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  • Ancillary Rights

    7.0 Ancillary Rights

    7.1 Promotional Services

    The record company will not only be exclusively entitled to the artist’s recording services but, to protect the value of those services, will also insist upon an obligation on the part of the artist to help promote new recordings. The company will arrange press interviews and promotional appearances and will seek some comfort in the contract that the artist will cooperate.

    7.2 Performance Rights

    It is not enough for the company to own the recordings. In strict legal terms, the company also requires suitable performer consents in order to be able to exploit those recordings and the contract will include provisions dealing with this.

    7.3 The 360o Concept

    It was traditionally the case that the record company’s rights would be restricted to the artist’s recordings and (in order to facilitate the exploitation of those recordings) the ancillary rights described above. More recently, the record companies have shown a predatory interest in other areas of the artist’s activity. This trend has been driven by the concern that in “breaking” a new artist the record company usually bears the brunt of the financial investment required. This works well for the record company if there is an acceptable level of return from record sales. However, with the general downturn in sales there is a fear that the investment is no longer justified in terms of the anticipated return so that if the same level of investment is to be made then some way has to be found of increasing the return. Some artists take the view that they cannot expect to “recoup” and thus to make money, or much money, from record sales any longer but that they need the exposure and promotion of a successful record in order to drive sales of concert tickets and merchandise. It is not surprising, therefore, that record companies have reacted by suggesting that if the company is to invest in the record then it wants a “cut” of the income from the artist’s related activities. In its “pure” form the 360o concept involves the record company having an entitlement to all of the artist’s services in the music business so that this would extend to live performance, songwriting, merchandising, sponsorship and so on. The weakness of the record company’s position is that whilst it is a record company it is not a promoter, music publisher, or merchandiser. It is inappropriate for the record company to own and control services in relation to which it has no experience or expertise. In practice, therefore, in those (increasingly common) instances of a record company straying beyond its traditional “patch” the record company does not own or control any ancillary services and/or rights but may have an entitlement to a share of the artist’s other income. There have been suggestions that, in order to survive, record companies need to broaden their activities but there seems little prospect of them being transformed into, for example, music publishers or merchandisers. Rather, any requirement for a share of ancillary income tends to be justified simply in investment terms i.e. the company will invest in a recording project only if it is given an additional incentive to do so. The majors rarely seek an interest in any music publishing income (after all, each of them has a music publishing affiliate and does not seek to compete with it) so that in practice the much talked about 360o concept seems to have come down merely to record companies seeking a share of touring and merchandising income.

    7.4 Touring

    The record companies have traditionally provided tour support. The company generally wants the artist to tour because this is perhaps the best form of promotion. During the early stages the artist will only be able to tour at an appropriate level (at worthwhile venues) if prepared to do so at a loss and to encourage the process the company will usually make good any shortfall. As part of the 360o debate the company may now agree to invest in a record project and provide an agreed level of tour support only if in return the company receives a share of any touring profits. In the past, tour support has generally been treated as a further advance and thus 100% recoupable from royalties. Arguably, this is unfair because tour support is in effect a marketing expense and if the full amount of any tour support is eventually to be recovered from the artist then it follows that the artist bears the full cost of a marketing exercise designed to sell records for the benefit of the record company. Nevertheless, in practice, tour support is almost invariably 100% recoupable. The contemporary twist on this is that record companies now will not only treat any tour support as fully recoupable but will also require a share of touring profits. Of course, if tour support is required then it follows that there are no profits (at least in the short term). Hence, the suggestion may be that in return for an agreed level of tour support during the initial stages of the contract the record company should receive a share of profits over a longer term period. This arrangement may apply for the full duration of the recording contract but a compromise position will be that the arrangement applies only for a limited period (perhaps two years). Alternatively, the arrangement may apply only until such time as the record company has been paid a given amount of profit (i.e. a “cap” of some kind applies). The record company may ask for a share of gross touring income but the artist should always resist this. It is more palatable to pay a modest share of net profit calculated after taking into account all expenses. A danger in this approach is that the record company is tempted to seek approvals over the touring budget which the artist will regard as inappropriate. If the record company insists upon taking a share of touring profit then the artist should try to ensure that any tour support is excluded for the purposes of calculating the profit given that the support would in any event be 100% recoupable from royalties.

    7.5 Merchandising Income

    If the record company insists upon a share of touring income then the likelihood is that the company will take a similar approach in relation to merchandising income. It may be possible to restrict the record company’s involvement only to a share of tour merchandising income (but so that the record company does not participate in any profits from general retail merchandising). In this case, the record company’s participation in touring income and merchandising income may be dealt with as part of the same calculation (with merchandising income being included for the purposes of calculating tour profits). In certain cases, however, the major may try to secure merchandising rights for itself rather than merely rely upon a right to receive a share of the artist’s income from the grant of merchandising right to third parties. The major may have an affiliated merchandising company and the artist may be required to enter into a separate agreement with that company. Alternatively, the major may insist upon a “matching right” so that before the artist may enter into merchandising arrangements of any kind with any third party, the principal terms of the proposed deal must first be notified to the record company and the record company given an opportunity to “match” those terms by requiring the artist to enter into a separate agreement with the major or its merchandising affiliate upon those same terms. This is far from ideal from the artist’s perspective because it is one thing for the record company to match the terms but it does not follow that the record company or its merchandising affiliate will prove as good a merchandiser as the preferred third party.

    7.6 Artist Websites

    The record company will usually insist upon the right to control the artist’s official website. Artists rarely resist this because the artist will not usually have the resources available to build and maintain what is required. Moreover, much of the essential content of any such website i.e. the audio and audiovisual content, will generally be owned by the record company. Hence, if the artist prefers to have control over the official website there will inevitably be issues with the record company in terms of exactly what material the label is prepared to make available and on what terms. The artist is usually satisfied with provisions in the recording agreement which afford the artist a degree of control (or at least consultation over) the key factors concerning the website such as its general “look and feel”.

    Increasingly, in the digital age, information and access to it is vital and the artist’s advisers should give some thought to how any database is developed, maintained and used. At the end of the term of the recording agreement the artist should be able to acquire the URL of the site and (depending upon the application of the Data Protection Acts) the artist should then have the right to access the database.

    Artist websites tend now to attract less attention than the artist’s Facebook page. The record labels may sometimes assist the artist in the development and management of the artist’s Facebook page but the artist will retain control of this. There may be reciprocal links between the Facebook page and the artist website.

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