Azoff, David Geffen and others is ridiculous in this day and age.  There are many who choose a simpler life – some based on spirituality or values other than amassing power and wealth. We need the Geffens and others who built our industry.  But without the artists, the writers and the others there would be no industry.  So don’t assume that the goals and aspirations of those who Leftsetz admires are the goals and aspirations of the rest of us – including all music business students.

A Few Song Submission Dos and Don'ts

This weekend I was inspired to go back and look some of the emails I have received from hopeful songwriters.  Most were embarassingly unprofessional.  If you happen to be one of the hopefuls then let me share with you a few do’s and don’ts that came out of my review.  And I will also freely admit that there may have been a time that I violated some or all of the "don'ts" myself --fortunately I don't remember.

 DO be professional and business-like.  Most of the people you will be writing to are full-time industry professionals.  Treat them that way.

DON’T write to an industry professional in ALL CAPs, multiple colors or all italics.  I got one email written down the page with only 3 or 4 words per line, each line a different color font.  I guess that was intended to catch my intention.  It did.  I questioned the mental stability of the sender.  The email I got in all blue italics was very long, very distracting and very hard to read. 

DO send your best songs.  I got an email from someone who first told me that they wrote all their songs while in prison.  And?  I’m not sure why I should care where you wrote the songs.  When I pitched my own songs back in the day I don’t recall telling the person I pitched to that I wrote the song in the shower or in my bedroom.  Or maybe I did! Nevertheless, the bigger point is what the writer said next.  The hopeful (who sent 3 unsolicited MP3s) told me they were not his best 3 songs.  What!!?  Why would you send me your worst songs?  I don’t think I need to elaborate on this one. 

DON’T send unsolicited MP3s, photos or other large files.  That makes me angry before I even read what you want.  It is an intrusion into my space that is not appreciated.  Ask first.  I almost always agree to accept submissions or at least forward them to a song plugger, although I might suggest that you use a service like yousendit.com so I can download the files myself.

DO hire a singer.  This hopeful went to a lot of trouble explaining about the quality of his demos.  Home recordings.  I can live with that.  If the hopeful has invested in the right equipment and software the his home recordings may be very good.  However, he then explained that he sang the songs and that he cannot sing!  Seriously folks.  If you cannot sing then do not sing.  Spend a few dollars and hire a demo singer.  That doesn’t cost that much.  Why risk having your listener not be able to focus on the good qualities of your songs because they are laughing so hard at the vocals? 

DON’T tell me that you or everybody you know tells you the songs will be hits.  That only really matters if everybody you know is a successful songwriter or a&r person.  And if they are then you probably don’t need to be writing me about your songs.  Write me about reviewing the contract you were just offered.

If you are a songwriter I hope this was helpful.  If you are an industry professional I haven't told you anything you don't already know.

Artists and All Others: How to Handle Unanswered Emails and Voicemails

I just re-read a very informative blog post by Peter Bregman in the Harvard Business Review entitled “When Your Voicemails and Emails Go Unanswered, What Should You Do?"  This is an excellent read for any professional, business person or creative artist. 

Even though I rarely pitch artists and songwriters to labels and publishers, it is not unusual for me to get emails from people requesting that I do so.  They hope I will listen to their music or songs – or both.  And then present their material to labels or publishers.  Incredibly, sometimes I get emails or calls back the same day asking if I have listened yet!  I can be a bit forgiving because I assume this person really does not have any concept how busy lawyers and others in the music business are – and as I understand it in most any other business.  But even if I accept their lack of business etiquette (and sometimes downright rudeness) as understandable, I nevertheless do not accept them as clients.  I cannot represent everybody and attitude is just as important as talent, ability to pay, etc.  So when I get emails or calls from people who show impatience to this degree, it helps me eliminate this prospective client quickly on the front end.  And I certainly would not want to send someone like this to a label or other industry gatekeeper with whom I have a trusted relationship.

Now – perhaps more importantly for my artist and songwriter readers:  A&R executives, producers and others in the business are just as attuned to who is going to be trouble for them and or their company to work with and all other things being equal, it helps eliminate one CD from the stack of submitted demos piled high in their offices.

Like the author of the Harvard Business Review Blog, I have experienced the same frustration with unanswered emails and voicemails.  And I have also violated the patience advice I am giving to you.  So I need to remind myself of the advice given in the HBR Blog.

Who Owns The Performances On Your Recordings? Part 2

Continuing with last weeks subject matter, why is it when you hire musicians, producers, vocalists and others that the resulting Master tracks are not “Works Made For Hire”.  If the recording were works for hire then you as the person who paid for their creation might be considered the employer and thus the “author” and owner of the sound recording copyrights.

The idea of work for hire is an exception to the general rule that the creator of a work is the “author” and thus is automatically the owner of the copyright.  There are two kinds of works for hire.  First, a work can be considered a work for hire if it is created by an employee within the scope of his or her regular employment.  If you were to hire a vocalist to sing jingles for you full time and told the person when and where to work, then the jingle recordings might indeed be works for hire.  But that is not the situation in most recording sessions that I know about.  The artist or record label hires the musicians to come to the studio and record for that one album or for a certain number of songs on the album.  Recording that specific album is not their full time job.  They get paid for the project and not as a regular full time employee.  They are independent contractors. 

The second type of work for hire is the situation where one hires independent contractors which is the example given for most recording sessions.  In that situation every one making a creative contribution to the recording will likely be a creator of it and thus an owner of copyright along with the other musicians, vocalists, etc.  However, their work can be considered a work for hire only if two conditions are met:  (1)  the work must be intended to fit into one of nine categories listed in the copyright act AND (2) there must be a signed contract that states that the work when finished will be considered a work for hire.  That is why I stated in last week's post that without the written agreement most songwriters and artists will not own the copyright in the sound recordings they just finished recording and paying for.  Does an EP or an Album fit into one of the required nine categories?  Arguably “yes” – in category number 1 below:

1. A contribution to a collective work

2. A part of a motion picture or other audiovisual work or sound recording

3. A translation

4. A supplementary work

5. A compilation

6. An instructional text

7. A test

8. The answer material for a test

9. An atlas

The lesson:  when you get ready to go to the studio be sure you have anyone making a creative contribution to the sessions sign a work-for-hire agreement that addresses all the requirements of the Copyright Act. 

Who Owns The Performances On Your Recordings?

There seems to be a common presumption that if you pay for the recording session you automatically own the copyrights in the Sound Recordings – that is the Demo or Master tracks.  The Sound Recording copyright needs to be distinguished from the copyright in the underlying song that is being recorded. The sound recording copyright protects the performance of the song.  It protects the performance from piracy.  It prevents others from actually illegally duplicating the sound recordings – or illegally downloading the recordings owned by record labels.

The U.S. Copyright Act grants copyright ownership to the “author” of a work.  In most instances this would be the creator – anybody who made a creative contribution to the work.  That isn’t necessarily the person or company that pays the studio, the producer, the engineer and the players, although it could be.  In the case of your song demos or master recordings in many cases more than one person made a creative contribution:  The Producer, the musicians, the backup vocalists, etc.  This is especially true at the professional level.  Although it has not been a standard practice in the industry, you should have each one of those people sign a simple agreement stating that their contribution to the song is a “work made for hire”.  This should be signed before the recording begins.  The agreement should go even further and state that if the work is not legally a work for hire then the person making the contribution (musician, etc.) is assigning his copyright interests in it to you.  If you have ever signed a recording agreement or a producer agreement you will have seen the work-for-hire and assignment language in the agreement.  Now you know why it was there.

It is becoming much more common that in the case where the “demos” or masters end up having an opportunity to be commercially exploited, having those agreements will be required by the record label, the motion picture company, etc.  And having to go back and get a written assignment from everybody involved in the session can be a real problem later on.  I know because I have tried to help artists about to be signed to a label try to get signatures after the work is done.

I have had many clients and prospective clients believe that their masters or demos are works for hire because they paid for them.  In most instances in the music business that is not going to be true unless the written agreement I referred to is signed by the creators.  And not always true even if there is a written agreement.  I will explain this more thoroughly in my next post.

What Is It That A&R Does?

I hope my friends in A&R do not take offense.  I'm sure they wonder what it is that I do.  Nevertheless, I have heard many artist managers ask (rhetorically and cynically) “What do the A&R people do these days?”  In my observation they still have jobs to do – but maybe it just isn’t what it used to be.  It used to be that when I was younger and playing in bands that A&R were thought to be the people who might stop in at one of our gigs and offer us a big record deal.  As time went on and I became less naive, I learned that A&R might indeed stop by the gig – but only after hearing about the band in advance and most likely listening to a demo (or if a solo artist with connections, acoustically in their offices).  It used to be that the A&R person looked for the raw talent, signed the artist and found the songs for them to record.  In my experience today, while finding songs is still a function of A&R, an artist who doesn’t come to the table with a few hit songs written by them or someone closely allied with the artist, their chance of getting signed is even less than slim (slim being the norm).  And of course A&R used to help "develop" the artist – perhaps together with an ancient label department known as “Artist Development”.  You might want to read Ritch Esra’s guest post on this subject, if only to lend some credibility to my observations.

While I have pretty much gotten out of the record deal shopping business, I still sometimes give advice on the process.  And today I tell the artist that to improve their chances they should get out there and do it!  By that I mean perform, record your own EP or Albums, sell them, get a fan club mailing list.  In short, get in the music business – and thengo to the label not only with a demo and a pretty picture, but also with facts and SoundScan data in hand.  Too many artists come to me and hope that I will do it all for them.  It doesn’t work that way – at least not most of the time these days.  Artists:  Go to work and be in the music business – be a working artist!  Don’t wait to be discovered by someone on the A&R Staff.  Chances are it won’t happen—at least until you develop the entire package you have to offer.

Who Wrote The Band's Song?

More than once in my career I have seen arguments occur among band members over who wrote the group’s songs.  Is it the member or members who walked in the door one day with the melody and lyrics or is it everybody in the band who “played” the song the first time they learned it from the music and lyric writers?  In the situation I just described I believe the answer is the creators of the melody and lyrics.  And in fact that is the way it is normally handled – think “The Beatles”.

I realize there are different situations that might determine who the writer or writers are of an original song performed by a band.  The genre of music might be a big factor.  Or the actual collaboration process.  I don’t argue that everybody might be a writer in the situation where an entire band collaborates.  My problem is the situation where there is clearly one or two writers who do their writing away from the entire band.  In effect, they “write” the song and then bring it in for the band to work it up – and probably to do some on the spot arranging. 

So why is it then that the rest of the group feels “entitled” to ownership of those songs?  In my experience band members do not make that kind of claim until there is money at stake.  The band gets a record deal and there is also a publishing or co-publishing deal being offered – with an advance.  The advance is to the “writers” – not to the artists – the players.  Maybe the players who were not a part of the original collaboration or solo writing project do make musical contributions that change the “fundamental character of the work” (Copyright Act terminology).  But I don’t think so in most situations.  Perhaps they truly believe that the day they first heard the song and performed it means they are songwriters.  But as one band member recently said to the true writer member and lead vocalist in the band:  “I stuck by you all this time.”  That musician was saying to the writer band member that since he had not quit the band during the hard times then he should now also be considered a writer and share in songwriter’s royalties and advances.  The recording advance and all the other band sources of income were not enough.  Maybe so – but the loyalty doesn’t make him a “writer”.  Any sharing in the writer’s money will be a result of the generosity of the writer – not a matter of law.

In most situations it seems pretty clean cut.  Some examples are:  (1)  Songwriter sits down with guitar or at keyboards and writes a song.  Done.  The next band practice he plays it for the other group members and they work up the song.  (2)  Two or more band members sit down with instruments and write the song.  Same as number (1)—the band works it up.  (3)  Band Member writes the music and gives melody to another band member who writes the lyrics.  The band learns to play the song.

In my opinion just because the band learns to play one of these songs it doesn’t make all of them writers of the songs.  Sometimes jealousy and hurt feelings are assuaged by letting the entire band share in the publishing or co-publishing income. 

I know some of you are going to disagree with my take on this so please post your comments.  Tell me why I am wrong – or right.

Persistent or Pest--Pitching your Songs and Artist Demo

 Many years ago I was attending a meeting of a songwriters’ association.  The speaker, a friend of mine, had procured many major artist cuts of her songs.  She was not affiliated with a publisher and did all of her own song plugging.  She made regular trips to Nashville to network and to pitch her songs.  I have never forgotten something she said during that presentation:  “There is a fine line between being persistent and being a pest.”

Take heed young writers and artists.  If you believe in yourself and your creative product, persistence is a requirement of success in the music business.  But take care not to be a pest.  Whenever you call on an a&r person, producer, artist, publisher, lawyer, or other person with your demo, be very respectful to that person and of that person’s time.  Your goal if you do not get any interest in the product you have presented is to be invited back when you have new material and if you are lucky to learn any specifics about what this person is looking for.  I have passed on deal shopping representation of artists and writers before and they have actually argued with me about my decision.  Guess who didn’t get invited back!

Because of my blog and my website, I get a lot of requests from songwriters and artists to help them place their material or help them get a record deal.  These days I decline to represent them 90% of the time because I no longer want shop deals in this difficult music business economy.  Nevertheless, some of those hopeful writers and artists keep emailing me and messaging me on social networking sites to the point of becoming pests.  When what they really need to do is email me when they have new material and ask if I would mind taking a listen.

Recently after several email exchanges I decided not to represent a new writer because networking on her behalf was part of what was needed – and as I said, I do not want to do that any longer – for anybody.  The writer wrote me a very kind letter, thanking me for my time.  I immediately gave her a couple of names of other people who might be able to help.  She was polite and persistent over our two weeks of exploring whether we would work together.  Never was she a pest.

Getting A Record Deal - Attitude

Last year I posted about one of the requirements for landing a record deal in Nashville – or for that matter succeeding as a recording artist in any genre or label city.  In that blog I posted about talent as a requirement for success as a recording artist.  If it is your desire to get signed, be it at an independent or a major, then your attitude can also be a critical factor.

As a reminder, there are always other artists being looked at (or soon will be) for the same slot at the same label that you hope to fill.  They are just as talented as you are—but the label doesn’t have the resources to take you both.  All other things being equal, do you suppose they will sign the arrogant jerk or the person they find pleasant and that will be the easiest to work with?  This is not rocket science!

Part of a good attitude around here is not saying anything negative about anybody.  Just be a good guy or gal!  You want people to like you!  I was once helping an artist procure a recording agreement in Nashville (Back when deals were more plentiful.  Translated, before illegal file sharing.)  At breakfast with me one morning the Artist made a critical comment about another artist – one already signed and successful.  By lunch I had gotten a call from someone considering signing my artist-client.  The comment had gotten back to the person calling me!  I told the artist.  He never did that again.  In this town you never know who you are talking to or who is listening to you talk.  Even if you don’t feel it, act like you are a nice person who is happy for everybody’s success!

Attitude is not only important when in getting signed – it is equally important aftergetting signed.  More than you might realize because you’ve never heard of the artists who sabotaged their careers with their own attitudes.  Apparently after getting a deal some artists feel they can then show their true colors.  A good friend and very successful manager once told me about a certain male artist he was co-managing.  The artist was on a major label and his first album was in the stores (remember stores?) and at least one single had been released.  The artist decided he knew more than the label about selling records and announced to management that he was going to have it out with the label president.  When the managers warned him that approach might not be so wise, he retorted “They won’t drop me because they have too much money invested in me!”  So, contrary to the advice of his managers, the Artist made an appointment with the label head and let him have it with both barrels.  I probably don’t need to tell you what happened next.  He was dropped from the label on the spot and kicked out of the building.  Who was he?  No idea – I never heard of him until his former manager told me the story (surprise, surprise).  And I know of other similar occurrences – at least one of which I was involved with as the only attorney this artist used that did not get stiffed (because management paid me). 

Burning bridges, being a jerk or an arrogant ass is not going to help you advance your career.  If you think you might be one of those then get some therapy before coming to town.  It might pay for itself.

Who Decides--the Lawyer or the Artist?

A baker doesn’t ask his attorney’s opinion of which dough to purchase.  However, as any entertainment attorney knows, he or she may often be asked for opinions and advice on artist career matters which technically have nothing to do with the legalities of the decision being made.  It is a part of what we do.  I have sat in on many a strategy meeting with managers and their artists.  I am there as a consultant because I have seen a lot during my career in the entertainment industry.  And I am also there to keep an eye out for any possible legal issues pertaining to the matter being discussed.  But I am not there to make the ultimate decisions regarding of the course of action being considered.

Most artists hopefully understand that ultimately major career decisions are theirs to make.  Often a distaste for things business related and a very busy schedule will lead to the artist delegating a lot of the decision making to the team members.  This might make sense when it comes to routing tour dates, the correct quantity of merch to order, and other matters of that nature.  But large career altering decisions should ultimately be made by the artist after listening to his or her advisers. 

I do not find that delegation to me of making legal decisions for my clients to be a sound policy – and frankly that does not work for me for a number of reasons.  A very successful client of mine once told another artist “Steve does what needs to be done for you – and then he tells you he’s done it!”  Ok – I was taking care of business for a very active touring artist.  But only matters within the purview of legal “maintenance” of a successful career.  Major decisions are a totally different matter.  I recently had another successful client enter into a long-term recording agreement – not the artist’s first.  After prolonged and difficult negotiations were complete and it was time to explain the contract to the artist, I was told that the artist told the manager “If Steve says it is ok I’m sure it is.  Just let me sign it.”

No – please come into my office and let me explain where we are with the contract.  Or I will prepare a bullet point sheet of the important deal points.  But I will not make the decision for you.  I will tell you what I think.  But it is your career and your life.  The decision is yours not mine.  Personally I don’t want the liability.  And if the deal sours someday, which many do, I don’t want you coming back and asking me why I “let you” sign the contract.  But mostly I want you to have a long and successful career.  You are the CEO so you must understand the basics of your business’ significant choices and make them for yourself.

Got it?

Music Lawyer - Living the Dream

Today I feel particularly grateful.   I have been able to make a living in the music business as an entertainment attorney for 30 years.  When I was in my late teens and early 20s I used to jokingly tell my band-mates that when I grew up I wanted to be a rock-and-roll hippie musician lawyer.  One of those band mates recently said “You became what you always said what you wanted to be.”  Well, sort of.  I never really was a hippie but I was certainly in agreement with the liberal and idealistic values of my generation.  Age and experience have tempered a lot of my “rock and roll” attitudes (as well as my politics).  Nevertheless, career-wise I am doing what I always said I wanted to do.  Not as powerful and famous as I thought I might be (except occasionally in the mind of a younger me) but certainly happy and grateful that I have the skills and a client base that keeps me busy and allows me the freedom of a lifestyle I enjoy.

As I review my career path it is almost as if I envisioned who I wanted to be and then went on cruise control.  Quite by happenstance I found myself more than once to be in the right place at the right time for my career as an entertainment attorney to get launched and advance.  Today upon reflection and with the benefit of 20-20 hindsight, I believe that my journey has been in the hands of a higher power all along (rather than happenstance) although I would not recognize that for many years. 

I like what I do.  I enjoy transactional work.  I want you to hand me the contract you were given and let me apply my experience and skills to negotiate the best deal possible for you given your relative marketplace strength.  Or, if my client is the drafting party then I love preparing the first draft to the specifications given me by him or her.  The work is hard, time consuming and often emotionally difficult, but at the end of the day worth the effort.  

Today I feel particularly grateful. 

Peer Pressure in the Music Business

During my years as an entertainment lawyer I have seen music biz colleagues leave their Music Row offices and continue their business careers in in other businesses.  Without fail I later hear comments like "so and so says he is now happier than he has ever been." Makes one wonder.

While the great majority of my clients are really good people and a joy to work with, there are still the "crazies" out there. . . . the Off-Music Row (figuratively) con-men, the thugs, the disloyal, the smiling liars, truly insane - to name a few.  I have often wondered if it is really any different in other industries and have come to the conclusion that it is probably the same.  The solution for me has been to at least attempt to carefully screen clients and matters before accepting them.  Not everybody has that luxury and I am grateful that I can do that -- if I will.  I chose the life of a solo and small firm entertainment lawyer for life style considerations -- not for the money.  So it is very important for me to find peace and serenity one day at a time.  But still I wonder at times -- would it have been different had I made a career in a different industry?

I was discussing this with a friend last week.  He is the former manager of 4 major label artists, one of whom reached super star status.  Before getting in the music business my friend was an accountant at a fortune 500 company in an industry having nothing to do with entertainment.  When I queried "I wonder if it is different in other businesses" he said "The difference is that in the non-entertainment world your work is about the job . . . about achieving success in the job you find yourself in.  Whereas in the music business it may be about that but it is also strongly about the peer pressure to succeed.  It is about looking good to other people in the business -- not just about doing a great job."  Wow!  I can't imagine what it would be like to be in a world where it didn't matter if one looked successful to his or her peers. To get caught up in that lifestyle is of course unhealthy mentally and spiritually.  

The only way I know to escape this "you better be successful in everybody else's eyes" syndrome is to find the self confidence and satisfaction with where I am and the job I am doing on my own.  To put on the music biz blinders and become comfortable that I am making a contribution to my clients, my family and hopefully society.  Expensive toys are an option -- but only if I need or want them.  Not because others need to see that I have them.

Stress Free Work

For me, practicing entertainment and business law has been high stress, particularly as I have gotten busier (for which I am grateful).  Getting stress free in the midst of client needs and demands and sometimes unreasonable adversaries has not come easily for me.  To some degree my "problem" as a lawyer has been that I care about the results of my work and what happens to my clients.  That might sound a bit lame, but detachment can be a blessing if one wants to leave their work "at the office".  I remember one of the greatest compliments paid to me by a client -- a member of a chart topping rock act.  He told another musician in front of me "Steve cares".  That is all fine -- however I think my job would be easier and less stress producing if I were colder and more objective.  Nevertheless, there is a solution -- maybe more than one.  

For me stress free work has required learning skills and techniques -- and practicing them until they become ingrained.  Of great benefit over the past year has been my application of the principles found in David Allen's best seller "Getting Things Done".  That plus learning that I cannot survive without a balanced approach to life, never forgetting to nurture the spiritual and physical areas of my life.  Then -- I can find the bliss and even joy that comes with stress free work.

Part IV: Four Basic Forms of Business for Artists and Others--LLC's

 Limited Liability Company.  A Limited Liability Company (an “LLC”) is the newest of the business ownership structures.  It offers the owners the advantages of both corporations and limited liability companies.  Like the corporation, the owners have limited liability.  Unlike the corporation the owners of a limited liability company can choose to be taxed like a partnership without having to meet the guidelines needed to form a Subchapter S corporation.  So, if the owners elect, the profits of the LLC may be passed through to the owners and taxed on their individual tax returns.  The latter point would be an advantage of course if corporate tax rates are greater than an individual’s personal tax rate.

One of the reasons many attorneys and clients tend to favor the LLC over the corporation is its flexibility and simplicity.  Owners may have one voting interest and a different profit sharing interest, for example.  In most states there is no requirement of annual meetings as in a corporation.  An LLC may have corporate or LLC owners and still elect the “pass-through” tax advantages of a partnership.  These are examples of the liberal provisions available to LLC ownership.

CAVEAT:  Each State has its own laws governing the different forms of business structures and ownership.  While most States aim towards uniformity with the majority of other States, you will always need to check the particular laws of the State in which you plan to form your business.

Part III: Four Basic Forms of Business for Artists and Others--Corporations

Corporation.  A Corporation is an artificial creation of the law existing as a voluntary chartered association of individuals that has most of the rights and duties of natural persons but with perpetual existence and limited liability.  While a sole proprietorship does not exist as an entity separate from its owner and a partnership by and large is very much identified legally with the individual partners, a corporation is a separate "person" at law.  It has its own identity separate and apart from it’s owners (the shareholders).  Its existence is not tied to the natural life of one or more owners.  And, unlike the sole proprietorship and partnership, the owners are not personally liable for the debts and obligations of the corporation unless they contractually choose to be so.  From this latter characteristic comes the term "limited liability".  The liability of the individual shareholder for corporate debts and torts is limited to the shareholder’s investment in the corporation (i.e., the value of their stock).  The shareholder’s personal assets (home, etc.) are not at risk.  Like everything else in the law there are exceptions and situations where a claimant can get at the personal assets of a shareholder but a discussion of that is beyond the scope of this blog post.  In addition to having limited liability, another reason some enterprises incorporate is for tax consequences.  Your accountant will give you additional information on this matter.

Generally speaking, a corporation will file and pay taxes just as individuals do.  And the profits realized by the owners of a corporation will again be taxed on their individual tax returns.  An exception is when the owners elect "Subchapter S" tax treatment.  In that situation the profits of the corporation will be passed through to the owner’s for taxation purposes—just as in a partnership.  However, there are certain guidelines which must be met in order for a corporation to receive Subchapter S tax treatment.  One, for example, is that only natural persons may own stock in a Subchapter S corporation (i.e., no corporate or LLC shareholders).

The primary reason my clients incorporate is for limited liability and for certain tax advantages if the corporation is to be their "touring corporation".  Artists will usually incorporate their touring activities.  If their corporation is administered properly, the artist will be shielded from personal liability for claims that might arise—such as a vehicle accident while traveling to or from a performance, injury to a crew member, etc.  The same with business clients—they choose not to be personally liable for business debts and torts.  For example, a music publisher would incorporate as a liability hedge against a copyright infringement suit.

The formal requirements of forming and maintaining a corporation are many—though not complicated.  Limited liability companies offer much more flexibility.  A few words about that in Part IV.

Part II: Four Basic Forms of Business for Artists and Others--Partnerships

This is a continuation of the series of blogs describing basic forms of business entities that artists and businesses use to conduct their professional activities.  I first described Sole Proprietorships in the previous blog.  The second major form of business entity is a Partnership.

    A Partnership is an association of two or more persons or entities that conduct a business for profit as co-owners.  I have had many clients fail to understand that they are doing business as a partnership and therefore subject to all of the laws governing partnerships, including state partnership acts.  If you are in business with someone other than yourself (a band, a duo, or any business owned by more than one person or entity), if your purpose is to make a profit, if you have not incorporated or formed an LLC—well then what you are doing looks like a partnership.  If it looks like a duck, walks like a duck and quacks like a duck—then chances are it is a duck!  And if it looks like a partnership, walks like a partnership and quacks like a partnership—then chances are it is a partnership.  It doesn’t matter what you call it—if you are doing business in a manner that meets the legal definition of a partnership then you are a partnership.  So what?  Well, you are governed by the laws of partnership—that’s what.  Except in Louisiana, a partnership is traditionally viewed as an association of individuals rather than as an entity with a separate and independent legal existence.  A partnership cannot exist beyond the lives of the partners. The partners are taxed as individuals and are personally liable for the debts of the partnership. Each partner can legally bind the partnership to legal obligations.

 So if one of your partners goes out on his own and purchases a new PA for the band, the partnership is liable for the purchase price.  Or—if the seller of the PA cannot collect from the other band members he can collect the entire price from you (maybe you are the only partner who has money). Hopefully you can get reimbursed by your partners, but as between you and the seller, you have to pay it all.  That is the law of partnership—the partners are jointly and severally liable for the debts and other obligations of the partnership.  Partners also own partnership property equally.  If you are operating a business as a partnership it is strongly suggested that you meet with your entertainment attorney and accountant to discuss whether or not you should form a corporation or LLC.  If not, then, at a minimum, if you are going to remain a partnership consider having a written partnership agreement.  There are many provisions of the partnership laws that can be changed or modified by a written partnership agreement.  And there are other matters that should be included in the agreement.  For example:  What is each partner’s percentage ownership of the business?  If the partnership ends, who owns or can use the name in the future?  How does one remove a partner from the business?  Are their any restrictions on a partner selling his or her partnership interest to someone else?  These are serious matters which should be resolved in advance.

In the entertainment business we hear a lot about “joint ventures”.  A Joint Venture is a cooperative business agreement or partnership between two or more parties that is usually limited to a single enterprise and that involves the sharing of resources, control, profits, and losses.  InTennessee, a joint-venture is treated as a partnership and, thus, the laws of partnership apply.  The reason is that it looks like a duck, walks . . . er . . . you know the rest.

[As in most matters legal, some states may have modified by statute the general laws of partnership so you should consult an attorney before acting on any information given in this blog.]

Four Basic Forms of Business for Artists and Others--Sole Proprietorships

This begins a series of blogs about business entities.  If you are doing business then your business is operating as a legal business entity of some sort—whether you intend it or not.  Two of the basic forms of business entities do not require that you do anything other than start doing business for their existence to spring into being.  The other two basic forms of business require that you do something in order for them to be created.  The reasons for operating as one form of business or another have to do primarily with factors such as tax considerations and personal liability issues.  However, often individuals are doing business as a Sole Proprietorship or a Partnership by default—that is because what they are doing falls within the legal definition of one of those entities, whether or not they have made a conscious decision to operate as that form of business.  The basic forms of business are:  Sole Proprietorship, Partnership, Corporation and Limited Liability Company.

Sole Proprietorship.  A Sole Proprietorship is a business owned and controlled by one person who is solely liable for its obligations.  I sometimes hear non-attorneys refer to this form of business as “a DBA”.  What they mean is a Sole Proprietorship.  As an example, solo recording artists who have not incorporated or formed an LLC are a Sole Proprietors (unless they have a partner in their career).  Many incorporate portions of their business (touring activities, for example) and continue to act as Sole Proprietors in other areas of their business (such as recording).  I have many business clients (personal managers, publishers and even independent record labels, etc.) who are operating as Sole Proprietors.  They just start doing business with no formalities.  They own the business and call all of the shots.  They are responsible for all of the obligations of the business and reap all of the profits as well.  In this form of business the law and the taxing authorities (IRS, etc.) do not distinguish the business from the individual who owns it.  All net income is taxed to the individual at his or her personal tax rate.  Should someone file a law suit because the business owes them money or because they were caused harm by the business, the owner (the Sole Proprietor) is personally liable for any recovery that the plaintiff might be awarded by the court.  In plain English that means that if you are a sole proprietor whose business owes a debt of $10,000, you personally are responsible for that debt from your personal assets (savings account, home equity, etc.).  Your creditor is not limited to the assets of your business for repayment—he or she can attach your personal property as well.

By the way—there is no such business entity as a “DBA”.  “DBA” is merely a shortcut abbreviation for “doing business as”—such as “PKA” (professionally known as) and “AKA” (also known as).  Any form of business (not just a sole proprietorship) can have one legal name but do business under a different name.  I have many corporate clients who are known to the public by a name different than their true corporate name. This might come about for a variety of reasons.  Often the sole proprietor, partnership, corporation or LLC has several different business ventures under one umbrella, each operating under a different name. Several years ago I owned an artist management company which was legally formed as an LLC under one name and later began doing business under another name.  My reasons were that the business originally used the last names of the partners.  When the identity of the partners changed we decided to begin using a name that did not identify the given names of the owners.  Rather than change the name of the business (which can be done) we decided to simply file the appropriate papers with the Tennessee Secretary of State and start doing business under our new name— in Tennessee the "dba" name is known legally as an "alias".    

Are you a solo practitioner?  Next in the series will be a few words about Partnerships.

For Aspiring Songwriters

My motivation for writing this blog is two-fold.  First, it is to be of service. Second, it is self preservation! Almost daily I receive emails from amateur songwriters either asking me to pitch their songs for them -- or asking me how to open doors and get their songs to successful recording artists.  The idea is that I can now refer them to this blog.  Following are my suggestions and answers for the as yet unpublished country songwriters:

1. I am not a song plugger and I do not know any attorneys who are.

2. Find a good song plugger in Nashville.  These people make a full-time career of opening the doors you want to enter.  If your songs are competitive then they will get them to the right people.

3. Meet the publishers, the producers, the a&r people, the artists--that means networking in Nashville and becoming a part of the natural flow of the industry.  I do not mean the online publishers that prey on songwriters.  I mean the real publishers in Nashville, LA, NY and in other smaller music industry pockets in the U.S.

4. Improve your craft and make connections by joining the Nashville Songwriters Association International -- and taking advantage of what they have to offer. I am not familiar with NSAI Chapters in other cities but I know they offer many priceless opportunities in Nashville.

5. Perform at writer's nights in Nashville.

6. Network in Nashville -- your goal is to get to know the publishers and other writers--writers who are more accomplished than you are at this particular time.  Perhaps you will be able to co-write with one of them and learn.

7. If you haven't already picked up on it, I strongly believe that if you are going to write for the country market then you need to spend a lot of time in Nashville.  My belief is not mere opinion -- it is the result of years of experience and observation.  Yes, you can find exceptions.  Maybe you are one. But this blog is for the rest of you.  It is about how to improve your odds.  If you cannot move to Nashville you can still make regular visits here.  Again, the idea is to increase your odds.  Go where the work is.  Go where the industry is.

I am sure there are many other good suggestions.  If you have any, then I invite you to share them by commenting on this blog.

Getting a Record Deal - Talent

Does it go without saying that Talent is a prerequisite for getting a record deal?  Or for success as an independent recording artist for that matter.  If you expect a record company to spend millions to help launch your recording career then you best have some talent or you won't get signed.  Talent is one of the required elements needed for a successful recording career -- and it cannot be bought.  Granted, you can improve on what you have with practice, experience, vocal coaches, etc.  But the raw talent needed to be a star is a gift.  

It is sad that there are so many hopefuls who do not have talent and do not recognize that they do not. The sad part is that it is often these good people who support the "fringe recording industry" in Nashville and elsewhere.  People who are willing to mortgage their homes (literally) to pay some "producer" to make recordings for them and help them become "stars".  There is no point in telling these folks that they do not have the talent to compete.  My experience is they do not believe me when I am honest with them.  And so far I have never been wrong.  They spend their money trying to buy stardom -- and without fail they lose their money.  I might not be able to pick who will be a great star -- really nobody can for sure.  But I am pretty good at recognizing those who do not have a chance.

There are hundreds of thousands of hopeful artists with good voices, tens of thousands with really good voices, thousands with great voices, hundreds with incredible talent and unique voices who will get signed, and of those, only a very few that that will be successful enough to keep their record deal for very long.  If you don't believe what I just said, come to Nashville for a couple of days and spend some time at the bars and clubs downtown and elsewhere.  These are the people who cannot get deals or haven't yet -- or who have had deals and didn't make it.  And if the implication is not clear, most are exceptionally good vocalists.  As a friend of mine says, "In Nashville, talent is the common denominator."  So -- if you have the common denominator then keep reading my blog for a few other requirements for success.

Pondering Purpose

I suppose it is better to ramble than to have no post at all for long periods of time.  So please forgive the unscholarly nature of this post--which includes a bit of rambling as I ponder my career purpose.

What I have been thinking about over the 4-day Thanksgiving weekend is the ways I can be of service to my clients and how I can fulfill my own needs at the same time.  Music is art.  Music conveys a message.  That message for me might be in the lyrics or just the mood, emotion, remembrance or other feeling it evokes.  Supporting artists who try to bring positive messages to their listeners is one way I can personally contribute, both as the attorney for these artists and their teams and as way of fulfilling my need to make a contribution.

I have been much more active this year in representing clients in faith-based music.  Specifically, the Christian genre.  Late last year I began silently sending out prayers of emotion and strong desire that I be allowed to support the songwriters, artists and business people of the Christian music industry.  My purpose was to help bring to music listeners a positive message -- messages of hope, faith, gratitude, freedom, celebration -- all of the positive words and thoughts I can come up with and then some.

The prayers were answered almost immediately with a phone call from a young artist who had offers from more than one recognized Christian label.  Since then my service to the Christian music industry has increased and continues to increase, with new clients coming on board regularly.  For me, service and giving have to be first.  Financial rewards follow.