As discussed in the first part of this series, when first faced with a dispute, band members should carefully review the group’s governing agreement (usually a band partnership agreement, operating agreement, or set of bylaws, depending upon the group’s structure), assuming one exists. Among other things, this document should include a procedure for resolving disputes, and specify the members’ rights and obligations to the group and each other if a dispute arises.
Unfortunately, many groups never get around to discussing — let alone preparing — a written agreement. In those instances, state law will dictate the parties’ rights and duties. Laws and their application can vary greatly among the states and, even in a single state, the specific legal rights and obligations of individual members might differ greatly from one entity type to another (e.g., partnership, limited liability company, or corporation).
Further complicating matters, all disputes are fact-based. Although two groups might have similar types of disputes, generally (e.g., the lead guitarist decides he doesn’t like the drummer any more — trust me, it happens), rarely do two isolated disputes stem from exactly the same facts or circumstances (e.g., the guitarist has evidence that the drummer is embezzling from the band vs. the guitarist’s girlfriend is “pretty sure” the drummer winked at her when the guitarist wasn’t looking). Thus, determining and applying the relevant law to a particular dispute can be complex and is a concept beyond the scope of this article.
Group members who find themselves in a dispute without the benefit of a band member agreement owe it to themselves and their families to consult with independent legal counsel before taking actions that might impact their rights (including potential future income) or obligations (including potential expense and/or liability to the group, other members, third parties with whom the band has existing agreements, etc.).
In the next installment, I’ll discuss possible options for moving forward toward resolution.
Throughout history, musical groups have formed, broken up for various reasons, sometimes reformed (in various incarnations), and frequently broken up again. It happens at all levels of the music industry, from your brother's garage band to the Beatles, Sonny and Cher, and the Eagles (multiple times). I'm neither a divorce lawyer, nor a marriage counselor, so don't ask me why it happens, it just does.
Fortunately, not all disputes lead to a breakup and many issues that groups frequently encounter can be resolved through good faith discussion. However, should the members reach an impasse, the suggestions discussed in this series can help move the members toward resolution, even if the ultimate "resolution" is dissolving the group.
Above all, the members should not ignore the issue, particularly if it is time-sensitive or affects the rights of outside parties (e.g., existing contracts for future services). Even issues that are not specifically time-sensitive deserve timely consideration. Aside from the potential negative impact on the group's business, leaving an issue open for an extended period can foster suspicion and animosity among members. Also, issues that might seem insignificant to certain members might be extremely important to others. Members should keep the lines of communication open and strive to maintain civility.
Assuming one exists, members should carefully review the band partnership agreement (or, if the group is formally organized as a limited liability company (a/k/a an "LLC") or corporation, the operating agreement or bylaws, respectively) for guidance on the specific issues in dispute, as well as the procedure for dispute resolution. Please see my previous article on band agreements for more information. It might also be necessary to consult applicable state statutes to fill any gaps not provided for in a written agreement or if there is no agreement.
In the next installment, I'll discuss some more formal steps for dispute resolution.
Years ago, during a music publishing seminar at which I was a presenter, a songwriter asked, “Why do I even need a music publisher? Couldn’t I just do what a music publisher does, myself?” My simple response was “will you?” It is generally true that of all the players in the music industry, the role of music publisher has one of the lowest thresholds to entry. Indeed, a financially successful music publisher’s stock in trade can sometimes be contained in a single desk drawer. However, that does not mean the job is easy or inexpensive, it just means that there are relatively few required steps for a company (or individual) to accurately call itself a "music publisher." If you are a beginning songwriter with one original song in your catalog and have not assigned any of your rights in that song to someone else, then congratulations, you are technically your own music publisher.
Songwriters frequently receive advice -- solicited or otherwise -- from “concerned” individuals (including fellow writers, family members, friends, rabbis, etc.) that they should never, under any circumstances, “give” their copyrights to anyone. And, because the vast majority of publishing deals involve the assignment of copyright to the publisher, some consider music publishing inherently evil. Of course, it is never a good idea to enter into an agreement with just any publisher who is willing to sign you, simply so you can brag to your family and friends that you signed a publishing deal.
An experienced music publisher should bring to the table at least four attributes that many songwriters lack: (1) an understanding of the music publishing business, including both the publisher’s traditional and developing roles in the larger music industry; (2) a set of established business practices and procedures to effectively manage a catalog and explore exploitation opportunities; (3) existing relationships in the industry; and (4) a relentless drive to both create a successful music publishing business and advance the careers of its signed writers. Notice that the last item does not say “a relentless drive to write great songs” -- that's the songwriter’s job. Writers who do not feel the same level of excitement about building a publishing business as they do about songwriting usually are better served by finding an effective publisher to fill that role.
OK, I know what you’re thinking: “I thought the whole point of this article was to help musicians who decide to ‘do it themselves.’ Why are you telling me I need to have a music publisher?” Well, I’m not telling you that you absolutely have to find a music publisher to achieve success as a songwriter, nor am I trying to discourage you from developing your own music publishing company. However, I do encourage those entrepreneurial writers who make the decision to take on the role of music publisher to learn as much about the business as possible and to seek help when necessary.
We all know the cliché, “knowledge is power,” and It definitely rings true in the music publishing world. Many great books on the subject are available, including Making Music Make Money: An Insider’s Guide to Becoming Your Own Music Publisher by Eric Beall and The Plain & Simple Guide to Music Publishing by Randal Wixen. Also, do not overlook Don Passman’s great, plain-English discussion of music publishing in his authoritative book, All You Need To Know About The Music Business, or Jeff and Todd Brabec’s detailed coverage in their book, Music Money and Success: The Insider’s Guide to Making Money in the Music Business. All of these books are available through most bookstores and online (be sure to confirm that you are purchasing the most recent edition).
As a parting thought, one of the traits that distinguishes successful entrepreneurs in any industry is the ability to recognize one’s own strengths and weaknesses. Most successful entrepreneurs humbly admit that, as mere mortals, they cannot possibly do everything themselves. Delegation of certain tasks to others who are better skilled in particular areas is a reality of the business world. Even seasoned music publishers sometimes enter into administration agreements with other publishing companies that are better able to perform administrative functions, leaving the non-administrative publisher free to concentrate on creative development and seeking exploitation. Finally, although entrepreneurial songwriters certainly can acquire knowledge of the publishing business, established music publishers are already in the game, and they can sometimes open doors that might otherwise remain closed to a songwriter just getting started as a publisher.
Regardless of the path you choose, you owe it to yourself and your music to make an informed decision.
I love bands. I’ve been in bands virtually my entire musical life and I can tell you firsthand, when a band is comprised of individuals who share mutual respect and a passion for their music, the experience can be great. However, almost invariably, when things go bad in a band, they go bad quickly and irreparably. Although nothing can guarantee that a band's members will always get along and keep making beautiful music together (sorry, I couldn’t resist), there are steps that bands can take to foster growth and facilitate a prompt resolution when things do go bad.
One of the most common challenges that new bands encounter is that they typically are so focused on their music that they never get around to discussing how they are to operate. Emerging bands are focused initially on trying to put together their repertoire, and then they start performing and recording and just never seem to get around to formally memorializing their inner workings. Unfortunately, this often leads to confusion or, even worse, mistaken beliefs among band members. Indeed, very successful bands have operated for years with no formal agreement on such critical issues as division of income and ownership of band assets. This is a recipe for disaster that all-too-often catches up with band members eventually.
If a band fails to formally organize as a business entity, it operates as a partnership by default. Although a partnership is a legitimate business structure, it might not be the best form for a particular band. Indeed, many bands choose to formally organize as corporations or limited liability companies (a/k/a "LLCs"). The choice of business structure should always be considered carefully and with the advice of legal counsel. Because of the possibility of conflicts when representing bands, lawyers should advise each band member of his or her right to retain independent counsel. Also, because the various business forms carry different tax consequences, band members should also involve their individual accountants or tax advisers in the decision-making process.
Regardless of the business structure that a band ultimately adopts, its members should discuss among themselves how the band will operate. This discussion should take place very early in a band’s formation and during an official band meeting, not during a band rehearsal. Rehearsals are for rehearsing and band meetings are for conducting band business. I am convinced that if bands would devote even one-tenth of the time they spend in rehearsals for band meetings, many more bands would survive rather than deteriorate because of internal conflicts.
After reaching consensus among members (assuming that all members of the band are to “own” the band), the members should memorialize their agreement in a written and properly executed document. If the band is to operate as a partnership, this will take the form of a “band partnership agreement.” If the band is to operate as a corporation, this information will be contained in a “shareholders’ (or stockholders’) agreement” and if the band is to operate as a limited liability company, the information will be put into an “operating agreement.”
The following is a non-exhaustive list of some of the issues to discuss and include in the written agreement: division of ownership and voting rights; division of income; ownership of master sound recordings; writing credits and copyright ownership for musical compositions written by the band members (if applicable); ownership of trademarks and service marks, including the band name and logo and brands developed for ancillary uses, such as band merchandise; and issues related to departing band members, including the continuation of the band following such a departure, the departing member’s right to use his or her name in association with the band name after departure, and continued payments to the departing member from certain income streams.
As suggested above, in many instances one individual will actually own a band -- directly, or through a separate business entity -- and will hire band members through separate employment or subcontractor agreements. This, of course, raises many other issues that should be discussed with counsel.
The bottom line is that band members need to give their band’s business the consideration and time that it requires. Meet, discuss, agree, memorialize, then focus on making great music with a feeling that all is well with the world -- at least until the drummer and the lead singer’s girlfriend decide to run off together . . . wait, that’s a different story for a different article.
How successful are you as a musician? These days, that’s not such an easy question to answer. I know many songwriters whose idea of success is being offered their first songwriting deal. Sometimes I receive puzzled looks from these folks when I ask them why they define success in those terms. Don’t get me wrong, I don’t mean to diminish the significance of being offered a songwriting deal -- by a legitimate publisher, of course (which, contrary to popular belief, doesn’t necessarily mean a big publisher). Other musicians I know claim to have the seemingly simple goal of “just having my music heard.” Here too, I do not want to diminish the noble aspiration of contributing to the creative fabric of the world. However, most artists and songwriters I have known are at least equally interested in achieving commercial success (i.e., making a living through live performances and/or commercially released recordings as a writer, artist, or both).
What is the point of this post? Simply that you should take time to periodically evaluate and adjust your goals as a creative professional. Part of this involves defining what you consider success, a task for which only you are qualified. After all, if you don’t take the time to define success, how will you know when you achieve it? You may already be more successful that you thought.
In the first part of this article on building an effective brand for bands and solo musical artists, I discussed some basic marketing considerations. However, in addition to marketing issues, trademark and service mark development also requires critical legal analysis.
The failure to clear a band name before using it in commerce can come back to haunt a group, because under United States (and certain other countries) trademark law, one obtains rights in a mark by being the first to use it in commerce, rather than being the first to register the mark. Although it is impossible to be 100% certain that a proposed mark will not infringe upon an existing use of the same or a confusingly similar mark, one should always take steps to limit potential exposure to infringement actions. Even if a challenged mark is ultimately deemed non-infringing, the legal expense to get to that point can put most bands out of business. It is advisable to seek help early from an intellectual property ("IP") lawyer with trademark clearance and registration experience.
Most IP lawyers employ a two-step clearance process. The first step is generally termed the “knockout” or preliminary search, which incorporates searches of the U.S. Patent and Trademark Office (“USPTO”) records, websites, and other databases. Assuming that the knockout search comes back clear, an experienced IP lawyer will then employ the services of a third party search organization for a more robust "full" search in those geographic territories in which the mark is to be used. The full search typically expands the previously mentioned sources to state business filings, industry directories, and other proprietary databases. Obviously, this is a more expansive and more expensive approach to the clearance of a mark. However, the extra expense pales in comparison to the defense costs associated with a typical trademark infringement action or, even worse, the amount of an adverse judgment. It is also extremely difficult, if not impossible, to calculate the expense of goodwill lost when one must abandon a mark and develop a new mark "midstream" because of failing to properly clear the first mark at the outset.
It is also worth mentioning that bands should discuss and reach an agreement as to who owns the band’s marks, including the band name. Band name ownership is one of many issues that should be handled in a written band partnership agreement if the band is operating as a partnership or in a shareholder or operating agreement if the band is formally organized as a corporation or limited liability company (a/k/a an "LLC"), respectively.
In summary, although a band’s primary business is making great music, members should always consider the management of its IP assets, including the band name, to be a critical part of that business. Addressing clearance and registration issues early with legal counsel can help limit the risk of having to adopt a new name after spending valuable time and resources, or worse, having to change names completely and pay damages to another party because of infringement.
What’s in a name? Everything! Most people recognize the power that a strong brand carries, but few take the time to consider what a brand really is. Although not completely accurate, many consider “brand” to be synonymous with with “mark,” which Black’s Law Dictionary (7th ed.) defines as “[a] symbol, impression, or feature on something, [usually] to identify it or distinguish it from something else.” True, a mark is used to identify goods and services, but at its core, a mark represents all of the goodwill associated with a particular company, product, or service. Unfortunately, a mark can also conjure up the negative vibes that one might associate with the mark’s owner. But let’s focus on the positives.
Most successful entrepreneurs recognize that their trademarks and/or service marks (together with their other intellectual property or “IP”) are among their most valuable assets. I encourage bands, individual artists, and writers -- particularly those who develop their own labels and/or music publishing companies -- to do the same. The building of a brand takes time and requires careful planning. Therefore, I always recommend consulting legal counsel who is versed in IP law well before the adoption and use of any new brand (and yes, this includes the adoption of a band or stage name, hence the title of this article), as trademark clearance and registration issues are rarely straightforward.
Often, a band will begin performing under a particular name without first taking steps to clear the mark. In most cases, the band will labor in relative obscurity for a number of years, flying under the radar of any other groups that have adopted the same, or a confusingly similar, name (unless the other band undertakes the advisable practice of conducting periodic vigilance searches to detect and prevent the unauthorized use of its name -- more on this topic in a later article). However, for those talented and fortunate few, opportunities can arise that quickly propel the band onto the regional, national, or even international stage. Even bands without any appreciable commercial success can place themselves on the world’s stage rather quickly by building an Internet presence.
In the next installment of this two-part article, I'll discuss some more advanced considerations regarding band trademarks and services marks.
In the first installment of this article on music business plans, I mentioned that there is no one-size-fits-all format. Nevertheless, every business plan should convey certain "standard" information. I have found that incorporating the following sections into a business plan ensures the inclusion of the most critical information:
1) The Executive Summary. This should be the first section of the business plan (although it is typically the last section actually drafted). As the name implies, this section is a summary of the key points discussed throughout the business plan. In the context of a music business, this section usually includes, but is not limited to, information about the types of products and services to be provided (e.g., recorded music, live performance, composition, merchandise, etc.), the applicable musical genres, company goals (often broken down into short-term, mid-term, and long-term goals), and information about the target markets for the company’s offerings.
2) Mission Statement. The mission statement often appears second in the business plan. The mission statement should paint a picture of the company’s goals, ideals, and business philosophy. Because the mission statement often provides a persona for the company, the creator should take great care to develop a message that accurately reflects the character of the company.
3) Company Overview. This section provides information about the basic structure of the company, including its legal structure (e.g., sole proprietorship, general or limited partnership, corporation, or limited liability company (“LLC”)). If the company requires special licensing, it is advisable to also include that information here. This section should also include a description of the basic management structure and company hierarchy (sometimes including a flow chart can be helpful) and provide descriptions of the various positions in the company. Also include a discussion of the interaction among internal personnel and between the company and individuals and organizations outside the company, such as vendors and consumers.
4) Marketing Analysis. I generally recommend describing in this section what marketing professionals call the “marketing mix.” The marketing mix contains four elements, which are often called the “four Ps”: (1) Product, (2) Price, (3) Place (i.e., methods of distribution), and (4) Promotion. Without going into too much detail, this section should provide rather detailed information about the precise goods and services that the company plans to offer, pricing for those goods and services, the methods of distributing the goods and services to the consumer, and how the company plans to promote the goods and services. This is an extreme oversimplification of the marketing mix. In reality, each of the four elements contains sub-elements, each of which deserves careful analysis.
5) Financial Analysis. This section should include basic pro forma style estimates of financial performance. I strongly recommend consulting a CPA for assistance. This section should also contain preliminary budgets for the company and its various departments. I also generally recommend including a breakdown of upfront capital requirements and how the company plans to raise those initial capital requirements (e.g., debt or equity financing).
6) Risk and Opportunity Assessment. As the name implies, this section should contain a realistic assessment of the various risks and opportunities for the company. I recommend preparing a “SWOT” analysis prior to completing this section. In a nutshell, a SWOT analysis is an analytical framework for assessing a company’s internal strengths and weaknesses and external opportunities and threats. It is generally prepared in graphical form for ease of use and to facilitate a quick understanding of a company’s position. For purposes of the business plan, I recommend translating the data into standard paragraph format.
7) Exit Strategy. Although no one likes to talk about ending a business before it even begins, it is important to include a road map for getting out of the business, for whatever reason. This section is particularly important if you plan to take on investors or seek outside financing.
Again, business plans come in all shapes and sizes. The sections I have described above are some of the more common issues to address in a business plan. Ultimately, each company must adopt a style of business plan that works best for its needs, as well as time and budgetary constraints.
Finally, don’t forget to look up from the plan from time to time. Do not become so obsessed with following your plan — or, more accurately, trying to force your company to fit the precise contours of the business plan that you developed initially — that you overlook changes in the market or in various areas of your business. The business plan should not be a static document. Rather, it should provide flexibility to permit the company to prepare for, and ultimately weather, the changes that might come down the road.
Entrepreneurial musicians — like all business people — often find themselves in quandaries regarding their daily business operations. If only there were a magic book to which one could refer when faced with a particular problem or new opportunity. If only. Unfortunately, no such book exists (believe me, I’ve looked). Even if there were a book that could tell you how to operate your music business, it would take at least half of the fun out of running the business. True entrepreneurs enjoy the ever-changing challenges that come with any venture, but that doesn’t mean you shouldn’t have a game plan in place at all times.
Enter the “business plan” — that intimidating sounding document that casts fear in the hearts of start-up business owners everywhere and, sadly, has created more stress for many individuals than the actual day-to-day operation of their businesses. The good news is that, while there are certain issues that all business plans should address, there is no absolute format for a business plan. In fact, a comprehensive and workable business plan could be jotted down on a napkin. However, if you plan to submit your business plan to other parties for securing financing or some other purpose, I suggest that you avoid the napkin method and prepare a more professional document.
Remember that there is no one-size-fits-all business plan. True, there are model business plans available, many of which are quite good. But there are no perfect “off-the-rack” solutions in any business. In my next post, I will provide additional information about business plans, including the type of information they should include.
With advances in recording technology and that great leveling factor known as the Internet, today’s music industry provides business-minded musicians with opportunities unheard of just a few years ago. But any opportunity comes with its fair share of risks. One very real, yet rarely discussed, risk is the threat of complacency. I won’t bore you with the now tired clichés like “thinking outside the box,” “disruptive innovation,” etc. However, I will encourage you to never stop thinking about the way you do business and asking yourself a simple question: “Why?” “Why am I doing it this way?” “Why did I start doing it this way?” “Why should I continue doing it this way?” You get the picture.
Does the music industry look different than it did in 1920? Without question. 1950? Absolutely. 1980? Of course. How about 2010? You bet it does. The music industry has survived to this day because of individuals who recognized they could not merely accept the status quo and had the foresight to develop and capitalize on the “next big thing.” Want proof? Just look at the opportunities that the recording industry’s initial failure to embrace digital distribution as a viable method of distribution created for independents. Had the established industry jumped on the digital bandwagon immediately, would there be as many different digital services today or would there be only a few mega-outlets? Would it be as easy, or even possible, for an independent to enter distribution deals with those outlets? Maybe so, maybe not. (And don’t even ask me to address the touchy issue of commercial viability in a digital market.) The point is that the industry’s initial reluctance to change the established model created opportunities for independents that continue to develop.
I challenge each of you to set aside ten minutes each day to think about your business and how it will operate in the future. This should be a workable exercise, so don’t allow yourself to get too bogged down in details. Think in terms of today, this year, next year, five years from now, and ten years from now. Don’t worry if your thoughts change over time – that’s precisely the point. There are no maps in life or business. However, a business that continues down a particular path simply for the sake of seeing it to the end rarely will survive. Keep your notes in a journal and review them periodically to see how well you were able to predict changing trends. This is one of the most critical abilities that you can develop in your music career, as well as life in general.
L. Kevin Levine is the founder of L. Kevin Levine, PLLC (go figure), a boutique entertainment, copyright, trademark, and business law firm in Nashville, Tennessee. A lifelong musician who grew up in his family's music store, it was inevitable that Kevin would build his legal career in entertainment and business.