Mika Karhumaa

Here is the article on the transferred rights and contract types that I promised. During this holiday, I had just enough time to finish the text. This article continues in the next section with passive income and how the different contract types and transfer of rights are economically linked to it.

The artist has often no choice but to transfer some of the rights that are originally belonged to them in the pursuit of their business goals. In the implementation and organization of their business, the artist management (whether or not outsourced) is a responsible player in relation to granting the rights, or licensing of them. If the artist is not thinking to handle everything themselves, is the artist most likely to deal at least with the record companies, music publishers and booking agencies.

For the sake of clarity, the artists also work effectively in other relevant business areas, such as new media (ringtones etc.), sponsorship, and merchandising. However, in these business areas, there is no such solid linkage or great influence on the core business of the artist that it would require a great attention in this article.

This article is about assigning, granting or transferring the rights which term it then wants to use. The essential aspect of this action is its impact on the artist’s private life, decision-making power and economic conditions. Each transfer of rights restricts the artist’s position to some extent. The artist, though, should receive a financial compensation from certain admission. The transfer of rights is an important trading instrument for implementing the artist’s business and career plans. What they are searching for these interest groups is often capital, infrastructure and strategic know-how.

The artist management’s mission is to create and develop the artist’s business so that it serves the needs and the goals of the artist. The artist’s merchandise for all this is the attraction of one’s own pre-essence, the performances both live and a recording, and of course the music behind the performances. All of these activities are associated with the copyright dimension. This means that the factors of production require the artist’s consent to allow the manufacture of products. It is a completely an articulate matter, in which all the music business areas the artist has activities and aspirations.

Because the success of the artist cannot be predicted very well, it must be careful when it comes to assignment of rights. The content, strength, or the scope of these granted rights is of great importance in assessing the motives and commitment of each interest group or a partner that the artist would like to have. To counterbalance the transfer of rights, it would be good to have a margin, something in return. The transfer of rights, thus, must never be free of charge. The artist’s business plan and current popularity is the source that tells you what rights are relevant and which should be excluded. The main rule could be that no rights should be granted for any kind of void action, just as an option without the implementers.

The rights to be transferred are either fixed term, indefinite or permanent. The most intense right relates to music publishing, whose value as merchandise is superfluous to cover up. The right of the publisher is identical to that of the author (song-writer) – the copyright will continue to protect the compositions at least for seventy years beyond the life of the author. The publisher’s right is not an original as the author’s, but a derivative. It is generated by the correctly signed music publishing contract. This agreement transfers to the music publisher significant rights – originally belonged to the authors themselves. The contract does not restrict the artist, therefore, only for the duration, but also in fact. In order to be justified, the artist has to in some way make sure that the publisher makes its own contribution to the fact that the value of the relevant catalog increases as substantively as in the case of income streams. Otherwise the music publishing agreement is difficult to justify. The music publishing agreement entitles the publisher to as much as 50 percent of the copyright-related revenue of the songs. It should also be noted that the termination of the music publishing contract does not end the rights of the publisher to those songs that have been included as a part of the contract during the term of the agreement. Even if the active part of the parties’ agreement is terminated, the relevant rights of the publisher will remain in force.

A similar permanent right is also associated with the recording agreements. In these contexts, however, the right is far more limited and does not restrict the artist’s freedom of action to the same extent. In these contexts, the permanent rights relate to the phonograms and other recorded material that the artist has recorded to the company during the term of the contract. The record company obtains, under the terms of the agreement, and effectively by acting as a financial producer of the phonogram, the status of the producer which entitles the producer`s right to the legitimate period of protection. The record company usually receives the decision-making power over the phonogram as well as the music publisher gets with the music publishing contract.

This, however, affects the artist’s circumstances mainly through the possible non-competition clause of the agreement. In general, the artist is required not to record any songs that the artist has recorded for the company during the validity of the recording contract. The protection period is, according to established practice, five years. So nothing prevents the artist from recording the same tracks as in new versions, as long as five years have elapsed since the end of the contract. Such a ban aims at enabling the company to obtain a motivational exploitation right of the financial investment they have made. In this case, the artist does not have the same financial impact as in the case of the music publishing agreement. The company is required to pay royalty after the term of the contract as defined in the contract. The artist will not be left without compensation during the validity of this restriction. In the music publishing contract, the publisher does not perform anything for the artist, but becomes a part of the copyright revenue generated by the songs of the artist.

In two of the above examples, we are dealing with two fundamental concepts, a song and its performance. These two concepts must never be confused with each other. This is also the point where we get to the topic of this article. The term of the music publishing contract is not a synonymous for the terminology of the recording contract. Yet these two things are closely related.  In case where the music publishing agreement concerns songs, the recording contract is in connection with the performance. The object of protection is therefore different aspects of the same thing. For those artists, who also perform the music they have made, this division is extremely important.

In addition to permanent rights, the artist transfers also fixed-term rights in order to implement their business plan. For example, the booking agreement gives the agency a right to convey performances to the extent specified in the contract. As has already been mentioned, the transfer of rights is often long-term, geographically broad and exclusive. As we can see, the artist has to deal with the contracts in several interconnected business areas at the same time. This uncertain situation will cause a headache while networking of contracts. The artist’s business areas are closely tied together. If some of the sub-areas do not function properly, it has effects on other the areas as well. It is therefore reasonable to have different exits in view of this opportunity. The artist is certainly not happy with the situation where the performances would be and records will sell, but the performances will not be on the calendar for some reason or another. If the situation is that the artist cannot match the current demand or demand is not even attempted to create, the artist will not want to adhere to a contract that, through exclusivity, prevents them from acquiring performances elsewhere. The same applies to other business areas’ contracts. Each agreement should have a future exit, if the parties intensify so that co-operation is no longer possible, or cooperation simply does not work. This is an expression of why each transfer of rights should be conditional, if only possible.

When designing the artist’s business plan, the risk management is extremely important. Where the business plan focuses on the maintenance and improvement of economic activity or earnings, the agreements are more concerned with the possibility that things will not go as planned. Therefore, mixed-type contracts should be avoided. It is not uncommon for the contracts to be negotiated enthusiastic about designing co-operation over the traditional business bargains. Where the artist’s interest groups (record companies, music publishers, booking agencies, external financiers, merchandising holders etc.) have a willingness to participate in the artist’s business in other areas than which is their heartland of competence, the artist may have a need to engage in motivated partners in all relevant areas. In an ideal situation, everything would remain in the hands of a competent, committed and trusted group, and there would be no disagreement between people over time. But this is rarely the case. It requires no more than one key player to change the organization, industry, or retirement and the whole operation gets a whole new direction.

Everything in the midst of the hurry easily forgets what this is all about. Due to the copyright dimension, it is about the transferring the rights of the artist and the consideration paid to the artist for these assignments. Each business area needs to be organized separately, even if the same operators take care of them. Every business area must also considerate as a separate unit. They must not be dependent on each other because the artist does not always grant equal rights to all their business areas or the reciprocal obligations are not at the same level.

Respect for the contract-type boundaries will come out well in the following example. The parties can make a very detailed contribution to the content of their cooperation. In such a situation, the parties will almost certainly have to resort to the basis and structure of a type of the contract that the industry is familiar with. If the agreement with the terms of the agreement resembles a recording contract, it will automatically become an impression of the exclusive right that is usually dealt with in that kind of contract. This makes it easy to imagine that the agreement will in other respects also be exclusive and constitutional. There is nothing wrong with this, if that really is the case. But if the parties have meant something else, it is not worth considering such an agreement. If the agreement refers to music publishing-related activities, it is already in dangerous waters. Even if the copyright is not in principle possible to transfer with the tacit approval, but with the express consent, it is still a risk. Terms of the music publishing agreement in a recording contract are incorrectly used in full code red. Any suggestion of the music publishing should not be conveyed to the impression that the artist, while entering into some agreement, also includes the music publishing rights. This is one more reason why each business are should have a separate agreement and a separate exit, says the business plan between the parties then whatever.

When you grant the rights originally belonging to you, do not grant them more broadly than the relevant business plan requires. Never give up rights unconditionally. If the promised performance of the counter party falls short, you must have a chance to react. With the utmost care you should be with the music publishing contracts, as they are final. Each song that is considered to be a part of the agreement under the music publishing agreement will give the publisher the status of the publisher and generally entitles them to administrate the songs and to receive 50 percent of the copyrighted turnover.

No matter how enthusiastic you are from a new partner, do not mix plans and agreements with each other. The terminology that goes beyond each business areas is to be critically addressed. This avoids imaginations that could infer that the rights would be extended more broadly than the original purpose. The same applies to the options. To be justified, the benefit of the option to the artist should be in some way realistic. If the artist agrees on an option that goes beyond the resources and willingness of the partner, the artist’s career in this regard may be stuck. Indeed, without the consent of the existing option-holder, the artist is unable to progress in these areas with potential other partners if the option is exclusive.

Mixed-type contracts can also pose problems in very good relationships. The management agreement between the parties may work flawlessly, but the prospective cooperation in production precipitates. If the agreement is principally in the exclusive domain, the productive parts of it may also be considered as exclusive. In such an imbalance, the management party hardly hesitates to withdraw from the production side of the plot, but if the disputes for some reason will arise, the contract and its contents will certainly have to interpret. Although some of the examples in this article are far-fetched, it is sensitive to keep contracts apart – even for the own peace of mind. When the unadjusted parts of any cooperation are easily removed, and no such confusion prevents going, it is easier to plan future.

The purpose of this article is not to comment on how the artist should organize their background organization and business. The purpose of this article is to clarify the significance and motives of granting rights. It is also important to understand that they not identical in all areas of activity. The artist’s business plan lives with a changing popularity. A joint business plan and the drawn up agreements should safeguard the position of all the involved so that it is able to focus on the essentials. If the parties have chosen a cooperating model in which, for example, the other party to the contract carries out both the artist management and the actual booking, each task has to be the subject of a different contract. If the management decides at some point to abandon the booking, or booking the management, this part is will be easier to unload and continue on what the remaining cooperation is going to be. If the artist’s record company and the music publisher are the same, then these issues should not be agreed upon in one agreement only. If such a crazy situation has happened, a special attention must be paid to the assignment and the determination of publishing rights. Particular attention must be paid to the ability of artist to change the record company or terminate the agreement. If the publishing rights are tied to the recording agreement between the parties, the publishing part of the agreement should also be terminated to that extent. Consequently, only those artist’s songs that are recorded by the artist during the validity of the contract could then include the publishing right. All new songs from the artist are no longer included in the same catalog. If the artist has entered into a house-writing agreement in connection with the recording contract, extends such a right to any material that the artist has created during the term of the recording contract. Where the publishing right of the previous example is tied to the albums actually recorded by the artist and their content, such a house-writing element makes it a vaguely challenging combination. At the end of the contract, it is difficult to decide which of the songs are covered by the publishing right or whether they are all included at all.

The main rule is that if the rights are to be transferred, they should be granted as narrowly as possible. These rights can always be expanded in the future, if there is a reason to do so. However, the artist is the party who needs proof that there is economic justification for each transfer of rights. The other half of the artist’s freedom is the exits. Although the music industry contracts are often long-lasting and include options, there must always be exits against them. The artist has to get rid of the contracts if the business plans behind them do not correspond to the reality.