The music industry is as labyrinthian and mysterious as any oriental court, but one thing is very certain: music makes money. Last year, the Recording Industry Association of America logged the release of 746.3 million albums with an estimated profit of $15 billion. This doesn’t even begin to cover the oceans of green raked in from performances, club tours, merchandising, television, videos, and on and on.
Of course, where money floats, sharks swim. Each artist, whether just starting or established, faces a gauntlet of agents, managers, record company execs, producers, promoters, club owners, hall rental agents, and technical teams. Perhaps surprisingly, one of the few in this melodic mix offering the artist a minimal conflict of interest is a good entertainment attorney.
To help everyone involved in the trade understand the legal processes of live and recorded entertainment, the New Jersey Institute of Continuing Legal Education is hosting “The Business of Music” on Thursday, June 26, at 9 a.m. at the New Jersey Law Center in New Brunswick. Cost: $189. Visit www.njicle.com.
Steven Schechter, veteran practitioner of entertainment law in Fairmont, serves as moderator. Other speakers include John Kettle, entertainment law professor at Rutgers University Law School; attorney Thomas Jannarone of Brick Township-based Kalas and Jannarone, which represents startup bands, night club owners, and music managers; and attorney Paul Ungar, who provides counsel for recording artists and small record companies. This seminar is designed not only for attorneys, but managers, agents, recording company executives, club owners, and any music professional.
Schechter insists that “the music and entertainment business operates just like any other — only it’s a lot more fun.” A native of Paramus, Schechter grew into the trade at an early age. While attending Syracuse University he directed and helped produce television. In l988 he graduated with a double major in political science and television and radio communications. Schechter continued to work in television’s production end and found a curious fact. “Every director, producer, and executive with whom I worked had at least some legal background,” says Schechter.
Thus inspired, Schechter earned his law degree from Yeshiva University and was retained as in-house counsel for New York’s New Line Cinema. Later, when Paramount acquired Prentice Hall Publishing, he worked as counsel in the book publisher’s Englewood Cliffs offices. After a short term with a boutique entertainment law firm in Manhattan, Schechter hung out his own shingle and concentrates on visual arts, vocal artists, and record companies.
“There really is no boiler plate in this part of law” says Schechter. “Every deal is totally fresh and individual.” Part of this is due to the commodity. Trying to define the artistry of a band or single vocalist in terms of the commercial draw it will mean to a publisher, distributor, or presenter is a rather ethereal quandary that is an art in itself.
New tech = new deals. They may still call them albums but how songs are collected and distributed is constantly changing. New songs coming onto the scene must now compete with older collections listed as “catalog” (typically albums released 12- 36 months previously) and “deep catalog” (collections older than 36 months.) As the era of digital recording has claimed a 65 percent marketshare increase over last year, the whole industry shifts to new demands.
Since 2006 classical albums have seen an amazing 23 percent increase in sales. Analysts are crediting this rise to the increase in iPods and MP3 players that allow greater access to this once poorly served market.
“Many new groups are not even going to albums. Instead they are going straight to the Internet.” says Schechter. Using the exploding popularity of cell phone ringtones and online downloads, an aggressive company can negotiate one dollar for itself per sale, and 6 to 10 cents for the songwriter. If the company keeps collecting its due royalties, a nice living can be made.
Career launch. “Vocal artists tend to be young and remarkably inexperienced in business dealings,” says Schechter. “I have seen new bands sign deals with absolutely no promise of distribution from the record company. Why would you produce a record and have no one distribute it?”
It might seem at first glance that the musicians’ agent should be the wise and trusted right arm. After all, when the musician makes money, the agent makes money. But Schechter points out that deals are complex and often fraught with conflicts of interest.
Many an agent has lured a group into contracts that give him large upfront signing money and lock the musicians into the record company for nine years. It’s great for the agent’s bank book, but it can be a career killer for the group.
Even totally ethical agents will call in an entertainment attorney during negotiations as a contract watchdog. While the attorney is going over the fine print, the agent can be pitching for the maximum advance. “A startup band, with no track record may be able to negotiate only $1,000 against future sales,” says Schechter. “But if the songwriter has a name and a history of bringing in several million with each album, advances of $2 million to $5 million are not uncommon.”
These numbers may seem boggling, and the star life glamorous, but Schechter always warns folks not to be fooled. Virtually no musician simply bursts on the scene. It takes years of starving and touring in a derelict van with a mattress in the back before gaining recognition. And even after fame is gleaned, most “stars” still have to live a life on the road because recording contracts simply do not net enough money.
Sculpting the deal. When a startup band gets one or two offers — or at least rumored interest — from a record company, Schechter and the agent can roll up their sleeves. They can negotiate every facet of the musicians’ career.
At the outset, they negotiate for the highest possible advance. Along with it, Schechter and the record company hammer out a budget for the recording — longer studio hours, additional background singers, mixers — everything that will deliver the best product. The questions of rerecording ownership are worked out: what is the advertising budget to be spent on the album? What are the ad strategies? Release dates are set. Ideally the artist will see his work distributed within six months. How wide is the distribution?
Once recording specifics are nailed down, the focus shifts to the artist. How long and how exclusive is the band’s contract with this company? Does this mean each member separately, in all genres? What are his royalties for each album in each medium?
Once the band gets to be known, Schechter can feed other considerations into the contract. The record company may agree to take a share of the touring expenses. They may contribute or shoulder all of the advance publicity. Merchandising rights and profits becomes an added arena, as do the rights to music videos and foreign distributions.
The list is long and tedious, and the negotiations involve esoteric concepts such as “renown” and “future draw.” Many musicians, passionate only about their art, find all the agent and attorney wranglings an off-key annoyance.
But money is seldom a complex issue. Just ask any of the thousands of starving street performers whose incomes, like musicians of old, comes solely from a simple passed hat. Probably all would gladly enlist a Schechter to make their lives a little more complex and a lot more secure.