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Seminar 9

Performance Rights Organizations
and Other Middlemen

Index List of All Seminars -- Free Lite Version
All Seminars Must Be Read In Order!



SEMINAR 9: PERFORMANCE RIGHTS ORGANIZATIONS


Greetings!

For the last couple of sessions we have been zeroing in on Part VI of our 7 part journey through the music industry. With the discussions on publicity, record promotion and the concert tour, the Part VI of our journey displayed the earmarks of "telling" and "selling."

In this session I need to now go back to Part IV...the "crossroads" and discuss some of the "players" I left out (this was done on purpose because a wider scope understanding of the primary players needed to be understood before focusing in on other "secondary" players).

So, now we will take a closer look at some of those lessor known (but highly important) players that become part of our "bigger picture" scenario. These secondary players get hooked-up with the songwriter and the songwriter's representatives, and work along parallel avenues, or in tandem, to further the songwriter's dream and the achievement of his/their goals. These secondary players, like the primary players, are a part of the song's "exploitation team" as it were. They are additional middlemen and middlemen for middlemen...


MUSIC BUSINESS MIDDLEMEN

To make a long story short, there are a ton of middlemen in this business we call music. The various roles these professionals play has an extremely wide scope. It would take a book to discuss them all, so here, we will limit the focus to just the more essential players.

Let's start out by defining this animal. A middleman is an agent, jobber, wholesaler, or other person or company who acts as an intermediary or representative between a buyer and seller, or between two contracting parties.

For example, there are middlemen that will shop the songwriter's song to a music publisher. There are middlemen that will shop a performing artists demo to a label. And there are even middlemen that will have the information as to who shops what and where!

There are middlemen that will negotiate your contracts. There are middlemen that will hook you up with those who negotiate contracts. Some middlemen are involved in carrying out contracts that are in place, or collecting the various moneys that are generated by the carrying out of the various contracts. Other middlemen count the moneys and income produced. Other middlemen check to make sure they are counting correctly. Some middlemen are just bureaucratic parasites that are there to carry out what amounts to a political agenda. And others, just outright steal your money.

Then, the tax man comes and takes what is left...if any.

All of this middleman activity is enabled from the beginning via the rights provided the songwriter under copyright law. The law grants the various rights to the songwriter, the rights are assigned to various middlemen, and middlemen that acquire these assigned rights carry out the various exploitations of those rights to produce income. Or, they may get other middlemen to carry out a portion, or all, of the rights they have been assigned!!


PERFORMANCE RIGHTS ORGANIZATIONS

Performance -- SMP Hot Link


One of the major middlemen in this business that has not yet been introduced is the performance rights organization. A performance rights organization (also called a performance rights society) is an agency that is an authorized representative for music publishers and songwriters.


The main functions of a performance rights society are:

1) To clear the music publisher's and songwriter's names before they are accepted as associate members (this is to prevent the misappropriation of royalties which would occur if names were duplicated),

2) To issue performance licenses to music users for public performances which include both live entertainment and commercial broadcasting. Performance licenses are needed for radio stations, network television, MTV, HBO, cable networks, stadiums, arenas, concert halls, nightclubs, hotels, ballrooms, dance studios, exercise studios, restaurants, casinos, malls, skating rinks, in flight entertainment and other commercial users of background music, and for jukeboxes. Licenses may be issued for bulk (blanket), or per program use, and rates may be based on program logs, annual income, seating capacity, specific and unique situations, or other relevant factors pertaining to each individual licensing situation,

3) To negotiate in good faith and attempt to establish reasonable fees (If negotiations are not successful license fees are set by the courts with the burden of proof of reasonableness resting on the performance rights society. Individual court decisions do not affect other previously agreed upon rates.),

4) To log commercial broadcasts to enable the correct calculation of payment for the music performances,

5) To collect fees form the performance licensees,

6) To audit licensees when necessary to assure proper payment of fees,

7) To distribute the proper performance royalty payments, accompanied by a royalty statement, to affiliated music publishers and songwriters,

8) To report to the IRS on Form 1099-MISC the royalties paid out, and

9) To pay the required employment and other taxes to the proper tax agencies.


The three main performance rights societies in the United States are ASCAP, BMI, and SESAC (We will take a look at ASCAP and BMI, the two largest societies, later in this discussion). There are also performance rights societies in foreign countries.

I hope you noticed, that the short overview list above introduced some new strange sounding phrases. Phrases like "performance royalty," "log commercial broadcasts," "performance license," and even the phrase "performance rights" itself.

To better understand performance rights societies, it is important to understand what these phrases refer to and what they mean.


Here is where you will need the SMP Membership Full Text Version of Seminar #9, along with the access it gives to the SMP Hot Links…you will find out how to "Take Care of Business" with detailed step-by-step answers covering:

1) Performance Rights…what they are and how many different kinds there are.
2) Performance Licenses…what the various fees are and what their basis is in the law.
Performance Rights and Licenses -- SMP Hot Link
Foreign Performance Licensing -- SMP Hot Link
SMP -- Digital Performance Right in Sound Recordings Act (DPRSRA).

3) Performance Logging and Royalty…what they are and what you need to know.
4) Performance Rights Societies…who can join (including eligibility requirements) and what services are performed by them.

You get all this and much more with the SMP Membership Full Text Version…

Go To SMP Membership Full Text Version -- Index List of All Seminars
Get Your SMP Membership Password Here!



THE HARRY FOX AGENCY

Another one of the secondary middlemen players is The Harry Fox Agency. The HFA is a mechanical rights society.


Here is where you will again need the SMP Membership Full Text Version of Seminar #9, along with the access it gives to the SMP Hot Links…you will find out how to "Take Care of Business" with detailed step-by-step answers covering:

1) Mechanical Right…what it is used for and what other rights HFA administers.
2) Mechanical License…negotiated or compulsory--which one, what are the costs?
Mechanical Rights and Licensing -- SMP Hot Link
Mechanical Licensing Agreement -- Purchase Online
SMP -- Digital Performance Right in Sound Recordings Act (DPRSRA).
3) Mechanical Royalty…what it is and who gets what percent of the royalty take.
Royalties -- SMP Hot Link
4) Other Important Rights, Licenses and Royalties…what they are and how to get them, and what basis they have in the law.

You get all this and much more with the SMP Membership Full Text Version…

Go To SMP Membership Full Text Version -- Index List of All Seminars
Get Your SMP Membership Password Here!


Now, we need to move on and introduce other middlemen players.


ARTIST AGENTS

Still another important agent middleman player is the artist agent. An agent, in general, is a person or company, usually licensed by the state (call your State Attorney for licensing information), who acts for or represents another (who is called the principal) by implied or express permission. The principal is held legally liable for acts performed by the authorized agent. For example, an artist is financially responsible for purchases made by his road manager agent where the agent is acting to facilitate the artist's concert tour.

The recording artist, for example, may use all types of agents. These "artist agents" may be any person or company who is a bona fide representative of the artist. An agent may be hired as a manager, booking agent, business consultant, contract negotiator, use rights licensing agent, promoter, publicist, tax agent, etc..

Artist Management -- SMP Hot Link
Booking Agents -- SMP Hot Link
Record Promotion -- SMP Hot Link
Publicity and Marketing -- SMP Hot Link
Taxes -- SMP Hot Link


Usually, however, when you say "artist agent" you will be referring to the artist's talent agent. An artist's talent agent will often work for talent agencies that are specialized to accommodate certain markets or to handle certain types of entertainment. Some talent agencies operate locally, others regionally, and some are large international agencies that are vary diversified. These large talent agencies may provide offices in major cities throughout the world. Departments of a large agency may include club booking, concert and college booking, publicity, film and video, television, commercials, and product endorsements and merchandising. And, they may represent a wide range of clients to include recording artists, entertainers, actors, TV personalities, producers, directors, comedians, sports figures, authors, composers, choreographers, screenplay writers, circus acts, and other novelty acts.


ARTIST SIGNING

 Bands Get Signed Here:  FREE GetSigned! Tip Sheet 

Large talent agencies rarely sign unknown acts. When an artist becomes a lucrative "commodity" and is signed, the agent who first signs him is his principal representative and is called the responsible agent (RA). The RA, however, will also rely on other agents in the agency (such as departmental heads) to handle his artist where the agency has internally delegated responsibilities.

When the agency is a large scale enterprise, it will attempt to maintain close interdepartmental coordination in order to promote the artist in a wide range of endeavors. Having this wide scope, for example, can speed up connections between a multi-talented artist's publicist, booking agent, and his perspective film producer or screenplay writer. Since these large agencies represent such a wide variety of entertainment specialties, they are better able to serve a recording artist if he wants to expand his career. Career expansion may include other artistic and income generating endeavors such as acting or doing commercial spots. This "power to package" is one of the major advantages of a large talent agency.


CONTRACTUAL CONTROL

When a large agency signs an artist they will have the artist sign a group of contracts to include: The AF of M Exclusive Agent-Musician Agreement, The AFTRA Standard Exclusive Agency Contract, The AGVA Exclusive Agency Contract, and other contracts that would cover matters not included in these union contracts. There could be 10 or more contracts in all.

By appearance, it would seem that the talent agency is in control since they have the artist sign the contracts. However, this is not the full picture. First of all, the content of the contracts are basically controlled by the artist's unions, since the contracts are theirs. Second, the artist can negotiate, depending on his clout in the industry, for additional safeguards and other specifics that are not specifically controlled by the unions.

The base of control is the point. Since most artists are union affiliated, the talent agencies must go along with the union and use their contracts if they want to represent any union artists. To enable the talent agent to use the union contracts and represent union artists, the unions grant the agents "franchise certificates."

With franchise and contractual control, the union provides that the agent must adhere to its regulations that provide safeguards for the artist. For example, under union contracts the agent's professional activities are limited by denying him the right to engage in activities where he would receive incomes from publishing, record production, and management. The reason this is done is to protect the artist from possible conflicts of interest.

Also, the length of time that the agent can represent the artist is limited to from one to three years. This allows the artist a favorable option to renegotiate. (Note also that termination or suspension of the contract could happen via various other situations that may occur, for example, the artist or agent may become injured, or unforeseeable catastrophes may occur (acts of God), or the enactment of laws that have retroactive dimension may occur, or the agency could go bankrupt, or the contract may be declared illegal or void by the courts, etc..)

The unions also try to protect the artist from a number of agent practices that are unethical and/or unlawful to include: kickbacks to agents from talent buyers, the misuse of the franchise to exploit a novice artist, the "black listing" of an artist, the misappropriation of an artist's funds, the failing to keep separate accounts for the artist's monies, the unauthorized collection of artist's monies, and the wrongful withholding of the artist's commissions.

The agents, on the other hand, in an attempt to minimize the control of the unions, have formed their own association-the Artists' Representatives Association (ARA). This association represents member agents in their negotiations with the unions.

From the talent agent's point of view, the union contracts also protect him in that they bar union artists from dealing with agents that are not "franchised agents," and also provide that franchised agents are entitled to exclusive representation of the signed artist. Under exclusive representation, other agents interested in acquiring the act would have to go through (pay) the exclusive agent.

From the artist's point of view, these exclusive contracts should have performance levels, allowances for partial releases under certain circumstances, and termination provisions spelled out so the artist is not put in a straight jacket. This is because exclusive contracts can lead to problems where the agent becomes unable to handle an artist's expanding needs. For example, a regional agency may not have the ability to book national tours. If the regional agent has exclusive representation rights to an artist, the agent could deny a partial release and thereby severely hamper the career of a rising star.

A talent agent usually works on commission for the life of the contract plus renewals. The franchised agent's commissions and pay schedules are also regulated by the unions' agent/artist contracts. The agent's commission may range from 10 to 20 percent of the artist's gross per contract secured. For example, AFM franchised agents are allowed 10 percent of the gross for three day or longer gigs, 15 percent for two day engagements, and 20 percent for one-nighters. AFTRA and SAG have a 10 percent rate for all engagements and this commission must pay both the agent and manager.

For complete details and contract copies call the respective union organizations. Their current telephone numbers can be acquired by dialing information for Los Angeles, New York City, or Nashville.


Here is where you will again need the SMP Membership Full Text Version of Seminar #9, along with the access it gives to the SMP Hot Links…you will find out how to "Take Care of Business" with detailed step-by-step answers covering:

1) Statutory Control…learn the various jurisdictions that regulate talent agents under the law.
2) Agent/Artist Relationship…what is it and how should it be evaluated?
Agents -- SMP Hot Link
Artist Management -- SMP Hot Link

You get all this and much more with the SMP Membership Full Text Version…

Go To SMP Membership Full Text Version -- Index List of All Seminars
Get Your SMP Membership Password Here!


Now, we need to introduce the final middleman player. Last but not least, we need to discuss…


THE MUSIC ATTORNEY

Legal Notes -- SMP Hot Link


The music attorney is a type of entertainment attorney who specializes in music law. He is a member of the bar and is licensed by the state (or states) to practice law. He is authorized to give professional legal advice on copyright, copyright infringement, contracts, publishing, business law, corporate law, patent and trademark law (service marks), tax law, court law, government regulations, international law, immigration law, libel, privacy rights, publicity and merchandising rights, etc.. A music attorney is also able to perform business or legal transactions specifically pertaining to the field of music, e.g., negotiating use rights licensing contracts, and also to related fields, e.g., television, motion pictures, stage, and even book publishing.

He is a middleman player in that he may represent singers, recording artists, bands, producers, artist management firms, music publishers, production companies, record labels, record manufacturers and distributors, unions, guilds, and other music professional organizations, and broadcasters, etc..

The fee charged by a music attorney can vary. For example, the attorney may be hired on a retainer basis, or, he may be paid a flat fee, hourly rate, salary, percentage of gross earnings (usually in the 5-20% range), or some type of sliding scale based on gross income. The fee may be contingent on the quality of the outcome of a negotiation--the better the result, the higher the percent paid. The fee charged would also be relevant to the number of responsibilities the attorney shoulders. The attorney would also be reimbursed for all related out-of-pocket and other add-on expenses.


See you next session for a look at how to handle your taxes.


*R*


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