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.

Saving The Music Industry One Brand at a Time

From the beginning of my career as a music producer of television and radio commercials, I sometimes received calls from consumers who wanted to purchase an album that contained the music they heard on a given spot. However, album production is not a general compliment to spot production. So, there never was a product to recommend people buy –unless they were referring to a pop track that an ad agency had licensed in lieu of commissioning an original underscore. In fact, most of the time the music one hears on a TV or Radio commercial rarely extends beyond the thirty or sixty seconds specifically created for the ad.

As a result:

1) A given intellectual property is limited from possible secondary use by simple virtue of its length.
2) Resulting inability to leverage music into extended customer experience (away from the TV).
3) Diminished ROI by neglecting opportunity (based on demand) to create a for-sale entertainment unit (or a Point-of-Purchase gift that may generate future sales).

Considering this, I began as early as 1994 pitching the concept of creating entertainment collateral. At the time I initially conceived of this collateral as 'gifts' redeemable upon purchase. For instance, buy a car, and here's a CD you can play on the drive home, et al. The idea would be to produce the music in tandem with the production of our primary commissions (being TV/Radio commercial, web site, theme park or electronic game scores). However –regrettably– at the time I couldn't convince one account to allocate the resources required to test this concept, although all seemed to think it was great idea (for someone else to do).

Regardless, the concept stuck with me. In March of 2001 the online marketer's magazine Clickz published an article I wrote on the subject of Sonic Branding. In it I argued the merit of this concept and other such alliances; and I suggested the following:

If music in a marketing context does its job, it will inform as well as entertain. And if consumers –that is, your audience– call the company switchboard and ask who wrote the music and where they can buy a CD of it, then maybe you and your client should actually produce a promotional CD that consumers can take home and listen to whenever they want...If you've produced a CD, for instance, folks will listen to it while they eat, work out, make love, and your company will be the underscore to their lives. Oats may be oats, but if I'm making babies to your music, then chances are my babies will be eating your oats.

Now, I was by no means the originator of this idea:

In the nineteen-seventies Post –and other cereal companies– packaged singles with their Super Sugar Crisp product. Many such promotions were dreadful (at least to adult ears). However, the Sugar Bears “You Are The One" continues to enjoy happy memories from enduring fans of the song to this day. Why? –Because the song framed an episode in many people’s youth. Their collective recollection has essentially been wrapped in its own soundtrack, brought to you by Post. And that's why kids of all ages still think the Post Super Sugar Crisp Bear IS THE MAN!.

* * *

Click on any link below to read all the articles in the four-part Fall 2006 AUDIO AS ADDED VALUE series exploring exploring new paradigms for Music Distribution:

1. The Compact Disc Is Dead
2. Saving The Music Industry One Brand at a Time
3. Self-Referential Jingles are not Content
4. Synergy = Energy

Creating Value By Licensing

So, someone wants to use your song in a TV Commercial. What now?

A fair price for a one-time license for a non-hit song from a no name is: whatever the artist is offered, or whatever your agent can negotiate without alienating the interested party. If the song has extended uses, other offers will follow. That's how you make money on licensing.

Songs –or anything for that matter– do not have any value until there is a market for them. You need to create a market. Like anything else, one accomplishes that by selling below cost and undercutting any potential competitors, which allows you to gain traction, publicity and some leverage on subsequent deals and transactions.

If a big agency knocks on your bedroom door and wants to use your song on a commercial that will increase your exposure, and which will also give you a platform to further market yourself –and if you are currently an unknown– don't mess it up by listening to a 'pal' who says your genius is worth more than what the offer is.

I can't tell you how strange it is to me that an unknown artist will give away their entire catalog on the Internet, but then claim it has extraordinary economic value the first time someone expresses interest in licensing a tune.

The prudent thing to do is to go with a reasonable* license for the present, and if the song is as catchy as your mother thinks it is, then other offers will follow (which is where you'll negotiate an ever escalating rate for your material, because now you have value).

*Reasonable means: Non exclusive use or limited exclusivity, for a limited time, in limited media; such as, 12 months for a designated TV/Radio/Internet Campaign, with an option to renew at the same rate, or a rate to be negotiated in good faith.

By the way, if the placement is for the theme of a TV show rather than for a TV or radio commercial, you can expect an equally low fee. Unlike advertising, however, the publishing on a hit show, especially if it goes into syndication will likely make any sum you negotiate very much worth your while. Even established composers scoring an original theme for a piece of TV entertainment will accept a low 'front end' figure betting on a series of fat paychecks on the back end. If the show gets knocked off the air you'll still end up with a bit of work you can use to promote yourself further.

Subsequent interest in your work –if there is any– will enable you to negotiate better terms as you establish a track record.

While it is unlikely several different advertisers will all want to use the same track at the same time in a given territory, sometimes they do. One piece of music can sustain simultaneous advertising licenses negotiated for use in different markets by industry or territory; and also win placement on a variety of entertainment projects, such as movies, games, TV shows.

A determined artist can certainly work the odds if they also learn how and who to pitch material to. But that's a career in and of itself. Do you want to be a music supervisor, or play guitar?

If you think of yourself less a performer and more as a composer, then one song –already favorably placed on a national campaign with a major advertiser– is a great way to introduce music supervisors with the rest of your catalog; and prospective clients in need of original music to your talent. Lots of music production companies were essentially built by one composer/writer who won a prominently placed track that he or she sold or licensed for next to nothing.

THE NAPSTER DILEMMA

Because I'm only too happy to make some attempt at solving all the world's problems, let's start with protecting rock stars–

Eventually the record companies will prevail in their litigation against Napster and it's ilk. But that doesn't mean they will have ultimately resolved the situation in their favor. The record industry has misjudged the issue that the online exchange of music files presents. Underlying the very real notion of copyright infringement is a perception that provokes the public to participate in this illegal distribution.

First and foremost, teen age fans, who are by far the greatest participants in this activity, will never be convinced by a corporate behemoth that he or she doesn't have a right, and indeed obligation, to trade and exchange their favorite music among their peers.

Secondly, among fans (the ire against the rock group Metallica notwithstanding), the general perception is that the record companies are exploiting the artists themselves by trapping them in unfair contractual arrangements. It may only a perception, but it would still be appropriate to call it circumstantial fact. So, it goes to reason that if the very people who distribute the music are taking advantage of the recording artists, and this perceived exploitation appears sanctioned by the government and the trade, then fans logging onto Napster look less like pirates and more like rebels with a cause. People are trading mp3 files because they love the artists. Not because their trying to steal from them. Can the same be said of an industry where nightmarish stories of exploitation surface on a regular basis?

The final point to consider is the price of compact discs. Technological advances generally drive prices down based on newfound conveniences in manufacturing and production. But record companies haveignored this economic fact. Consumers understand that what was already a luxury item in 1979 should now translate into a modestly priced compact disc. Instead prices have escalated towards the dizzying nearly twenty dollars CD's fetch in many retailers today. When the means of distribution are limited this cost can be explained as 'what the market will bear'. But now the consumer has a weapon and it's called the Internet. If the artists were smart, they'd understand this weapon is also theirs to use to their advantage.

The bottom line for record companies? Repair their relationships with the artists, and the public perception of those relationships as well. Next, lower the price of this expensive product. Or alternately, they can continue to chase the technological demons that will never cease to look like a consumer's saving grace.