TipsTips on the Music Business on the Music Business

7/29/2019 TipsTips on the Music Business on the Music Business

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http://www.canadianmusician.com/


2/20

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Dave Genn is a Vancouver-based musician,songwriter and producer, best known for hisguitarist and keyboardist roles in (currently)

54-40 and (formerly) Matthew Good Band.

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Rick Rose has written songs for Sony Tree-ATV Music

and Warner Chappell Music, and has recorded for

Columbia, Elektra Records, and Attic-Polygram. He

is the founder of the Niagara Institute Of Music Arts,

The Music Shoppe, Tangerine Records, and Tangerine

Broadcast Signatures. www.rickrosemusic.com
http://www.rickrosemusic.com/http://www.rickrosemusic.com/


4/20

BusinEssCover Songs

Or, As Jenny Lewis Would Say By Way Of The Traveling

Wilburys, Handle With Careby Pat Leyland

Pat Leyland is a law student at Taylor MitsopulosBurshtein (www.tmblawyers.com), a former

recording artist for Arista Records, andco-manager of the upcoming metal bandThreat Signal.

The views and opinions ex-pressed in this article are notmeant to substitute or legaladvice which should be soughtin each particular instance.

IntroductionWe all have our avourite. For me, its a

toss-up between Annie Lennoxs versiono Bob Marleys Waiting in Vain andthe Smashing Pumpkins adaptation oLandslide, as originally perormed byFleetwood Mac. Other tracks commonlycited include Johnny Cashs spin on TrentReznors Hurt, and, more recently, NellyFurtados acoustic take on the currentlyubiquitous Gnarls Barkley smash Cra-zy. O course, what we are talking abouthere are cover songs. For the purposes othis article, the term cover song reersto a new perormance or recording o acomposition written and/or previouslyrecorded by another artist.

Live PerformanceA cover song can be a valuable tool

in a live setting. I placed appropriately

in the set list, a cover can elevate theoverall perormance and reinvigoratethe audience members by inusing themwith a dose o amiliarity. However, anartist should consider the possibilitythat a rst-time audience member mayonly recall a handul o songs rom a set,and a recognizable cover song may e-ectively displace an original song romthe listeners memory (or better or orworse).

In terms o the legalities o perormingcovers, Canadas Copyright Act grantsthe creator o a copyright protected musi-cal composition the sole right to perorm

the work in public. As such, in order toperorm a copyright protected song, anartist must rst obtain permission romthe creator o the song or the owner othe copyright in the song, i such copy-right has been assigned by the creator.Fortunately or the musician seeking toperorm a cover, this burden is eectivelyrelieved via the Society o Composers,Authors and Music Publishers o Can-ada (SOCAN), the non-prot collectivethat administers perorming rights inCanada.

In exchange for license fees, whichvary according to the nature of the partic-ular usage, SOCAN issues blanket per-forming right licenses that grant users

of music the right to publicly perform inpublic any song in SOCANs vast reper-toire. Due to reciprocal agreements withinternational performing rights organi-zations, a SOCAN license offers accessto songs from all across the globe. It willvery rarely be the case that the respon-sibility to obtain a SOCAN license lieswith the performing artist. Generally,such responsibility falls on the ownerof the venue and/or the promoter of theevent in question. However, if you areplanning on performing a cover, it maybe wise to inquire with the venue and/orpromoter in advance to ensure that theperformance is covered by a SOCANlicense. Please visit www.socan.ca formore information.

RecordingsAs in a live setting, an artist must be

careul that the inclusion o a cover songon an album does not overshadow theoriginal material. At the very least, anartist should produce covers in a mannerthat tilts listeners in the direction o theartists original works. A good example

here is Marilyn Mansons cover o theEurythmics Sweet Dreams. This cover,which gave Manson his rst commercialhit, contains the dark and distorted goth-industrial elements that helped denethe artist, as does his later (and excel-lent) cover o the song Tainted Love.On the fip side, note the many bandsthat eectively became one-hit wondersater recording cover songs (e.g., AlienAnt Farm). A cover song can give yourcareer a boost, but it can only carry youso ar.

On the legal side, recording coversongs engages issues of law distinct from

those related to the performance of coversongs, namely because an entirely dif-ferent right is at play. While performingcover songs involves the right of publicperformance, recording cover songs im-plicates the right of reproduction. Thisright also originates rom the CopyrightAct. The owner o a copyright protectedmusical composition has the sole right toreproduce a composition in any materialorm. Thereore, i you want to manuac-ture an album that includes a cover song,you need to rst obtain permission romthe person(s) holding the copyright in the

song in question. Such permission takesthe orm o a mechanical license, whichis essentially a contract between the par-

ty making thereproductionsand the partyadministeringthe copyrightin the song.

Similar tothe case withSOCAN andthe performingright license,a non-profitagency pro-vides administrative assistance to an art-ist who seeks to manuacture copies oan album that includes a cover song. TheCanadian Musical Reproduction RightsAgency (CMRRA) issues mechanical li-censes to music users on behal o thecopyright owners represented by the or-ganization. The mechanical license di-ers rom the perorming right license inthat the artist manuacturing copies othe cover song is responsible or pay-ing a ee, currently set at 7.7 cents persong per copy sold or distributed i thesong is ve minutes or less. Each addi-

tional minute or part thereo adds 1.54cents to the ee. Thereore, i you wishto manuacture 1,000 copies o an albumcontaining a cover song that is ve min-utes or less, then the mechanical licenseor that particular pressing will cost $77,provided the CMRRA represents theapplicable copyright holder(s). I theCMRRA does not control the rights to thecomposition in question, then the artistseeking to manuacture copies o thecover song must obtain the mechanicallicense directly rom the pertinent copy-right holder(s). Any ee related theretowill be entirely subject to negotiation.

Note that the reproduction o a song pro-tected by copyright in the absence o amechanical license constitutes copyrightinringement. Please see www.cmrra.caor more details.

ConclusionWhile the cover song can be a valuable

weapon in the arsenal of a musician, itmust be handled with care. Use it sparing-ly, use it strategically, and use it legally.

Photocredit:MichaelGorman.
http://localhost/var/www/apps/conversion/tmp/scratch_4/ww.tmblawyers.comhttp://localhost/var/www/apps/conversion/tmp/scratch_4/ww.tmblawyers.com


5/20

BusinEss

As revenues rom the sale orecords continue to decline,band merchandise comprisesan integral part o an artists

total revenue stream. Todays defnitiono band merchandise has expanded be-yond the traditional concert merchan-dise o yesteryear (e.g. T-shirts, base-ball caps, and bumper stickers). Today,artists sell all kinds o wares every-thing rom action fgures to perume to supplement their income. Someartists, such as Gwen Steani and Jen-nier Lopez, have orged identities asull-scale ashion designers.

All o this increased merchandisingactivity raises a host o legal consider-ations. Most importantly, it is necessaryto identiy who owns the underlyingrights in the merchandise. This includesboth copyright in the artwork and de-signs, and trademark rights in the bandname, brand logos, and any slogansutilized in the merchandise. I the artistin question is a solo artist, this is usu-ally less complicated than i the artist iswith a band. To assert ownership in theunderlying rights, a solo artist will need

to ensure that he or she has proper rightsto his or her proessional trade name,and has obtained a complete assignmento copyright rom any third party artistswho designed the artwork in the rst in-stance. In terms o the latter, under Cana-dian copyright laws, any assignment ocopyright must be in writing. Otherwise,copyright in the designs rests with theoriginal creator. Thus, an artist shouldnever assume that just because he or shehas paid or the designs that he or she isthe actual owner o the copyright in suchdesigns. Indeed, in order or an artist tobe able to reely exploit the merchandise,

unencumbered by any uture claims bya third party designer, there should bea written agreement evidencing an as-signment o all right, title and interestin and to the copyright o the designs inperpetuity, throughout the universe. Ocourse, i the musical artist is the personwho is actually designing the artwork, noassignment will be necessary.

For a band comprised o multiplemembers the situation is somewhatmore complex. First, the various mem-bers will need to sort out who owns therights to the band name; e.g. i one bandmember leaves the group, will he or shebe entitled to any profts rom the sale oband merchandise ater such departure,

and i so, or how long? The band willalso need to ensure that the designs andartwork have been assigned to the bandby the relevant copyright owners in themanner noted above, and, as well, howany profts derived rom the sale o themerchandise should be split betweenthe members. These internal band is-sues relating to ownership and divisiono profts are best addressed in a bandpartnership agreement (or as some liketo call it, a pre-nup or rock stars).

Once it is established who actuallyowns the designs in the merchandise,and how any resulting prots are to bedivided, there are other legal issues tobear in mind. It is not uncommon or re-cord companies to try to participate inband merchandise revenue. Record com-panies argue that since sales o recordsare in decline, they should be entitled torecoup their substantial investment in anunknown artist through the artists mer-chandise (as well as touring receipts andsometimes even publishing income).Whether or not an artist should agree toa record companys right to participate intheir merchandise revenue, and i so, to

what extent, will depend on the relativebargaining power o the parties.Other related legal considerations to

bear in mind are the terms o a merchan-dise distribution agreement. For bandswith a certain degree o notoriety, theymay want to use a third party distributorto mass market their goods. In that case,certain key terms should be set out ina merchandise distribution agreement.These key terms include the defnitiono the territory would the applicableterritory o the agreement be limited toCanada only? Or would it be in eectthroughout the world?

Another key provision is the lengtho the term o the agreement Will theterm last or two years? Five years? (romthe artists point o view, the shorter theterm, the better). Moreover, the partiesneed to determine whether the distribu-tor has exclusive rights to distribute allo the bands merchandise throughoutthe territory or whether any specic saleo merchandise (e.g. o-stage sales) orany channels o trade (e.g. the Internet)should be excluded rom the scope othe agreement. O course, the royaltyrate is important to determine, and therate should be based on industry stan-dards. Some artists will be required topay 50-75 per cent to a distributor with

solid distribution channels although awell-known artist should be able to com-mand a higher royalty rate than a lesser-known act. The rate may also fuctuate ithe distributor is responsible or securinga sublicensing deal in a oreign territory

in which case a third party distributor inthat particular territory will also need tobe paid its share o royalties. It is alsoimportant to determine which costs maybe considered allowable, deductible ex-penses beore the distributor determinesthe net prots to be split. Reasonable,out-o-pocket third party costs shouldbe allowed as deductible expenses, butthe distributors general oce overheadshould not. In addition, artist approvalover the look o their merchandise issomething that may be important so bothparties should clearly set out their expec-tations to this eect in the agreement.

Now, more than ever, merchandiseplays a vital role in an artists ability tomake a living; it is also an importantmedium or artistic expression. It isthereore well worth taking the time toconsider these issues in detail.

The views and opinions expressed inthis article are not meant to substitutelegal advice which should be sought ineach particular instance.

Dont Lose Your Shirt: Legal IssuesSurrounding Merchandise Agreements

by Lynn Burshtein, B.A., LL.B

Lynn Burshtein is a lawyer and founding member of theentertainment law rm, Taylor Mitsopulos Burshtein,which represents clients such as Avril Lavigne, Nelly

Furtado, Sum 41, and Three Days Grace, among manyothers. For more information, please seewww.tmblawyers.com.
http://www.tmblawyers.com/http://www.tmblawyers.com/


6/20

BusinEss

Bands at every level showcase.This past March at AustinsSXSW The Tragically Hip show-cased you might think my

God, why would they showcase? butAustins estival is internationally HUGEin the music industry and you see alllevels o artists and bands ocking thereto perorm. With so many levels o artistshowcasing, Im ocusing my point sur-rounding North By Northeast (NXNE). Ittakes place June 6-10, and it has a greatreputation o selecting the best new mu-sic rom Canada and internationally.

So frst o all, congratulations, youvebeen chosen. Get excited and now thinkabout this: what do you want to achievewith this show? Your aim should be togather all the right people together toget you to the next level. Do you want themusic media to be there? Do you wantto get a manager, an agent, a publisher?Make a list o who you want to attract and

ocus on your list.Lets start with media. Do you want ad-vance coverage in the local media? I youhave a budget or a publicist, get one. Inot, most estivals and clubs these daysprovide local media contacts. So makeeight to 10 packages or more, send themto the correct music contacts at the dailypapers, online music sites, the weeklies,the music magazines, campus radio sta-tions, and entertainment TV stations thateature music. Mark NXNE clearly on theenvelope and ollow it up with a coupleo detailed e-mails and a couple calls.Follow-up is one thing, overkill another

and there is a fne line. Some mediajust get mad i you pester them too much.Make sure they have everything theyneed and that is: music, contact inor-mation, a 300 dpi .jpeg by e-mail or alink, your website ino, and maybe a ewclippings or quotes. Get them excitedand remember 400 other bands are doingthe same thing. So do it early. I you arehoping that the weeklies will do some-thing, remember their deadlines; contactthem at LEAST a month in advance and

Showcasingby Sue McCallum

i there is something unique about theband make sure they know that. Themedia want a great story that is their

aim. Now with that list you made earliero all the people you want at the show-case, properly invite them and ocus ongetting them there. Thats the hardestpart, but get them excited. Maybe its anagent or a manager or a club promoteror an international distributor. Do someresearch to make sure you are spendingyour time on the right contact, think othe match. Dont ocus all your energycontacting someone who just does bluesi your act is pop, or example.

During this type o estival, whateverlocation you have been given and what-ever time slot you have embrace it,

work it. Get a hold o the other acts onthe bill because they may want to spliton yers or advertising. Also rememberyou are surrounded by music ans at theconerence hotel and at the other events.Target these people too i they are juststanding around. Not everyone has a ullagenda some make their decisions onthe y, so get them interested. Flyers,signs, posters, Tshirts, busking, air-planes ... well that can get expensivebut not all publicity stunts cost money.

At the club you are dealing withsound techs and stage managers and alot o them are volunteers, so make sure

you are respectul to all around you andall the other acts on the bill and thatincludes being ON TIME. Its an old say-ing that rock shows are always late; well,since the rock show became corporate,rock shows run on time, and specifcallyat a estival like this. You have a specifcamount o time and hundreds actuallydepend on that. You and everyone elseare listed in print in schedules at specifctimes, so start when you are supposed toand dont go over your allotted time youcould potentially throw hundreds o otherpeoples schedules o. Its not cool.

O course, frst and oremost your

band needs to be ready. Obviously thesound and visual are most important butyou would not be showcasing at NXNEi you were not together, so it is up toyou and your band to bring it. Kick some@$$! Your perormance that night needsto be a million dollar perormance. Youhave invited all the right people youwant to be there to advance your career,so make them take notice. Most impor-tantly, have a blast and make it worth-while, isnt that why you are doing it?

Sue McCallum is the Director of National Promotion at True North Records.


7/20

BusinEss

Well, we all know that themusic business revolvesaround the amous clichehurry up and wait. This

phrase has been in eect or many yearsand it will stand strong, so accept it anddont try to change it roll with it, and inthe meantime, keep your cool!

What Im getting at is that all o younew, young, eager, and talented song-writers, artists, producers, musicians,and managers have to maintain integrityand dignity. Dont let desperation takecontrol o you and let it run your lie inthis business.

Yes, we all would like that break thatchanges our lives orever or monetaryreasons and or creative satisaction. Itwould make us stand above all the rejec-tion that we aced in the years o tryingto make it, and it is the ultimate high!

But remember, there will be winnersand there will be losers, just like whenthe Maple Leas play the Canadiens.Theyre both great teams the epitomeo hockey both teams are winners with-in the overall perspective o hockey, butin any given game there is only room orone champion. So, sort o like the musicbusiness, theres only so much room ornumber one songs, top 10 songs, bandsgetting signed, bands landing a greattour opening or a major band, gettinga FACTOR grant or a video or tour sup-port, landing an endorsement the listgoes on orever.

So what do you do while youre wait-ing or your ship to come in?

It usually works this way: stay busy,stay creative, pay your bills, respect yourloved ones, live your lie, nd time toplay road hockey or baseball, and al-ways try to learn something new everyday.

One o the greatest eelings is ndingsomething that you really love to do andnding a way to make money doing it.Its like the old saying: nd a job thatyou love and youll never work a day inyour lie. While youre waiting or re-plies rom record labels or publishers,stay active and earn a living with yourother talents, and, believe me, you allprobably have some God-given talentsthat you can put to use and make moneywith while youre waiting or the phoneto ring.

Now dont get me wrong playinggigs, selling T-shirts, selling CDs, andhoping people will pay a cover chargeto see your show are all ways to earn anincome, but how about the other acetso the industry? Some o the avenuesor you to explore to help you subsidizeyour expenses while you are out there

working on your career are: teachingmusic, writing radio commercials, doingstudio session work, producing bands,managing artists, doing graphic designand/or website design, booking bands,repairing instruments, selling equip-ment, sound engineering, becoming alighting technician, music consulting,and perorming many other roles the list can go on orever. I you oeredthese services, you would get paid oncompletion or very close ater it, so thatmeans that you would have consistentcash fow to stay afoat.

While youre spending all that time in

the studio recording your new creationsand racking up bills, hoping that a labelwill change your lie orever, still t timeinto your crazy schedule to go out andearn money because when youre earn-ing an honest dollar, it enhances yourdignity, and you have a certain kind oenergy that travels.

So stand tall and dont let anybodysay that you dont have what it takes,especially i they cant back it up witha success o their own, not a successthey road on someone elses coat tails theres a big dierence. A lot o olksin the music business are great at pre-tending, so do your research and becautious.

Tom Petty did sing, the waiting isthe hardest part, but what Im sayingis, the waiting is just part o it.

Surviving During The Waiting Game

by Rick Rose

Rick Rose is currently working on his new CD entitledOnce Upon A Time In Niagara for Tangerine Records.

Rick has written songs for Sony Tree Music, WarnerChappell, and Attic/Polygram Music. He is the founder

of the Niagara Institute Of Music & Arts, TangerineBroadcast Signatures, and Music Supply Outlet.

Contact: [email protected].


8/20

BusinEss

One o the most important, butoten overlooked, steps in pro-

tecting ones musical assets isproperly documenting song-

writing splits. Collaborative songwritingis a positive, constructive experience. Itis natural to be ocused on the creativeprocess, rather than papering copyrightshares to avoid uture disputes. But ail-ing to be proactive at the outset can becostly once the song is a success andrecollections o the creative process be-come distorted.

The Split Sheet. My advice is simple as soon as you have completed a songwith collaborators, have everyone sign aone-pager setting out the ollowing:

1. Title. The title o the song and anyalternate title(s).

2. Date and Location. When and wherethe song was written.

3. Names. The legal name o each col-laborator. You may include collaborators(such as producers or arrangers) who

are not entitled to a share in the songin order to have written confrmationo that act.

4. Publishing Info. I available, theperorming rights society (e.g. SOCAN,ASCAP, BMI, etc.) afliation, member-ship number and CAE number, as wellas the publisher o each co-author.

5. The Splits. Each collaborators per-centage share o the song. Standardpractice is to attribute 50 per cent tothe lyricist(s) and 50 per cent to the

composer(s) o the music, but you arenot bound to that convention. Separatingthe music and lyrics simplifes things

where a song is subsequently translated a portion o the lyricists share would

be allocated to the translator, leaving thecomposers share intact. Similarly, ithe lyrics are set to new music, the com-posers share can be adjusted withoutaecting that o the lyricist.

The orm should be kept simple. Thereis no need or detailed legalese that willprompt negotiation beyond the percent-age shares. The purpose is merely toidentiy the song, the collaborators, andtheir respective authorship shares. Thekey is to do this as soon as the song iscompleted, beore it generates revenue,and while the collaborators (1) remem-ber what they contributed, (2) can stillbe contacted easily, (3) are on speakingterms, and (4) are less likely to be moti-vated by greed.

Use of the Song. While it is important tokeep the split sheet simple, it may be ap-propriate to add a line or two regardinguse o the song. Under Canadian law,one co-author cannot license the useo the song without the consent o theother co-authors. So where a producerco-writes with a recording artist, the art-ist may want the producer to agree not to

restrict his use o the song, and may alsowant language preventing the producerrom recording his own version o thesong or a period o time. In some cases,it may be appropriate to appoint oneauthor as administrator, allowing herto authorize use o the song on behalo the other co-writers. This is a trickyarea, so it is important to consult expe-rienced legal counsel to drat languageappropriate to your circumstances.

What is Songwriting? To truly appreci-ate the importance o the split sheet, itis helpul to understand how Canadian

law defnes songwriting. It is common-ly believed that the only collaboratorsentitled to copyright in a song are thosewho write the lyrics, melody, and chordprogression. While infnite dierent ver-sions o a song may be commercialized,they all boil down to those three basic el-ements. Using this rationale, it would berelatively easy to determine the authorso a song in a dispute. Many bands haveone or two writer-members, who rely onthis assumption as the basis or believ-ing they own 100 per cent o the bandssongs, and see a split sheet as an unnec-

essary ormality. However, the Canadiancourts have given a much broader mean-ing to the concept o songwriting.

The Element of Contribution. In 1999,the B.C. Supreme Court ruled on this very

issue inNeudorfv. Nettwerk ProductionsLtd. Darryl Neudor sued or a share ocertain Sarah McLachlan songs that heproduced. Neudor argued that his pro-duction ideas, arrangements, and othercontributions were sufcient to qualiyas songwriting. McLachlan and her ex-perts argued that songwriting is limitedto the lyrics, melody, and chords. WhileNeudor was ultimately unsuccessul inhis claim, the Court agreed with him thatsongwriting goes beyond the three ba-sic elements. Instead, it ruled that anysignifcant or substantial contributiono original expression can qualiy asauthorship. This contribution might bea signifcant hook, arrangement, or drumpart, or example. This ruling suggeststhat ALL persons involved in the creationo a song (including producers, arrang-ers, and band members who are notinvolved in writing melody, lyrics, andchords) sign a split sheet, even i it isjust to confrm that they have NO sharein the song.

The Element of Common Intention. Theimportance o the Nettwerk decisiongoes beyond defning songwriting. The

Court also ruled that each collaboratormust show not only that s/he intended tocontribute to the song, but that each othe other co-authors considered him/herto be a co-author. This common inten-tion requirement makes it essential tohave a split sheet signed at the outset.Without it, the only evidence o com-mon intention will be the testimony oyour collaborators (whose interests maynot be aligned with yours i there is adispute!).

The Bottom Line. It takes a ew min-utes to complete a basic split sheet,

and the cost o preparing a reusableorm is nominal. But not documentingyour splits could cost you a lot o timeand money i a dispute arises. Music isyour business, and your songs are theassets on which that business is built.Proactively recording your song splits isa key step in protecting those assets andavoiding costly disputes in the uture.

Collaborative Songwriting: Doing The Splitsby Jason Klein

Jason Klein is a lawyer and founding member of theentertainment law rm, Taylor Mitsopulos Burshtein,

which represents clients such as Nelly Furtado, Sum

41, Billy Talent, Alexisonre, Bedouin Soundclash, andThree Days Grace, among many others.For more information, please see www.tmblawyers.com.
http://www.tmblawyers.com/http://www.tmblawyers.com/http://www.tmblawyers.com/


9/20

BusinEss

The recorded music business isevolving. In recent years, we

have seen ewer major label di-rect signings, but steady growth

in deals at the independent level. Dueto changing consumer trends in musicconsumption, major record companiesappear to be streamlining their opera-tions to ocus on the more lucrative andpredictable business o licensing anddistribution, while increasingly shitingthe speculative business o artist devel-opment and production to smaller busi-nesses with a greater appetite or risk.

Production Companies, Labels, and

DistributorsIn contrast to the direct sign model,where a major record company does ev-erything rom development and A&R, toproduction and marketing, to sales anddistribution, there is an increasing trendtoward compartmentalization o roles.For example, a developing band mightsign a production agreement with aproduction company, which licensesthe completed record to an independentrecord label, which is distributed by amajor record company. The productioncompany (usually owned by a producer)

nances the production o the record.The label licenses the record rom theproduction company, taking responsi-bility or the marketing, promotion andsale o records. The labels distributorcollects a wholesale price rom retailers,retains a distribution ee and fows thebalance to the label. The label pays theproduction company a royalty under itslicence, and the production company ac-counts to the band under the productionagreement. This illustrates the unda-mental nature o the production agree-ment it is the contractual oundation othe bands recording business.

Production Agreements vs. Producer

AgreementsGiven their similar titles, there is otenconusion as to the distinction betweena production agreement and a produceragreement. The names are oten mistak-enly interchanged, and an inexperiencedartist presented with one or the otherby her producer would likely assumetheyre the same thing. But the businessrelationships that they contemplate areentirely dierent.

A producer agreement (or producerservices agreement) involves the artist(or her record company) hiring the pro-

ducer to render production and relatedservices in connection with the record-

ing o masters to be owned by the artist(or record company). The producer istypically paid or his services, and hisinvolvement ollowing completion o thework is limited to collecting royalties (orpoints) i the masters produced arecommercially released or exploited.

A production agreement, on theother hand, looks very much like a tra-ditional recording agreement. The artistis typically bound to record exclusivelyor the production company or a periodo time, usually covering two or morealbum cycles (though the production

companys right to record subsequentalbums is oten tied to negotiated con-ditions being met). The productioncompany pays all recording costs andtypically owns the masters. Rather thanthe artist paying producer royalties, theproduction company pays royalties tothe artist, based either on a percentageo the retail or wholesale price o therecord, or a negotiated split o the pro-duction companys net receipts. Thedenition o net receipts is likely themost important nancial term in anyprot sharing agreement, and must becareully negotiated.

Rationalizing The Production AgreementWhether a production agreement makessense or a particular artist depends onher circumstances. Where the artist hasa budget and merely requires a producerto produce a record, which she will ownand solicit or exploit through her own net-work (e.g. lawyer, manager, label, etc.),it might make sense to stick with a ser-vices agreement, hire the best producershe can aord and own her masters. Onthe other hand, where a producer investssignifcant time and money in an artists

development, is willing and able to coverrecording costs, has the resources, busi-ness sense and connections to secureand maintain the business relationshipsrequired to sell records, and is able toaccount or royalties payable on an on-going basis, a production deal might beappropriate. From the producers perspec-tive, a production agreement ensures alonger-term involvement with the artist,unlike the traditional ee or servicearrangement.

Ancillary Revenue Streams

A undamental problem with the oldmodel o the music industry is that themajor record companies, who spent mil-

lions o dollarsinding and

develop ingnew talent andbuilding theircareers en-abling them totour, sell mer-chandise, andearn publish-ing income only partici-pated in record sales revenue. The labelsfnancial investment and promotional e-orts built the goodwill in artists namesand images, but they did not share in

the related merchandising, sponsorship,and endorsement income. Similarly, thelabels fnanced artists concert tours (i.e.through tour support), but never partici-pated in any o that revenue. Now thatrecord sales are dwindling, labels (and,by extension, production companies)are looking or ways to diversiy theirrevenue base to justiy their continuedinvestment in artists recordings andcareers. To that end, it is not uncommonto see proposed recording and produc-tion agreements tap into merchandising,live perormance, publishing, and otherrevenue streams. While including non-

record revenue sources in a productionor recording agreement is not currentlyaccepted as the norm, participation inone or more o these areas may be jus-tifed, depending on what the label orproduction company contributes to thatarea o your business. Since industrystandards or multi-rights deals havenot been established, proessional adviceis essential to ensure that any non-recordrevenue participation is appropriate andjustifed in each case.

To sum up: as an artist, you shouldtake the negotiation o a productionagreement as seriously as any otherrecording agreement. It is undamentalto your career to establishing the legalramework or your recording business,and to potentially impacting other incomesources as well. Production agreementshave many negotiable parameters, onlya handul o which are mentioned in thisarticle. Always seek advice rom an expe-rienced music lawyer beore you sign anycontract, particularly one as important asa production or recording agreement.

Production Agreements In The Evolving Music Businessby Jason Klein

Jason Klein is a lawyer and founding member of theentertainment law rm, Taylor Mitsopulos Burshtein, whichrepresents clients such as Nelly Furtado, Sum 41, Billy

Talent, Alexisonre, Bedouin Soundclash, and Three DaysGrace, among many others. For more information, please

see www.tmblawyers.com.


10/20

BusinEss

Lal Apc O Ip Rcori Par I

T

he prolieration o independentrecordings released makes thisset o legal issues highly rele-

vant, particularly in view o theact that most musicians who releaseindependent recordings are not awareo the numerous legal issues involved.A number o the key legal aspects toindependent recordings are outlinedand discussed below.

COPyRIght

a) the MAsteRCopyright o the master recordings isowned by the maker o such recordings.

This is typically the entity that pays orsuch recordings, such as the recordcompany, unless there is an agreementto the contrary.

In the case o independent record-ings, it is oten either a musician indi-vidually, or a musical partnership in theorm o a musical group who would bethe maker, and thereore owner, o therecording.

b) the ARtwORkOther copyright aspects with respectto recordings include copyright own-ership to the artwork, and any and allmaterials which may be printed on theCD inserts.

For example, in many cases, theartwork is often done by a friend or agraphic artist who is an independentcontractor. In the absence of an ac-knowledgement in writing assigningor licensing the copyright to the art-work, the copyright will remain withthe artist who created it; therefore, itis advisable to obtain an agreement inwriting with respect to ownership ofthis copyright. This is particularly im-portant if the artwork is also used on

T-shirts, for example, or if copyright tolyrics or other literary works is includedon the CD materials, consent shouldbe obtained from the copyright propri-etors, such as in the case of a poemwhich is reproduced on a CD insert,consent should be obtained from theowner of such copyright.

c) COPyRIght RegIstRAtIOnOne should also consider registeringcopyright to the sound recording and art-work, although copyright registration isnot required under The Copyright Act.

d) MeChAnICAL LICenCesThe issue of who pays mechanical royal-ties and to whom they are payable are

relevant to the songs that are on the re-cord. In particular, if a song is covered,a mechanical licence must be obtainedfrom the copyright proprietor and the ap-plicable mechanical royalty paid.

This can be done under a mechani-cal licence from the Canadian MusicMusical Reproduction Rights Agency(CMRRA), for example, and in somecases from SODRAC (Socit du Droitde Reproduction des Auteurs, Compos-iteurs et diteurs du Canada) dependingon who has the right to administer suchmusical copyrights.

COntRACts

a) geneRALLyThere are a number o contractual is-sues, including: (i) obtaining copyrightclearances or samples; (ii) copyrightclearances with respect to the artworkand other literary works that were usedwith respect to this independent record-ing; (iii) the contractual issue o whoshould be entitled to a share o recordsales income.

b) PROduCeRA producer is often entitled recordroyalties in addition to producer fees.Producer royalties are typically in therange of one to three per cent of sug-gested retail list price for records soldand not returned.

c) PeRfORMeRs PeRfORMAnCesAlso, one should acquire the rights inwriting to use the perormers peror-mances, such as background vocalistsor background musicians perormanceson the recording since there is currentlycopyright in a perormance under theCopyright Act.

d) ARtwORk / PhOtOgRAPhsIn cases where artwork or a photograph isused, proper consent or a model releaseshould be obtained rom the appropriateparty.

e) MAnAgeMentA manager by custom, and often by awritten agreement, is legally entitled toa percentage of the artists record sales

royalties and the artists mechanicalroyalties accruing rom sales o suchrecordings.

) LOAns

In some situations, a loan may need tobe paid back either to a private inves-tor, or government unding agency, andthis raises a contractual issue as well.A loan agreement stipulating pay backprovisions and interest is oten enteredinto.

Paul Sanderson is an entertainment lawyer who enteredprivate practice after having spent several years as aprofessional musician. He has practical experience as asongwriter, guitarist, keyboard player, and is a publisherand writer member of SOCAN. He is also the authorofMusicians and the Law In Canada, now in its third

revised edition.

Paul Sanderson, 2006. The above issummary advice only and in specifcsituations, skilled legal advice shouldbe obtained.

Check out the March/Aprilissue o CM or

Lal Apc O Ip RcoriPar II.

b Pal saro


11/20

BusinEss

Legal Aspects Of Independent Recordings Part IIby Paul Sanderson

LABELING, CREDIT, AND NOTICE

ON RECORDINGS

a) NOTICES

i) CopyrightIt is advisable to place copyright noticeson recordings, which consists o the ol-lowing: the copyright notice, i.e. , thecopyright proprietors name, and dateo publication. This constitutes copy-right notice or copyright in the lyrics,artwork, and music. The symbol , thecopyright proprietors name and the

year o publication, constitutes noticeo copyright in a sound recording.Neither o the above notices is re-

quired under the Copyright Act inCanada; however, it is a useul prac-tice. The eect o these notices is togive notice to the world that copyrightis being claimed.

ii) TrademarkA number o valuable trademarks maybe credited and be identifed as ollows:TM and . The stands or reg-istration o a trademark in the UnitedStates. The TM symbol gives the worldnotice that you intend to claim rights ina trademark.

Neither o the above notices is re-quired under the Trade-marks Act inCanada; however, they are advisableor the reason oered above, concern-ing copyright.

iii) Business NameAlso, the business name under which thegroup is releasing a recording should beregistered with the appropriate provin-cial Ministry o government ofce.

iv) LabelingUnder the Consumer Packaging andLabeling Act, the principal place obusiness o the person or whom theproduct is manuactured should beidentifed on the label: on the CD insertmaterial, or example.

The minimum height or type sizeunder this statute or upper case letters(whether these are used alone or withlower case letter; or where both upperand lower case letters are used on theprinciple display service o the contain-

er) is at least 1/16th o an inch, or 1.76 mmin height. The type must be legible. Italso makes sense to have the telephonenumber and mailing address indicatedor purpose o selling recordings by mailorder. One should also consider the useo French language recordings distrib-uted in Quebec. Contravention o thisstatute may result in fnes.

v) CreditAlso, alse accreditation can result inlegal action being taken. Credit in thisregard is recognized by contract or by

statute, by case law or custom in theindustry. Credits can be extensive andusually include producer, musician, re-cord company, etc.

vi) Other NoticesOther industry notices are given by cus-tom and practice, or example the MAPLlogo, which consists o the circle o let-ters MAPL in our sectors. M = musiccomposed by a Canadian. A = the mu-sical lyrics were principally perormedby a Canadian Artist. P = (1) productionconsists o a live perormance o music

that is wholly recorded in Canada, or(2) perormed wholly in Canada andbroadcast live in Canada. L = the lyricswere written by a Canadian. The no-tice is particularly relevant to radio orpurposes o complying with CANCONrequirements.

Other industry credits and labelingcould include digital coding and otherdesignations such as whether or notthe recording was originally recordedin mono or stereo, and bar coding, whichis used in inventory and sales control.

The use o warning stickers may alsobe advisable, or example, as an explicitlyric advisory.

THE LIBRARY AND ARCHIVES

CANADAIndependent recordings must be de-posited with The Library and ArchivesCanada. One copy o any sound record-ing that includes Canadian content pub-lished in Canada or public distributionor sale, must be deposited. Contact 1-866-578-7777 or legal deposit at www.lac-bac.gc.ca or more inormation.

TAX: RETAIL SALES, GSTThe sales o independent recordings

have tax implications not only with re-spect to income tax, but also retail taxstatues. The purchaser o any such re-cordings must pay retail sales tax on theair value o such recordings at the timeo purchase. In most provinces, vendorsmust be licensed prior to making sucha sale and i they are not, they may beliable to a fne; however, distributiono promotional recordings is exemptrom retail sales tax. Books and recordsshould be kept and returns made peri-odically in accordance with the appli-cable statues. Also in applicable cases,GST should be charged, collected, andremitted.

Paul Sanderson is an entertainment lawyer whoentered private practice after having spent severalyears as a professional musician. He has practical

experience as a songwriter, guitarist, keyboard player,and is a publisher and writer member of SOCAN. He is

also the author ofMusicians and the Law in Canada,now in its third revised edition.

Paul Sanderson, 2006. The above issummary advice only and in specifcsituations, skilled legal advice shouldbe obtained.
http://www.lac-bac.gc.ca/http://www.lac-bac.gc.ca/


12/20

BusinEss

There is a new orm o recorddeal emerging, and like it ornot, more and more labels areexpected to continue to want to

share in a piece o all o an artists rev-enue streams. This new deal (which iscommonly reerred to as a 360-degreedeal) cuts the label into a sizeable por-tion o the artists live perormance, pub-lishing, merchandising, an club, andendorsement earnings while continuingto take a signicant portion prots romrecord royalties.

Whats the benet rom the artistspoint o view? Many artists and artistmanagers will tell you none whatso-

ever, especially in this day where re-cord label inrastructure is shrinkingamid industry-wide cost cutting. Otherexperts recognize the need to incentiv-ize the label and are prepared to leavesomething on the table in the hope thatthe record label marketing machine willincrease their eorts in return.

RecoRd RoyaltiesThe recording agreement itsel remainslargely unchanged; however, advanceshave come down signicantly since theearly part o the decade. Go to www.

tmblawyers.com/publications.php ora look at Recording Agreements Part Iand II. Some labels are oering a higherroyalty share in return or being cut intotouring and merchandise or a reversiono master ownership, but this is not thenorm so ar.

Publishing incomeIn a typical co-publishing deal, the re-cord label would own the copyright inthe artists compositions in exchange orreceiving 50 per cent o the publishingincome. One o the many issues in doinga publishing deal with a label is: howwell do they know the publishing game?Also, are your publishing royalties goingto be cross-collateralized with your re-cord royalties? They shouldnt be. I youdo decide to do a publishing deal withyour label, they should be oering youa cash advance or the rights they areseeking. Again, go to www.tmblawyers.com/publications.php or articles onPublishing Agreements Part I and II.

touRing, meRchandising, Fan club, &

endoRsement incomeFor many artists, their main source o

income is touring and merchandise, andlabels now want a slice o this. To jus-

tiy this, labels argue that they can putup more money and marketing eortsbehind the band and take more time todevelop and build a long career with theartist.

The question that arises again is: howwell does your record label know thetouring or merchandise business?

I you are doing this type o deal, thelabel should be oering a developmentbudget which is only recoupable romtouring income and not any other royaltystream. Further, participation in touringshould not kick in until the artist is play-ing large venues or running protablelegs or x months at a time. You may

want a solid, guaranteed tour supportbudget beore allowing the record labelto participate in this income stream.

Many o these deals have the labelwanting to act as business manager andcollect the touring income, and in somecases hire the artists tour manager. Tryto limit the label to passive participation,so that the artist collects the money, andthe artist remits to the label what is ow-ing, as opposed to vice versa

These deals vary anywhere between30 per cent o touring income to 5 percent o touring income being paid to thelabel, depending on the label. These

amounts should reduce per album cycle,and obviously the less the artist pays,and the shorter the term, the better.Percentages can be calculated on netor gross. These provisions should becareully reviewed. Try to include asmany deductions in the net denitionas possible like booking agency ees,crew ees, opening acts, sound andlights, and any commissions paid tovenues or merchandise sales.

It might be best to keep 100 per cento the merchandising or yoursel, butoten that is not possible. A best-case

scenario is where the label gets no mer-chandising but has a matching right.This means that the artist can go outand shop around or the best deal, butmust come back to the label and givethem a chance to make the best dealon the same terms as the best oer youhave received.

I that does not fy, try and negoti-ate a merchandising deal that limitsthe label to a certain number o mer-chandise items (ie. two t-shirt designs,two posters, and two buttons only), andlimits what outlets the label has controlo perhaps the label keeps retail only,

and the artist keeps online and touringmerchandise. Again, you would want to

negotiate some advance, with rollingadvances when you recoup the advancerom merchandise sales, so that there isa constant inusion o income. An art-ist will also want ull creative approvalover all merchandise designs and limitthe percentage o net prots that arebeing paid to the label, ensuring that

these amounts reduce with each albumcycle. The same applies to endorsementdeals. The artist should have approvalover which company they choose to en-dorse, and how much they are paid.

It is very important to ensure that allo these income streams are separateand not cross-collateralized, meaningthat the label should not be using yourmerchandise income (or example) torecoup your record label advances/ex-penditures.

Rather than give up so much poten-tial income, does it make more sense or

new bands to distribute their own mu-sic and hire a publicist and independentmarketing company to handle the busi-ness side? That really depends on thedeal being oered and what type o dealyou and your lawyer can negotiate.

360-dr d s a. mp

Stacey Mitsopulos is an entertainment and media

law lawyer with the law firm of Taylor Mitsopulos

Burshtein. Stacey is a strong supporter of

independent musicians across the country,

as evidenced by her client list which includes

Wintersleep, Constantines, Stars, and Sebastien

Grainger to name a few. For more information goto www.tmblawyers.com.


13/20

BusinEss

Why does it make sense, roma business point o view,to have the best live showpossible?

What youre trying to do is createans that buy things and support youand tell other people about you. In asense its Marketing 101 word omouth. Ive worked with a bunch o

artists that have a lot o radio airplayand what Ive tried to explain to themis that all radio does is get people outto the show. Now the question is: whenpeople get to the show, what happens?I you can create ans right there, theyllbe ans or lie.

Personal Skills. Who you are on stageis more important than what you do. Itscreating authority, its developing con-fdence, its learning how to be trulyspontaneous, and listening to your au-dience. An audience doesnt understandwhats happening musically, but it doesunderstand human behavior. An artist incontrol leads an audience and has somecharisma all that stu is teachable.Some people say it isnt, but it is.

Technical Skills. There are certainplaces on stage that are more impor-tant than others. I always ask a band:Do all your songs sound the same?They, o course, say no. Then why dothey all look the same? Because they do.Fity-fve per cent o communication, tothe people in the audience, is what theysee with their eyes.

Placement on stage is important;movement on stage is important. Thereare things that we make up as we gobecause weve been told its gotta bespontaneous, but there are practicalthings you can do to rehearse deliver-ing a solo, movement, placement, andspacing. I you did a solo rom a certainside o the stage because its a dramaticsolo instead o behind your pedal board,it would sell 10 more CDs. I you havenine solos in a night, I guarantee youeight out o nine solos are in the exact

same place behind a pedalboard. Thephrasing is dierent, the tones are di-erent, everything is dierent about itexcept one thing the visual part. Anaudience generally doesnt understandmusical things, so songs start sound-ing the same because the audience isnot locked in to what the musicians arelocked into.

Planning. Usually when you put a settogether, you string songs together 30minutes beorehand. Dont! When Iwork with an artist, I will listen to songs.Ill listen to them many dierent ways,with headphones, without headphones,small speakers, hal a headphone and Ill start trying to fnd the momentsinside those songs and get a vision orthose songs. I can see the audience re-sponding a certain way in each song this is a un, musical thing. Im look-ing at how to create moments out othese songs and I take that vision intothe rehearsal room, develop the musicalideas, the verbal ideas, the eel o eachsong, and basically rewrite the song.This brings us to the ourth element,which is the creativity.

Creativity. Eight out o 10 bands recordthe music frst, which I eel is a mis-take, personally. Musicians record theirsongs and then they go and play themthe way they are on the record. Theresno reason in the world to do that. Anartist will play the song the way itsrecorded because he or she is trying

to create, in 3 minutes, a momentthat a record company is looking or,and what connects with people whiletheyre driving down the road in theircar or listening on their iPod. When youdo it that way live, youre discountingthe act that 55 per cent o communi-cation rom the stage is visual. On arecorded song, its zero. Theres nothingthat applies to a show. What youve gotto understand is how to deliver a songvisually and be authoritative and con-fdent on stage, and bring it in a way

that the audience will receive it as amoment, not just a song.

Let me put this all into perspective.When I work with a band, I usuallyspend at least a day on a song. Some-times, Ill spend as much as nine dayson a song. I have a real good riend, Dez,who played with Prince or eight years.I asked him how long they rehearsedor. He said theyd rehearse a show sixdays a week, or six weeks, 12 hoursa day. Now your eyebrows raise! Well,does Prince have a great show? You bet.

Theres a reason or it. Its like recordinga record. The reason we spend monthsrecording a record is because the recordcompany is protecting its investment.What the artist has got to understandis that his or her investment is in thelive show.

Key Elements Of A Great Performanceby Tom Jackson

Tom Jackson is one of the premier performance

consultants and live producers in contemporary music

today. Check outwww.tomjacksonproductions.com for

some of the coaching materials he has available. Also

check out World Vision, a cause that Tom cares a lot

about, atwww.worldvision.ca.
http://www.tomjacksonproductions.com/http://www.worldvision.ca/http://www.tomjacksonproductions.com/http://www.worldvision.ca/


14/20

BusinEss

This column marks my return toCM. Its good to be back! In myabsence, Ive been busy. My newbook, Music Business Tactics,

takes a look at the business o being amusician.

Achieving success as a proessionalmusician involves more than playingor writing well. While you are frst andoremost an artist, you must also thinko yoursel as a business i you hopeto make a living in this competitive

marketplace. A successul businesscreates a product or products, identi-fes a market or those products, andactively promotes its products to themarket. Your musical abilities are yourproducts; it is your responsibility tomake sure your products are market-able and marketed. This is the businesso being a musician.

Consider the ollowing: Your product line must be excellent;no amount o marketing makes up ormediocrity.

Your products must constantly be newand improved! I you stop growing as amusician, you become stale. Your products must be unique; youneed to distinguish yoursel rom thecompetition. The greatest product in the world canlanguish on the shel i it is not promotedproperly. The packaging o the product aectspeoples perception o its worth andvalue.

The Eight PsMusic Business Tactics is organized in

eight sections, each beginning with theletter P. Minding your Ps will lead tosuccess in all acets o your lie: musical,personal, and business.

Performance: The better the musicianyou are and the more musical hats youwear, the greater the chance that therewill be a gig or you tomorrow. Every day,strive to become a more accomplishedand versatile musician; i you are notpracticing, someone else is. Play yourbest on every gig; you never know whois listening!

Personality: Managing your relation-ships with your colleagues is at leastas important as your musical ability. Ipeople like you, they are more likely tohire you. Be interested and interesting.Respect others and they will respectyou.

Punctuality: Managing your time, show-ing up on time, and responding in atimely manner are crucial elements othe musical business plan. Return mes-

sages promptly, show up early or thegig, and dont waste time watching TVwhen you should be practicing!

Presentation: A well-dressed personcommands respect. On stage, it is evenmore important. Improving your appear-ance will improve your success rate.Look like you mean business.

Promotion: Its not good enough to bean excellent musician; others have tobe made aware o your abilities. Learnhow to promote yoursel. Hire a photog-

rapher. Learn how to write an eectivebio. Build a mailing list. Put together akiller website. Show yoursel in the bestpossible light.

Preserving For Posterity: Recording yourmusic preserves it or posterity. Market-ing it properly can lead to prosperity.While it is easier than ever to make agood recording, it is also just as easyto make a bad one. Make sure the de-tails involved with recording your musicdont distract you rom the true purpose:making a musical statement and captur-ing you at your best.

When it comes to marketing your re-cordings, we are in the midst o a shitingtide. Whether digital music reproductionrepresents a threat or a golden opportu-nity or the musician, burying your headin the sand or pining or the old daysis not the answer. Stay abreast o currentdevelopments, and fgure out how to usetechnology to your advantage.

Pennies: Take care o your pennies, andthe dollars take care o themselves.Managing your money is an essentialcomponent o any business plan. Learn

what expenses are tax-deductible, andkeep accurate records. Strive to increaseyour avenues o income, and be ready toadapt to changing musical landscapes.Be prepared to supplement your playingincome, one way or the other.

Passing It On: Teaching is good or thesoul. It can also be good or the pocket-book. Passing on what youve learnedis cathartic, and will make you a bettermusician. Teaching is a good way ora musician to earn extra income; how-ever, that should never be the primarymotivation. Its too much work to do itor the money!

Music Business Tactics:Professional Prosperity Proffered

By Chase Sanborn

Chase Sanborn is a jazz trumpet player andteacher based in Toronto. He is a member of the

jazz fa cu lt y at th e Un iv er si ty of Toro nt o an d aYamaha artist. Books by Chase Sanborn include

Jazz Tactics, Brass Tactics, Tuning Tactics,an dMusic Business Tactics .

www.chasesanborn.com.
http://www.chasesandborn.com/http://www.chasesandborn.com/


15/20

BusinEss

Y

ou want your bands bio to bea representation o your bandsmusic. The music is the point;

the bio is to drum up interestabout the music while giving the readera sense o your bands personality. Youwant them to go Oh, thats interesting.Ill check this out, and not Oh, thatsobnoxious. I want to ght this band.Lets not concern ourselves with how to

write a great bio, because in 50-someyears o rock n roll, there hasnt yet beena great bio. Currently, the scale goesrom wretched, to still very poor, topassable (which unortunately scores10/10 because its the best anyone hasever done). Well just concentrate onhow to write a bio that isnt wretchedand wont make your ans quit typing


16/20

BUSINESS

Ater reading Andrew KingsIndie Insider (CM July/August2008) about taking your tourStateside, you made the deci-

sion to pursue glory down south. Theperormances are scheduled, the USwork permits are in place, and you areheaded to the US or a great show. Youdream o energetic crowds, great peror-mances, and cash in your back pocket.

Your thoughts are nothing but pure blissuntil the promoter shakes you back toreality with the mention o US withhold-ing taxes

When a Canadian artist perorms inthe US, the venue or promoter is requiredto withhold 30 per cent o the artistsgross receipts and remit to the InternalRevenue Service (IRS). In addition, manyo the individual states have their ownwithholding requirements. For example,Caliornia will withhold another 7 percent to bring your total withholding toa monstrous 37 per cent!

Tax is withheld on the total proceeds

you receive rom the venue and does nottake into account out-o-pocket costs. Foran artist who is already shelling out alot o money or an agent, travel, hotel,and crew costs, withholding can suckup that last penny you earned in theUS, or more. The good news is, with alittle advance planning, there are waysto reduce the withholding requirements.First, lets walk through the methods toavoid the withholding altogether.

Generally, i your gross incomeearned rom US perormances is lessthan $3,000 and you are in the US ewer

than 90 days, there is no ederal with-holding. Caliornia has a similar rulethat says i your gross payments are lessthan $1,500 in a calendar year, there isno Caliornia withholding. But lets getserious you ultimately want to build aUS market or your music and pay thebills. You are not going to do this bykeeping your US receipts under $3,000per year.

There is an income tax treaty be-tween Canada and the US, which raisesthe threshold slightly. Under the treaty, aCanadian artist can gross up to $15,000CDN per year beore ederal withholding

kicks in. But be careul gross incomenot only includes your perormance ees,but also any travel or other expensesreimbursed by the venue. To claim thisbeneft, provide a completed IRS orm8233 to the venue or promoter. Yourmanager may be amiliar with this ormand able to help you.

Many o the US states do not ol-low the treaty. There may be situations

where you are taxed by a state, but notthe ederal government due to treatybenefts.

Since this treaty exemption is basedon annual earnings and it is oten hardto know what your earnings will be be-

ore the end o the year, not all venueswill accept this withholding exemption.I you meet the treaty exemption and thevenue withholds tax anyway, you willneed to fle a US income tax return toclaim your treaty benefts and requesta reund o the withholding.

The sure bet or all artists to reduceederal withholding is through a CentralWithholding Agreement. These agree-ments are negotiated in advance o yourUS tour with a group in the IRS that spe-cializes in such agreements. The IRS willissue a letter providing or withholdingon the perormers net income ater

deductions instead o their gross income.The withholding rate will vary depend-ing on your expected annual taxableincome in the US. These agreements areextremely valuable in situations whereyou have large guarantees or there isexpected to be nil or minimal net incomerom the US tour.

Central Withholding Agreements aregenerally enacted at the individual level.

I you are a member o a band, a sepa-rate agreement is negotiated with eachbandmember. Even i you tour througha corporation, the agreement is usuallystill with the individual bandmembers. Iyou have a manager, he or she should beable to handle your reduced withholdingrequest with the IRS.

Finally, the IRS may also include anyadditional income earned at the peror-mance, such as merchandise revenues,in the Central Withholding Agreement.It is important that your tax advisorsunderstand what income is subject towithholding and taxed in the US. The US

and Canada oten have dierent rulesregarding how income is categorizedand taxed; thereore, advance planningis necessary to reduce or eliminate dou-ble taxation. Double taxation is a badresult or anybody!

Are you a US citizen living in Canada?I so, the US tax implications are evenmore interesting, and advance planningis even more important.

Remember: the goal is to open up anew market or your music, have un,and come home with some cash in yourback pocket. With a little advance plan-

ning, and o course some good music,the cash will stay in your back pocket where it belongs.

US Taxes Often Surprise Canadian Musiciansby Wendy Wixson, CPA, MS

Wendy Wixson is a Senior Tax Manager inthe International Services Division of Moss

Adam s LL P, and ha s ov er 15 ye ar s of pu bl icaccounting experience. She has published

several articles in trade and business journalsapplicable to international business, foreign

athletes, and entertainers. Wendy haspr esen te d on US-C an ada cr os s- bo rd er ta xa ti on

and other international topics to a numberof groups, including the Canadian Society of

Certif ied General Accountants and Council forInternational Tax Education (CITE). Contact:

[email protected].


17/20

BUSINESS

A

bout 10 years ago in this col-umn, entertainment lawyerChris Taylor provided an ap-

proximate breakdown of the$19.95 retail price of an average CD asfollows:

Manufacturing $1.00 (5%)Retailer $5.95 (29.8%)Distributor $4.39 (22%)Songwriters $0.69 (3.5%)Artist $1.31 (6.6%)Producer $0.44 (2.2%)Record Label $6.17 (30.9%)Total: $19.95 (100%)

Since 1998, the recording industry hasbeen dramatically propelled by the orig-inal Napster and its P2P progeny into

a new age marked by unprecedentedlevels of piracy and the challenge of es-tablishing and developing a legitimatedigital market for sound recordings.Lets take a general look at where themoney goes today by breaking downthe $9.99 retail price of the average digi-tal album sold through Apples iTunesMusic Store.

RetailerIn April 2008, the iTunes Music Storebecame the number one music retailerin the world. While the bulk o iTunes

sales are in the orm o $0.99 individualtrack downloads, sales o digital albumsare accounting or a growing portion ooverall album sales in Canada.

So how much does iTunes make romthe sale o a digital album priced at$9.99? Roughly 30 per cent o the grossrevenue: $7.00 rom each digital albumsale is paid to the record company, withthe remaining $2.99 pocketed by iTunes.This amount osets various expensesincurred by Apple, such as technologycosts, credit card transaction ees, and,o course, advertising.

DistributorDigital distributors ulill a valuableunction as an intermediary betweenonline retailers and record companies.By way o compensation, distributorsgenerally receive a ee in the range o15-20 per cent. While some distributorsoer a lower percentage, one should becautious o additional ees that may becharged.

Choosing a mid-range ee o 17.5%or this example, the $7.00 netted bythe record company on a $9.99 digitalalbum sale results in a payment o $1.22to the distributor. The revenue is appliedagainst expenses such as the cost o en-coding and delivering music and related

metadata to online retailers, though thecosts o digital distribution generallypale in comparison to the costs associ-

ated with physical distribution, such asmanuacturing, warehousing, and ship-ping CDs.

SongwritersThe songwriters on an album are paida mechanical royalty or each copy othe song sold or distributed. In Canada,mechanical royalties are generally paidat the industry standard rate o $0.081cents (where the song is fve minutes orless), as negotiated between the Canadi-an Musical Reproduction Rights Agencyon behal o music publishers and theCanadian Recording Industry Associa-

tion on behal o record companies. Inthe case o permanent downloads, how-ever, the mechanical royalty is set by atari requiring online music services togenerally pay songwriters 7.9 per cento the amount paid by a consumer orthe download. On the sale o a digital al-bum priced at $9.99, a sum o $0.79 centswould thereore be divided between therelated songwriters.

ArtistBroadly speaking, a record companypays an artist a percentage of the rev-

enue generated from the exploitationof the artists sound recordings. In 1998Taylor noted that an artists royalty rateis usually subject to many contractualdeductions and reductions, which havethe affect of diminishing payments tothe artist. He noted that an artist royaltyof 12-14 per cent applied to the sale ofa $19.95 CD would likely result in aso-called penny rate of $1.31, ratherthan the $2.39 to $2.79 one might expectbased on the simple application of theroyalty to the base price.

Sensibly, there has been a movementin recent years towards simpler and

more transparent royalty provisions.While certain o the deductions andreductions applied to CD sales do not(or at least should not) apply to digitalalbum sales (e.g., packaging deduc-tions), others, such as amounts owingto producers, are subtracted rom theartists share. Assuming an average art-ist wholesale royalty rate o 17.5 per cent(including 3.5 per cent to be allocated tothe producer o the recordings), a $9.99digital album sale might be expectedto yield a payment to the artist in theamount o $0.98, calculated as ollows:

$7.00 (net wholesale price received bythe record company) x 14 per cent (artistroyalty less producer royalty) = $0.98.

ProducerThe producer o the $9.99 digital al-bum in this example is provided witha royalty o 3.5 per cent, which has theeect o reducing the artists 17.5 percent royalty to 14 per cent. A producersroyalty is customarily calculated andpaid in the same manner as the artistsroyalty. In this illustration, the sale oa $9.99 digital album would thereoreresult in a payment to the producer inthe amount o $0.24.

Record CompanyThe record company will receive the

$3.77 remaining ater the payments tothe retailer, distributor, songwriters, art-ist, and producer. The record companywill claim that its relatively large pieceo the pie is reasonable based on thespeculative nature o its business activ-ity and the increased risk the companybears given the state o the industry. Italso covers general operating expenses(which does not include as many sushilunches these days).

ConclusionIn summary, the $9.99 from the digitalalbum sale breaks down as follows:

Retailer $2.99 (30%)Distributor $1.22 (12.2%)Songwriters $0.79 (7.9%)Artist $0.98 (9.8%)Producer $0.24 (2.4%)Record Label $3.77 (37.7%)Total: $9.99 (100%)

Formerly a recording artist for Arista Records, PatLeyland is a lawyer at the entertainment and media law

rm Taylor Mitsopulos Klein Oballa, which representsartists such as Nelly Furtado, Alexisonre, and Saint

Alvia, among many others. For more information,please see www.tmkolawyers.com.

The views and opinions expressed in this article are not meantto substitute for legal advice, which should be sought in each

particular instance.

Where The Money Goesby Pat Leyland

A Breakdown Of The $9.99 Digital Album
http://www.tmkolawyers.com/http://www.tmkolawyers.com/


18/20

BUSINESS

Introduction

Every week or so, I am approached by anindividual or an organization inquiringwhether or not a client o mine wouldbe interested in perorming or appear-ing at a charitable event. Most o theseevents assist great causes, and thepeople behind them are oten willingto dedicate signifcant time and moneyto help others. This drive and dedica-tion to help others in need, along witha lack o sophisticated knowledge onrecording artists careers, oten cloudsthe expectation in this area.

The reality is that popular recordingartists are approached daily to make

themselves available for charity events,and while many artists dedicate them-selves to helping those in need, theyhave limits on the number of charitableevents they can be available for espe-cially where the organizers are expectingthe artist to perform live.

So, what guides the decision on thecharities they do choose to be availableor?

TimeAs discussed above, recording artistsget approached to make themselves

available or a countless number oevents throughout the year. The lie orecording artists can be incredibly tax-ing on an artist and their loved ones.They are oten spending months awayrom their amilies, and time spent athome is a treasured commodity. Charityevents oten involve rehearsal, traveltime, and general preparation. In myexperience, artists are incredibly giv-ing with their time, but there is onlyso much time to go around. Considerhow you can make the time commit-ment minimal.

Busy artists are often booked 6-24

months in advance, so plan far enough inadvance to plan around their schedule.

MoneyAn artist can show up to play a gol tour-nament a lot easier than they can showup to play a show. Artists normally haveto pay or rehearsals, transportation, ac-commodation, and crew costs relatingto perormances. Its not as simple asshowing up with the band and playinga set or ticket buyers. That being said,some artists can show up and play aew songs acoustically or on piano and

save on the costs relating to a charityevent. Consider whether a stripped-down musical perormance can serve

the needs o your charity as much asa ully-instrumented show. Your event

may be more attractive i there is a eeor the perormers at least to cover costs.I the ee is signifcant, some artistsmight consider contributing it back tothe charity and thereby receive a chari-table receipt.

Dedicated CharitiesMany artists I work with select theircauses with which to ailiate them-selves. Some o them may have a amilymember aected by a particular ailment(i.e. Multiple Sclerosis) or want to dedi-cate themselves to childrens issues (i.e.

SickKids), while others may be passion-ate about international issues (i.e. WarChild) or environmental issues (i.e.Greenpeace). More and more artists Iwork with are fnding dedicated causesand ocusing their eorts toward areasthey eel passionately about. It doesntmean that they wont be interested inproviding their time or your event butthey are more likely to volunteer i theevent benefts a charity they are knownor. Find out which artists already eelpassionately about your cause andapproach those artists frst.

ProessionalismOnce an artist has reached a certainlevel o prestige, he or she has to con-sider the proessionalism o the eventin question. I you have never put onan event beore, most high-level actswill not consent to appear. There are toomany items that can go wrong or a frstevent producer such as proper promo-tion, venue readiness, insurance, andlive presentation (i.e. sound & lights).Get some experience under your belt orretain an experienced production com-pany to help with this element i you are

trying to entice big-name acts.

Career BeneftsThere are a number o charity eventson the calendar that involve signifcantprestige and artists will oten elect toplay benefts or charities that can ur-ther their careers. The Princes Trust,or example, eatures the worlds eliteartists perorming in ront o the RoyalFamily or the beneft o charity. Otherevents such as Music Cares, Band Aid,and Farm Aid litter the charity calen-dar and compete or space on the artistschedule. As a charity organizer, youare up against these events, and it istough to make a case that your event

is good PR when there are so manyo these events that provide antasticprofle and a real beneft to a successulartists career.

ConclusionThe reality is that your request willnot make it to the artist i you haventcrossed a bunch o the hurdles listedabove. The typical charity request otenends up on the managers desk or thebooking agents desk, and both o themare paid on a commission basis; so, inan indirect way you are asking them towork or ree as well.

I your request takes into account allo the above, you will have a better shotat landing that big-name act. The realityis, although amous recording artists

give o their time generously, most big-name acts are booked up ar in advance,and the career obligations and numer-ous charity requests compete or dateson the calendar, and its oten impos-sible or an artist to do it all.

The views and opinions expressed in this article arenot meant to substitute for legal advice, which should

be sought in each particular instance.

Chris Taylor is a music lawyer with the law rm of

Taylor Mitsopulos Burshtein and works with NellyFurtado, Billy Talent, and Sam Roberts among others.www.tmkolawyers.com.

Will You Play My Charity Event?by Chris Taylor, B.A., LL.B.
http://www.tmkolawyers.com/http://www.tmkolawyers.com/


19/20

Heather Ostertag, President and CEO, and Krista Culp, CommunicationsManager, are from the Foundation to Assist Canadian Talent on

Recordings (FACTOR). Visitwww.factor.ca for more information.BUSINESS

by Heather Ostertag

with Krista Culp

FACTORsonline submission system has beencreated to support artists in beingable to expedite their submissions to the FACTOR programs.It will calculate the budgets or you, and will allow you to goin and out as a program. You can start an application, go awayrom it, and come back at your leisure. I youre conused onsomething, you can pick up the phone and call the sta, and

they can go online and look at it with you.There are reminders there about what needs to be included

with your submission so youre not wasting time. You attacha JPG o your photo, you attach your MP3, and you uploadthese things as opposed to having to burn them and sendthem in, eliminating any challenges with burnt CDs withwhich weve had a lot o trouble. The MP3 allows us to haveyour submitted recording available instantly.

It supports FACTOR going green, in the sense that weretrying to become paperless so that everything can be viewedrom monitors and heard through computers with great soundsystems.

Its a lot harder or the FACTOR sta i we have to sort sub-missions manually because, as people need to understand,

the way the inormation is gathered rom an applicant fndsit held in one database and then moved over into our internaldatabase. So all o the inormation that youve manually writ-

ten, and then printed out, and then sent in needs to bere-input so its whole and complete in our database.

So really, prior to us going virtual or being ableto apply or unding, it would take our sta about 20minutes to process an application, and or a juriedsound recording program it can take up to our hoursor one application. And the thing that people need toreally, really understand is the act that we cant startto actually process orms and get decisions on und-ing until all the applications rom that deadline havebeen processed. So people are holding each other upand were spending more and more time having tochase people or materials.

Another point: people wait until deadline day toapply. The system has crashed. We had 52,000 hitssimultaneously. Dont do that. Weve staggered our

deadlines to try and deal with that. The system crash-es, and people say, The system doesnt work. No,

it works, but i all o you decide youre leaving it to the lastminute, what do you expect?

Our new policy is going to be i the system goes downbecause o a clogged artery, thats not our problem. Now,weve taken steps to try and prevent that rom happening, buti there was one tip that I would recommend to everybody,its not to wait until deadline day to submit your application.And dont just start putting it together at 9 a.m. that morning,because chances are its not going to be very good and thatsgoing to translate through to the jury.

Go online; our programs are available with the new criteria.Lets get started. Work on it as youve got the pieces becausewhen you leave it to the last minute, its not going to be your

best. This will also ensure all o the components are there.Along with encouraging the industry to take up and use

our online system, were also going to start rejecting applica-tions out o hand. I they are incomplete, in the past FACTORshad a history o trying to be supportive o the industry romthe standpoint that, Oh, well theyre busy and they orgot toinclude this and they orgot to include that but itll get bet-ter, and our experience and our analysis o history shows itdoesnt get better it gets worse. People then begin to expecthandouts, and we simply dont have the time or resourcesto do this.

The online system lets you see your attachments and whatyouve got going with your application. It can help to ensurethat its all there. We are required because o our agreement

with Canadian Heritage to still allow people to submit hardcopy applications, but people need to understand the onlinesystem is in place to support you the artists.
http://www.factor.ca/http://www.factor.ca/


20/20

Recommended Reading

All You Need to KNow About the Music busiNess, 6th editioN bY doNAld PAssMANUniversally regarded as the defnitive and indispensable guide to the music industry it is now in its sixth edition.http://musicbooksplus.com/ball-need-know-about-music-business-edition-p-8541.html

i doNt Need A RecoRd deAl bY dAYlie deANNA schwARtzI Dont Need a Record Deal!is a completely comprehensive step-by-step guide to the new world o independent recording.http://musicbooksplus.com/dont-need-record-dealb-p-6226.html

Music diRectoRY cANAdA, NiNth editioN bY NoRRis-whitNeY coMMuNicAtioNsThe Ninth Edition o this ESSENTIAL GUIDE to the Canadian Music Industry has been completely updated and revised.Featuring over 60 categories, each listing includes: Company, Contact, Address, Phone, FAX, E-mail, Web Address andDescription.http://musicbooksplus.com/bmusic-directory-canada-ninth-editionb-p-8066.html

Music, MoNeY & success - 6th editioN bY JeffReY bRAbec ANd todd bRAbecMusic, Money & Successcovers every aspect o the music business and gives you real acts and hard numbers so thatcomposers and perormers can know what to expect in terms o contracts and incomes.http://musicbooksplus.com/bmusic-money-success-editionb-p-10259.html

MusiciANs ANd the lAw iN cANAdA, 3Rd editioN bY PAul sANdeRsoNA unique and practical text, Musicians and the Law in Canada, 3rd Edition, provides a ully current overview o the law, contractsand the legal issues conronting m

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TipsTips on the Music Business on the Music Business