Collaborating and Joining Forces
“Under God, all are created equal but record labels use another formula.”
After a year together, The Today Tones have been getting their chops up and are playing more gigs each month. The band is moving towards an original show, replacing their older repertoire of cover tunes with songs written by band members. There is a regional buzz around the band and it’s time to get down to work and work out how Today Tones is going to handle the business of the business.
It is becoming increasingly apparent that the band is going to need a few legal entities to move forward. The band now has a website and wants to sell CDs and other merchandise. The band has had a couple double-booking incidents because all the band members were soliciting gigs and sometimes stepped on each other’s scheduling toes. The band will need one point of contact from here forward. There are monthly band expenses starting to accrue: the website fees, the recurring ad in a local entertainment weekly and other regular expenses. Just as there needs to be one point of contact, there needs to be one place the band earnings are funneled in and out of[em]the band bank account.
The Brand/Band Name
As discussed in a previous chapter, the band name is what brands the product. It would be a good idea to get on the Internet and Google around to see if any other band has already taken the name you want to use. Also, search some of the big CD/DVD sites like Amazon to see if anyone with your name is selling product.
Creating a trademark comes to mind when securing a name or logo, but in the case of a band or artist, there is another place to start. A trademark is defined as a word, phrase, design, symbol or other device that labels the product and sets it apart from other products. A physical product is what we are talking about in this case. A band or artist is more accurately providing a service which makes the service mark more applicable to defending the brand. At a later time, when the “Today Tones Action Figure” actually becomes a physical product is when you would trademark the brand.
You cannot use a service or trademark that has been taken – again, even in some cases if it is your surname. Don’t plan on calling your band, “Dillards,” or “McDonalds.” You would also have a hard time acquiring a trademark for the name of your band, “The Lowes.” Even changing it to, “The Home Despots” might get you in some trouble with a humorless law firm.
In the 1980s, there was a popular band, Zeitgeist, from Austin, Texas that had built a large following and fan base. They were touring nationally and had just secured a deal with a major label. The only problem was that there was another musical group in Ohio that had already been using the name for over a decade. The Austin-based Zeitgeist soon became The Reivers after a cease and desist notice from the Ohio band’s legal counsel. Needless to say this caused a lot of branding problems for the band who after reaching national recognition had to change their name, posters, stationary, business cards and every other form of promotion, branding and identity
Bottom line, what this reflected is that the band didn’t check to see if the name had already been taken. I feel that the Austin band probably could have prevailed as they had been touring nationally and that there was no confusion, at least outside of Ohio, over which band was which. Many courts have found that two non-competing businesses, even of a like nature, that are separated by geographic distance can use the same trade name without damage being caused to either party. Perhaps the litigation necessary to prevail would have put things on hold for too long. If I was a record label executive that just signed a new act and the first order of business was to defend an infringement lawsuit, I would be less than enamored with the newly signed band and the delays it could mean.
Once the band has done its due diligence on a band name search and decided on a name, let’s look at the role of each member of the band in terms of how we put a partnership together that will compensate everyone as fairly as possible. We will look at business and legal entities from the simplest to the more complex.
Every member of the band brings something to the table. Each member of the band values their own talents and contribution as much as any other member.
The Today Tones have four members who all play instruments, but Jim the lead singer/front man also writes all of the band’s original material. To date, the band income and expenses have been shared equally and that is the plan for the immediate future. It is necessary for the band to become a legal entity. In this case, we will use a simple General Partnership to get the ball rolling.
A General Partnership, second only to a Sole Proprietorship, is the simplest and least expensive method to create a business entity. The terms can be plain and simple, and easily understood by all the band members. Here is an outline of the salient points that could be covered in this simple agreement. One of the band members should be selected to be the point of contact. All communications should flow through one person. The decisions can be made by all, but if one person acts as the traffic cop, much less will fall between the cracks.
There are pitfalls to a General Partnership you should be aware of. All the partners in the partnership are equally and severally responsible for band liabilities. This means that members of the partnership could be sued as individuals. There is no layer of liability protection that you might find in other more complex vehicles like Limited Partnerships, Sub S Corporations,Limited Liability Companiesand the like. We will be looking more closely at those platforms shortly. Simplicity can have its costs.
The Band/Artist Assets
There are two components to the asset list of an artist or band, the intellectual properties or “soft” assets and the physical property or “hard” assets of the band such as equipment or vehicles. Generally speaking, when you are putting together a band-as-a-business you will be listing at least the following assets:
- Band Name and Logo
- The right to make decisions and enter into agreements, conduct business legally
- Original Song Compositions
- Original Sound Recordings
- Performance Income
- Artist/Band Image
- Merchandising Income
- Sponsorship Income
- Endorsement Income
- Physical Assets (equipment, vehicles, etc.)
These are the assets and rights you have been dealt at the beginning of your career. Their valuation is up to you. The parts are inter-dependent; you will not get an endorsement offer before a live performance or recording deal. Regardless of who you will be sitting down to negotiate with, you will be selling the above items. Your goal as an artist or manager is to make relinquishing these rights expensive for the purchaser and the purchaser wants everything on the menu at the lowest possible cost.
Songwriting Royalties Concerns
Let’s talk about Jim, the songwriter in the band, for a moment. The songs are actually Jim’s property and not the bands. This has been a point of contention for many band members in the past when they discover that they don’t share in writer royalties. For purposes of the band’s partnership, songwriting royalties are off the table as a shared asset. Some bands will compose all their material together and all should be credited and compensated as writers. They are songwriting as a team.
Equipment and Other Hard Asset Concerns
Does the band own the equipment or does each member contribute what they can? Equipment brought to the table by each member should be regarded as the property of that member; not a contribution to the band’s assets. Equipment that is later purchased by the band, in many cases a PA system, is an asset owned by the band and each partner in this scenario owns 25 percent. If a member leaves the band, the remaining band members should pay to the exiting member his or her share of the market value of equipment purchased while in the band. The remaining original members now own the PA system three ways. When a new member joins the band, he only shares a percentage of the equipment purchased since coming aboard. Can you see how convoluted the accounting can get when, for example, after a few years a six-piece band is down to two original members and has new members who have been in for different lengths of time? This scenario can change as a group finds success. In many cases a longtime band member who has left will still share in some band revenue such as CD sales and merchandising of products using the ex-member’s image manufactured during his or her tenure.
We will look at the sole proprietor one-man-band scenario a bit later but for now let’s look at how a group might approach cutting up the pie. The first deal you will need to cut is with your band mates. In most casual situations a hand shake is enough for weekend warriors but when a group is serious about creating and branding a new sound and image, it is a good idea to get down the rules of the road between the band early on. It is time to think of your band partners as partners in a legal sense.