New Music Deals, No Record Label needed

On a well known music industry forum, one member asked for advice on how to structure a deal between an upcoming band and a potential sponsor. I thought I would post my own suggestion, as well as that of others, for the benefit of readers to this blog, who like me have long considered the future of ROCK BRANDS.

Without further ado:

'Cicada' posted the following scenario on The Velvet Rope:

"There was previous discussion here of the benefits of seeking out marketers to underwrite bands. Look at the Bacardi deal with Groove Armada. The company pays a fee that covers all costs associated with extensive use of the band's music in their advertising campaign and uses the band to play live events and in many other ways to promote their product. It's a great alternative for the band. They get paid, lots of promotion, don't have to worry about sales and it's a non-exclusive agreement so the band benefits from all of the promotion.

But what if you're not dealing with Bacardi, Red Bull, Nike or some other huge corporation with very deep pockets? What would you expect to get paid for a similar deal that is on a much smaller scale? How much do you think this deal is worth?

Scenario:

An 'up and coming' COMPANY, with corporate sponsors coming on board soon, wants to use XBAND's music for an all-in promotion deal. Their promotional area is online and in the Midwest. Keep in mind, it's a sort of "get in on the ground floor" type of deal, where they don't have the mega-funding yet that they expect to have over the next few years. So the pricing should reflect XBAND's desire to build a relationship with COMPANY. The COMPANY deals with sports marketing, the deal will likely include...

• Covering costs for XBAND to play at several events
• Pressing and distribution of 5K copies/ 3 song Promotional CD

Those 3 songs used extensively in...
• Online / Web advertising with COMPANY's website
• Promotional videos for COMPANY
• Free downloads and give-aways offered to promote COMPANY
• Ringtones
• Other promotional use of XBAND's name and likeness
• It's a non-exclusive use

ALSO:

The company is gathering corporate sponsors, building a website, doing a soft launch this year with continued and greater promotions into 2009 culminating in events that are projected to have 40,000 attendees (by 2010). But that's all projected, right now they are limited in what they can spend to develop a relationship with the band. They approached the band, they like the idea of building a sponsorship relationship. Band's name and image, 3 songs, used in website, internet promotions, company videos, cable TV productions, Free downloads, CD give-aways, ring-tones, the band will piggy-back and be included in their promotions as well as perform at several events.

The band has some small recognition in this region with a very big top 10 commercial radio hit last year in one of the major cities in their market and a distribution deal with a major retailer that covers their market and included LOTS promotion (band blurb/photo featured in 7 million circular ads, TV appearances with local FOX affiliate). The band does well in the club circuit here, has headlined a festival (4,000 people) and has had guarantees with colleges of $1000-$1,600 and corporate events for $2,000.

How much is that deal worth? What should the band be looking for? How about a dollar figure range? Remember, this isn't HUGE money yet. But it's not small potatoes either. More like almost medium potatoes. Your thoughts?"

A member logged on as MusicMBA suggested:

"Depending on the regional popularity of the artist (maybe measured by their guarantees in local clubs?) I would look for something in the $50,000 - $100,000 range".

Another contributor, QueenSheDevilCow, cautioned:

"I cannot think of a single case where a corporate sponsorship did not make a band seem cheapened, with the possible exception of sponsorships by companies that produce quality music gear. But, it's not the band's image that I am worried about, it's the chilling effect that this would have on music itself.

Record labels are filled with the reprobate of the Earth, but they are primarily MUSIC companies who live and die based on the success of their music, not the success of their bar soaps, cell phones, apparel, beverages, etc".

Okay, my own reply:

"On the other hand, advertising creatives these days appear to demonstrate greater acceptance for a wider variety of music than their major label brethren.

I can't speak to the variety of corporate sponsorship packages out there, but anyone who has turned on the TV at least once in the last decade can see any number of marketing campaigns that appear mutually positive for both musical artist and advertiser (Sting & Jaguar, for one early example).

As we move into the future, the best active sponsorships will resemble collaborative development deals. Ideally, sponsors won't make you be or do anything you're not. Rather, you'll choose each other because the relationship makes sense. Athletes seem to make it work, why can't artists?

Personally, I would start to arrive at a fee by beginning to think in terms of what the contract is going to look like.

Maybe something like this:

EVENTS:

a) If XCORP books XBAND for specific events delineated at the time of execution of contract: XCORP Provides XBAND $1,500 + Hotel, Air, Ground, Meals & backline requirements per event. (NUMBER OF EVENTS x 1.5K)

b) For XCORP sponsored events beyond the limit of the contract: XCORP Provides XBAND $2,000 + Hotel, Air, Ground, Meals & backline requirements per event.

c) In lieu of sponsoring specific dates, XCORP instead only options to display XCORP signage at TBD number of dates independently booked by XBAND (except for private dates):
FEE: $500 per event.

Additionally, XCORP will be responsible for securing signage and installing its display at each such event, at no cost to XBAND.

Artist's presence at promotional events or live performances of any kind is not guaranteed without the prior written consent of the ARTIST or ARTIST’S Manager.

Signage is not guaranteed for dates already booked by XBAND. XBAND will provide option to XCORP on a gig-by-gig basis as new dates are considered.

In any event, all arrangements shall be made through ARTIST’S Manager TBD weeks/months in advance.

* * *

2. PROMOTIONAL CD – OPTION A: CO-BRANDED CD

a) XBAND grants XCORP the right to produce 5000 units of a CO-BRANDED promotional CD containing 3 songs provided by XBAND (and only these three songs) and selected by mutual agreement by XBAND and XCORP. No other artists to be represented on CD.

XCORP provides at no cost to XBAND: mastering, design, production, manufacture and distribution of Promotional CD.

XBAND grants XCORP the right to design CD to reflect goals of XCORP marketing strategy.

XCORP provides that final approval of design and copy of said product shall be by mutual agreement of all signatories to the contract.

Song selection subject to mutual agreement.

MASTERING:

Songs to be pre-recorded and delivered by XBAND.
Mastering must be provided by XCORP at no cost to XBAND.
XBAND retains option of having representative present at mastering session.

OR

Mastering to be provided by XBAND, for a fee to be determined by both XBAND and XCORP, and reimbursed by XCORP,with any costs above said fee to be responsibility of XBAND.

XBAND grants XCORP option of having representative present at mastering session.

FEE: $9,000 – $15,000 (not including mastering)


PROMOTIONAL CD – OPTION B: XBAND CD w/GUARANTEED SALES

b) Alternately, XBAND produces 3-song promo CD at no cost to XCORP. XCORP guarantees to purchase 5000 copies of XBAND CD at a reduced rate of $3 per unit.

Additionally, XBAND grants XCORP right to apply stickers to CD for the purposes of co-branding (at no cost to XBAND).

Cost of design and application of Stickers during manufacture process to be provided to XBAND at time of production.
FEE: $0
SALES GUARANTEE: $15,000

In either case, regardless of FEE or GUARANTEE, XCORP agrees to return undistributed copies to XBAND at end of term, and at no cost to XBAND.

* * *

3. Use of Band Name, Image and Association:
If applicable: FEE: $TBD

* * *

4. MUSIC LICENSE: 3 songs (same 3 songs as on CD. Original usage)
Usage as follows:
– Unlimited streaming on XCORP website.
– Unlimited usage in non-broadcast promotional videos for XCORP.
TERM: 12 mos.
FEE: $3,000–$6,000

5. MUSIC LICENSE: 3 songs (same 3 songs/additional usage)
Usage as follows:
– Unlimited use in XCORP advertising campaigns, worldwide, in all media.
– Unlimited usage in cable TV productions
TERM: 12 mos.
FEE: $6,000–12,000

6. FREE DOWNLOADS: 3 songs (same 3 songs/additional usage)

CHOOSE ONE:

XBAND grants XCORP right to distribute up to 1500 total downloads –in any combination– of the same three songs covered elsewhere in this agreement, after which XCORP will have the option to renew.
TERM: 12 mos.
FEE: $375–$1,500

OR

XBAND grants XCORP right to distribute unlimited downloads of the same three songs covered elsewhere in this agreement, for a term of 12 months.
TERM: 12 mos.
FEE: $1,500–$3,000

OR

$1 per download


7. RINGTONES

Ringtones to be produced under the supervision of XBAND by vendor of XBAND's choosing, at no cost to XBAND for non-exclusive distribution by XCORP. Vendor to be paid directly by XCORP, or by XBAND and reimbursed by XCORP pending approval of estimate provided by vendor.
FEE: 0$

* * *

The above is for illustrative purposes only. Not a lawyer, don't pretend to play one either, so I would hesitate to use the preceding as a boilerplate. Nevertheless, I've worn the Head of Production hat for three notable music production companies, and therefore possess considerable experience engaging in my own fair share of contract negotiation (with legal teams representing Fortune 400 advertisers and behemoth entertainment companies). More recently, I've gained experience as consultant to artist/talent management on a variety of similar matters. I hope this post provides at least food for thought for any aspiring Rock Brand new to such matters, but only use the language submitted here at your own discretion.