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Trickle Down

Reports in the press of contract disputes of years past - one favorite of this music, film and entertainment lawyer that's entitled "Dixie Chicks Sue Sony" - discussed another installment inside the seemingly-perennial process of music recording artists suing the record labels that they previously signed contracts. According to "Dixie Chicks Sue Sony", the Dixie Chicks claimed them to be due a minimum of US$4.2million in royalties under their contract, off their music label. There's a commonality between this type of music dispute, and a "net profits" or "points" dispute poor film or television.

This music, film, and entertainment lawyer article, however, may offer no opinion about the merits from the Dixie Chicks litigation or contract, or opine with regard to the oft-wondered question in litigations of "which side is within the right?". The statistical odds in any music, film, and other contract litigation about royalties, net profits, or "points", are that this case will settle pursuant with a stipulation of confidentiality. Regardless of whether we discover the important points in the Dixie Chicks contract or the case's resolution, we'll therefore never fully realize for certain regarding how other similar music royalty or another contract disputes may have been reconciled. But notwithstanding the sizable numbers of money at stake, the Dixie Chicks-Sony case might be controlled by certain principles present with all music and film industry contract disputes of its kind, as any entertainment lawyer like myself will explain.

It genuinely boils down to the timing of when a music artist, film talent, or another artist for instance, is or needs to be paid within the contract. Though this may sound pedestrian, the equation is not hard. The background music and entertainment lawyer opines that, "Agreeing inside a contract to get paid the majority of one's compensation later as opposed to sooner, raises the odds any particular one will probably be unhappy with the dollar amount of the royalty, "back end", "net profits", or "points" payment(s) at this later date". Would the Dixie Chicks-Sony music contract litigation haven't ever occurred, if your band's paid-up-front recording advances ended up larger? No one - not music and entertainment lawyer, and perhaps not the parties to the lawsuit themselves - will ever fully realize that answer for sure, either.

One cannot argue with the equation. As argued and hammered-out between music or other entertainment lawyer counsel inside the contract negotiation, a more substantial up-front advance on the artist or group a minimum of cuts down on the magnitude of later artist dissatisfaction with the "net profits", "points", or royalty stream of payments such as the following. Arguably the Dixie Chicks would be within a better economic position, if suing underneath the agreement for "only" US$1.1 million as an alternative to US$4.2million. The type of equation strengthens across film, television, publishing, and all other entertainment, media, and related realms. You might be more satisfied the quicker you're paid.

Holding aside the Dixie Chicks contract dispute example for just a moment, the sensible reality for other artists inside the record companies is because often sign record contracts - or now, 360 deals - without the help of a music and entertainment lawyer, before they become commercially successful. Every successful recording artist in the music industry has historically a "breakthrough" album. What looks like a tremendous advance in a contract to a starving music artist negative credit an early on record deal, may later seem like a per diem to that particular same artist several years later after that person "made it". As wll as, the record label's frugality is understandable. Few if any economically-rational record labels are able to plunk down a tremendous contractual advance to have an artist who has yet to "make it" commercially, even when they have already retained the services of good music and entertainment lawyers. The music and entertainment lawyer can look after the artist. But under virtually all circumstances (in addition to one great band and keyboard player which i know in Pittsburgh), the songs and entertainment lawyer isn't one also making the music.

Again, these artist-payment contract disputes, inside the music business, film industry, and otherwise, really are a objective of some time and timing. On this light, the Dixie Chicks are essentially fighting the cost-effective identities that elements inside music business unilaterally used on them back many years ago, before these folks were hugely famous and successful. I wouldn't know at what point within the timeline the Dixie Chicks may have retained high-powered music and entertainment lawyer counsel. In case your band was comparably famous and successful previously when they signed their deal, they might have likely commanded considerably more by means of sizable contractual advances, and would presumably thereby have already been better secured from the risk of (alleged) back-end royalty payment deprivation by the record label.

It can be ironic that in the past a few months ahead of the suit, the Dixie Chicks were the main topics a TV news magazine show, in which at the very least two relevant things were said: (1) one band member suggested that the ladies from the band might soon desire to leave the music activity and entertainment business; and (2) one band member boasted on-camera about having procured the "best [recording contract] offer Nashville", or words compared to that effect. In terms of the viewer in the Tv series often see, no music or entertainment lawyer was physically present on-camera combined with the ladies when these statements were made.

The thrust in the news magazine program was that in spite of "the lowest price in Nashville", (and presumably able music and entertainment lawyer counsel), an internationally-famous musical recording act was required to endure a contractual situation wherein their label was charged with holding a lot of the money. Based on press reports, the Dixie Chicks albums "Ready to Run" and "Wide Open Spaces" sold greater than 19 million units, resulting in a lot more than US$175 million in revenue. That approaches 25 % of the billion dollars, and would normally apparently justify the retention of music and entertainment lawyer counsel, at least for future deals. And yet the band's lead singer dolefully attested on camera which she didn't "even" have US$1 million in the bank herself before the job interview. She jokingly added that her label have to have remodeled its Nashville offices based upon the achievements her band's music.

"Where is all with this money going?", asks the artist-side music and entertainment lawyer, particularly. Well, we know or suspect where it's going. It is true that launching and promoting albums, and developing artists, requires major expenditures from the record label, likely within the huge amounts of money. The label must spend money to make money. The label needs to buy its own music and entertainment lawyers to draft and negotiate the contracts, as an example. The film studio or television production company will deploy similar rationales when defending "net profit", "points", or other back-end payment arrangements. But also in the case of your successful recording and touring act, no less than some of the incremental money above expenditures is certainly going towards someone's profit. It can be reasonable to assume that this Dixie Chicks sued simply because they didn't think these folks were receiving their share of same within the signed contract, then convinced a number of music and entertainment lawyer litigators to same effect.

What logical deductions are we able to make out of this research study, that connect with other individual musicians and bands - and maybe with media and artistic representations like film, television, and publishing poor royalties, "net profits", and "points"? First, we should instead back up, whilst in mind firstly, music along with other entertainment lawyers learn in reality. There's 2 principal techniques for an artist to have covered services with a contract: (1) "fixed compensation", and (2) "contingent compensation". Royalties are "contingent compensation", along with the traditional these days fast-evaporating record contract model usually contingent upon either the manufacture or the sale of (non-returned) units. Strictly defined, "contingent" includes it is possible they'll never receive money. In film, television, and other realms, "points", "back-end", and "net profits" are terms an indication of forms of contingent compensation within a contract. Certainly one of my law professors during the 1980's was obviously a well-known practicing entertainment lawyer using a music, film, and tv practice, and a lot individuals classroom workshops were consists of haggling over proposed net profit definitions in draft contracts. The song remains to be the same today, in large part.

Music royalty calculations and film and television "net profit" or back-end "points" definitions often take many pages of contract text to define - being a music, film, or entertainment lawyer will advise you. In defense of the companies, this verbosity isn't necessarily just a product from the labels and studios along with their entertainment lawyers so conspiring. Rather, the wages streams inside the music and film and TV organizations are truly hydra-headed and fairly sophisticated, and require some care and patience to define. As an entertainment lawyer I recognize that is all scant consolation to some screenwriter dealing with a studio's or network's 50-page written contract meaning of "net profits" - or, inside the music context, a recording artist immersed in arcane label record contract text purporting to delineate ways of royalty computation. But the complexity of calculating contingent compensation is a reality of the marketplace to which the film net income or music royalty definition relates.

However, make no mistake about it. Accepting any type of contingent compensation, be it net profits, "points", music royalties or else, is tantamount to accepting another woman's "trickle-down", because artist-side music and entertainment lawyer will argue. Which is, the artist deputizes the corporation to get the artist's money, hold it (presumably) in trust, and after that remit it in installments towards the artist after a while with a deferred basis. Do a lot of people even do that using their own family? Because music and entertainment lawyer will attest from observing others, and man's instinct and greed being powerful motivators that they are - the organization will frequently thereupon pay for the musical or other artist if this seems like it, and the way much it seems like it, sometimes it doesn't matter what the contract says. And company "deductions" in the gross payment stream to get to "net" or "royalties", may become extremely creative as you would expect. Music and other entertainment industry audit contract disputes often center around the acceptability and fairness of which "deductions" from "net profits" or "points", as fought and argued between entertainment lawyers on either sides.

You will find contractual methods for musical as well as other artists to even the proverbial scales of justice regarding royalties, "net profits", "points", or other type of contingent compensation - typically best deployed with the artist's entertainment lawyer. Essentially the most familiar method is the deployment of contractual "accounting" and "audit" clauses or provisions. The background music or other artist can try to contractually need the company to remit detailed written accountings of all revenues collected, and (carefully-circumscribed) deductions taken therefrom, regularly. The clauses might be drafted with the artist's entertainment lawyer. Accordingly, the songs artist also can seek to reserve the contractual right to audit the books and records of the record company to make sure correct remittance of royalties. Inside the professional entertainment industry context, audits similar to this come about on a regular basis, thus ensuring a livelihood for several entertainment industry accountants, entertainment lawyers, yet others. Many experts have reported that wholly two-thirds of all entertainment industry audits lead to findings of underpayments. Usually thereafter, the parties reach a fiscal settlement and move on with their lives. Sometimes, they do not, plus they litigate using music or entertainment lawyers instead. So when indicated above, many litigations themselves settle before you go to trial.

And there is hope. Industry custom, and film, music, and entertainment lawyer practice, does often contemplate that recording and also other artists are often paid on a "fixed" as well as a "contingent" basis. In theory, the contractually-specified recording "advance" represents a set up-front payment to the music artist. However, many - uh - "creative" record label forms transform the development into a contingent payment at the same time, a minimum of to some extent - this really is sometimes referred to as the "recording fund" concept. Film producer compensation might be manipulated by the studio in similar fashion, by payment in a budget in contrast to payment directly to a producer's banking account. For instance, in the event the musical artist gets a US$300,000 "advance" beneath the contract, but must herself or himself direct-pay to the first album's recording expenses out of his / her "own" pocket, then it would behoove the artist to not blow all US$300,000 on a single weekend at Monte Carlo. To put it differently, the majority of that US$300,000 may not in fact certainly be a fixed payment towards the artist, but rather might need to be relevant to things such as studio some time and fees for session musicians. There are numerous artists available who briefly thought these were rich for this reason, prior to the record contract was read and reviewed with their music and entertainment lawyer. Similarly, maybe the film producer must not write a check mark with the Lamborghini yet, either.

What independent and unsigned artists will find without or with a music or entertainment lawyer, in particular those music artists with talent, is there can be a good amount of folks across the road who will be ready to bargain for exclusive recording services, promising no amounts ahead of time, however, many fuzzy and inchoate "points" afterwards - with or without waving a proposed contract while watching artist. This phenomenon is generally exactly what it feels like - Wimpy's "I will gladly purchase from you Tuesday for any hamburger today". Would-be entertainment company impresarios make an effort to play actors and writers similar to this, constantly, too.

Sure, the songs company and it is entertainment lawyer could have a valid point that this artist should be needed to share in some of the down-side risk that the recorded finished product will not sell. But with that analysis, the artist-side entertainment lawyer must also conclude the musical artist should be paid some fixed compensation or "earnest money" up-front, and then some additional contingent compensation later if the project succeed. Otherwise, what assurance will the artist obtain that this company is truly serious, devoted to the music project, and acting in good faith? And arguably, the up-front fixed payment to the artist needs to be no less than sufficient to enable the artist to retain music and entertainment lawyer counsel to draft and negotiate an agreement clearly specifying how a back-end contingent compensation must be paid, and what the artist's accounting and audit rights should be. The same rationale applies for back-end "net profits" or "points" deals within the film and tv realms. The up-front payment at minimum needs to be the glue that cements the agreement.

It can be astounding, however, the amount of artists, typically without music or entertainment lawyer counsel, will consent to be paid for work and their music and other work-product by "points" or "net profits" or another "back-end" alone, perhaps commemorated with writing for the back of the cocktail napkin, as well as (gasp) on the handshake alone. What makes these artists selling themselves so short? Perhaps because they are dying for his or her first big break, and perhaps they do not have sufficient confidence inside their abilities so that they think that another valuable opportunity will come along. So they really don't enlist the help of a music or entertainment lawyer, and quite often sign bad contracts or otherwise consent to bad deals.

Nevertheless the point is, there needs to be some minimum standard of decency, perhaps along the lines of a well-known California case on point, Foxx v. Williams, as well as a California statute on point, Civil Code Section 3423.

Some deals are only not worth an artist's making. Some contracts aren't worth signing, and possibly shouldn't even be permitted to be signed. Obviously any good Read More in need of a beachfront apartment should not transfer to a condemned premises the location where the floor is within danger of collapsing. Along with that property situation, the area government - over the building code or equivalent - may serve as "watchdog", and prevents those tenants from striking those bad lease deals set up tenant otherwise would like to accomplish that. However, there is certainly typically no governmental or other "watchdog" that prevents a music artist from stepping into an undesirable recording contract, only perhaps case law and statutes that could be invoked as long as now you ask, ever later litigated - and additionally perhaps, only an artist-side music and entertainment lawyer, if ever enlisted for your situation. Rather, like a practical matter, within the recording agreement context, the "watchdog" must be prospective and internalized. Also must the watchdog be internalized in each and every artist, from the film, television, as well as other industries and art forms. The songs or any other artist can only look to his or her wise practice, and hopefully occasionally the artist's music or entertainment lawyer's experience and judgment - which assessment should be made before signature of the contract.