the truth about the music business a grassroots business and legal guide

The Truth About the
Music Business
A Grassroots Business
and Legal Guide
The Truth About the
Music Business
A Grassroots Business
and Legal Guide
By Steve Moore, B.A., J.D.
Foreword by Mike Lawson
The Truth About the Music Business: A Grassroots Business and Legal Guide
© 2005 by Steve Moore. All rights reserved. No part of this book may be reproduced or transmitted
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Dedicated to the memory of:
Col. Jake & Maj. Billy
The two best friends anyone could have ever had!
vi
Foreword
“ The music business is a cruel and shallow money trench, a long plastic

hallway where thieves and pimps run free, and good men die like dogs.
There’s also a negative side.”
The above quote, often misattributed to gonzo journalist Hunter S. Thompson, sets the stage
for the world that soon awaits the often naïve yet fi ercely dedicated musicians seeking to
navigate their journey through the minefi eld of the music industry. The quote points out
the perils of working in this industry, holding them up as perhaps the best most can hope
for, while warning that things can also be worse. In a humorous way, this quote, sometimes
used with the words “music business” replaced by any number of entertainment-related
professions, illustrates that these travelers will be accompanied by shady characters, and the
good-intentioned spirits will often fi nd their muse crushed along the way.
For most musicians, this journey begins with a love of music as a child, with the
inspiration to perform brought on by another musician or group popular during their
childhood or youth, and inevitably at some point the ability to seek riches, fame, and the
adoration of fans (often of the opposite sex). It also seems to many a suitable replacement
for the daily doldrums of a “real job” with the perceived leisurely lifestyle of a musician.
“ That ain’t workin’. That’s the way you do it. You play the guitar on the MTV. No
that ain’t workin’. That’s the way you do it. Get your money for nothing and your
chicks for free.”
—Dire Straits
Unfortunately, the music business is work. While the guy installing microwave ovens,
refrigerators, and custom kitchens might not understand that it really is work, he also is
not likely to make the sub-par hourly rate most musicians end up making when wages are
all broken down at the end of the gig. Making the way from playing in a fi ve-piece band
earning $250 a night at a bar using the band members’ expensive equipment (usually
including investment in a PA system), the business-side return on investment of this career
path often is a fast way to make a slow buck. (With setup, sound check, four 1-hour set
performances, and breaking down time, a band like this would earn about $8 an hour
vii
before taxes, with no benefi ts.) Those who choose this life full-time while seeking the larger
stardom their music deserves face the life of an independent contractor with no benefi ts, no

401k plan, no company-provided insurance, or anything else found in the corporate world.
Making the leap from this beginning level to the big-time usually involves talent,
luck, and intensive business planning. Unfortunately, while excelling in their performance
abilities, many musicians never progress in their business savvy, and those are the musicians
most vulnerable to exploitation, fi nancial ruin, and downward-spiraling career choices that
lead to either a change in profession or a future playing hotel lounges and the free stage at
the local area casino.
One embarks on a career in the music business for different reasons than one might
become a plumber, a landscaper, a sales clerk, and so on, and the underlying artistic
motivation tends to passionately overrule one’s intelligence at times when dealing with
business, fi nancial, and legal issues. The child-like innocence of an artist fi rst stepping out
on this journey is quickly eroded when faced with the real-world experiences of dealing
with their art and craft as a functional legal entity—that is, a business. This intimidating new
revelation fi nds an artist suddenly dealing with issues of law, taxation, intellectual property,
partnerships, entity structures, capital requirements, hiring of management for personal,
business, and fi nancial issues, and the hiring of lawyers for a multitude of tasks from the
most basic formation of a corporate structure to negotiation of contracts that affect the life
and livelihood of their art—all of which allows the artist to come full circle and fi nally enjoy
the riches, fame, and adoration he sought in his youth.
Beyond understanding the basic legal and business issues surrounding the life of a
working musician who makes a living solely from performing, the much more involved
knowledge required to create an intellectual-property-based revenue stream from
songwriting, recording, and other professional areas of a music career requires a great deal
of study. This career requires much more than the ability to count double-four time, how to
augment a seventh-chord, or sing high-harmony without doubling the lead vocal line.
Clearly, having a destination and a road map are the best ways to set about on any
journey. Knowing where one can re-fuel, eat, rest, and get services on a trip typically results
in making the journey end successfully with the destination reached and the least amount of
expected and unexpected challenges met along the way.
The Truth About the Music Business: A Grassroots Business and Legal Guide

viii
These analogous references to travel are appropriate to the career of a musician, as
a large proportion of one’s time in that career is spent traveling on the road. The typical
career path travels to roadside bars to nightclubs, college fraternities to theaters, concert
halls to stadiums, and, unfortunately for many musicians, the frequent full-circle right back
to roadside bars and nightclubs. Having a plan for the business and legal needs and fully
understanding who the players are in those areas, what the objectives are, and how best to
protect your art along the way serves only to shorten the time between playing at roadside
bars to reaching the concert halls and stadiums, while also hopefully increasing the time
between those larger venues and the full-circle back to where you started.
This book will help you plan your journey. You’ll understand where to stop along the
way, where you can re-fuel, eat, and rest, and how far you will need to go to reach your
fi nal destination. Having followed this path myself from childhood to roadside bars, to
frat houses, and on to concert halls, record releases, publishing contracts, songwriting
partnerships, producer relationships, and all the rest, having this book in my hands early on
would have certainly made things easier. While there is a lot to take in given the scope of the
author’s work in providing this atlas, it is a long road to travel. Have a nice trip!
Mike Lawson
Foreword
ix
Special thanks to:
Dr. Ben Fisher
Mike Lawson
Clay Barnes
Ralph Murphy
W. G. (Pan) Doss
Stephen E. McCord
Keith & Jerene Sykes
My Family and Friends
x

About the Author
Steve Moore launched his music career in 1977 when he began playing music
professionally. Later, he embarked on a solo career as a singer/songwriter in addition
to fronting several of his own bands. He has worked in live sound and lighting
production, as a studio owner, recording engineer, record producer, publisher, and
as independent label head for New South Records. For over ten years, he worked
as an entertainment attorney in Nashville, TN, where he represented a number
of music clients including national and international acts. Moore has been a
contributing writer to national magazines and has lectured on the music industry
throughout the Southeast United States. In 2002, he formed High Cotton Records,
signing independent alt country and rock artists from the Southeast. He is also the
founder of Music Square One, a new venture that focuses on new marketing and
delivery systems for unreleased music. He is currently still writing music, making
records, and taking time out when he can for his fi rst love—playing live.
xi
Contents
Introduction xxvi
Chapter 1 Entertainment Attorneys 1
The Pocket Guide to Entertainment Lawyers 1
What Is an Entertainment Lawyer? 2
What Does an Entertainment Lawyer Do? 3
What Can an Entertainment Lawyer Do for You? 7
What Does a Lawyer Charge? 12
Retainers 13
Hourly Rates 15
Flat Fees 16
Value Added Billing 17
Contingency Fees 17
Spec Deals 20
Double Billing 20

Incidentals 21
Overbilling 22
Saving Legal Costs 24
Attorney Referrals 25
Getting Along with Your Attorney 25
Summary 27
Chapter 2 Choosing a Business Structure 28
Sole Proprietorship 30
General Partnerships 32
Limited Partnership 37
Joint Ventures 39
Corporations 42
Limited Liability Company 52
Limited Liability Partnerships 55
xii
Professional Associations, Professional Limited Liability
Companies, and Professional Corporations
56
Nonprofit, Non-Profit, Not for Profit, and Not-for-Profit
Companies 56
So What’s Next After Choosing Your Business Structure? 58
Why Worry About It? 59
Chapter 3 Making a Business Plan 61
Do You Have a Business Degree? Do You Even Need One? . 62
What Is It That You Plan to Do? 63
Cover Page 65
Summary 65
Mission Statement 66
Business Objective 67
Define Your Products and Services 69

Business Structure 70
Company Ownership/Management 70
Marketing Strategy 71
Do a Comparison with Your Competition 72
Promotions 72
Sales Strategy 73
Distribution 76
Outsourcing 76
How Do You Plan to Use Newer Technologies? 77
Financial Plan 79
Startup Costs 80
Income Statement 81
Break-Even Analysis 82
Projected Cash Flow 83
Balance Sheet 85
Paying Off Debt 87
Conclusion 87
Contents
The Truth About the Music Business: A Grassroots Business and Legal Guide
xiii
Chapter 4 Advertising, Marketing, Promotion, and Distribution
89
Advertising 90
Marketing 96
Build Your Brand 98
Publicity/Media Marketing 99
Promotions 100
Internet Marketing 105
Postcards 108
Distribution 108

Summary 110
Chapter 5 Useful Tips 112
Work Hard and Then Harder 112
Be Organized 118
Day to Day 119
Week to Week 120
Month to Month 120
Year to Year 121
Look to the Future to Keep Working 122
Go to Where the Action Is 123
Do Your Homework 12 4
Make Yourself Memorable 125
Be Grateful 126
Be Professional 127
Check Your Ego at the Door 128
Be a Team Player 129
Get Business Cards 129
Put Together a Professional Promo Kit 130
What Was I Looking For? 135
Quality Product 135
Depth of Material 136
Using a Computer 137
Keys to Success 138
Summary 140
xiv
Chapter 6 Intellectual Property
141
Copyrights 143
International Copyright 144
Federal Copyright 145

Bundle of Rights 146
Statutory Copyright 151
What Type of Copyright Form Should I Fill Out? 154
How to File for Your Copyright 155
Word for a Third 158
Works for Hire 158
Assignment of Copyright 159
Termination Rights 160
Derivative Works 161
Infringement of Copyright 162
Remedies for Infringement 164
Statute of Limitations 165
Fair Use 165
Trademarks 166
Trademarks and Service Marks 167
Federal versus State Trademark 167
Classes of Goods or Services 168
Common Law Trademark 168
Federal Registration 169
Branding 169
Choosing the Wrong Name 169
Trademark Registration 170
Trademark Searches 174
Infringement 175
Statute of Limitations 175
Patents 176
Trade Secrets 179
Non-Disclosure Agreements 181
Non-Disclosure/Non-Circumvent Agreements 182
Non-Compete Agreements 183

Contents
The Truth About the Music Business: A Grassroots Business and Legal Guide
xv
Publicity and Privacy Rights
184
Summary 190
Chapter 7 Publishing 191
Setting Up Your Business 194
Acquiring a Catalogue 196
Pitching Your Songs 197
Song Pluggers 198
Management 199
Administration 199
Publishing Deals 200
The Split 200
Single Song Contracts 202
Exclusive Songwriter’s Contracts 205
Jurisdiction 211
Revenue Streams 227
Summary 233
Chapter 8 Digital Rights 234
File Sharing 236
Copying CDs 245
Should File Sharing Be Legal? 246
Lost Revenues 251
Licenses on Blank CDs 252
Right of Privacy 254
Will File Sharing Ever Stop? 257
New Models 258
What Is Legal? 260

Fair Use 260
The First Sale Doctrine 262
Possible Solutions 262
Pay Per Download 264
Subscription Services 265
Blanket Royalties for File Sharing Sites 265
ISP Use Tax 266
xvi
Encryption and Password Protections
266
Hardware Keys or Dongles 268
Software and Site Regulations 268
New Legislation 270
Will the Market Bear Itself Out? 271
Where Is the Law Headed? 272
DRM—Digital Rights Management 273
AHRA—The Audio Home Recording Act of 1992 273
The Federal Anti-Bootleg Statute of 1994 274
Digital Performance Right in Sound Recording Act of 1995 . 274
World Intellectual Property Organization Treaty of 1997 275
No Electronic Theft Act of 1997 275
Digital Millennium Copyright Act of 1998 276
Digital Media Consumers’ Rights Act (DMCRA) 276
The Piracy Deterrence and Education Act of 2004 277
The Inducement Act 278
The Future Is Digital 278
Summary 279
Chapter 9 Why Sign a Record Deal? 281
Deal Point for a Major Record 282
Options 283

Number of Releases 283
Term 285
Exclusivity of Services 285
Territory 286
Creative Control 287
Ownership of the Masters 288
Co-Publishing 289
Controlled Composition Clause 289
All-In Rate 290
Royalties and Deductions 292
Reduced Royalty Rates for Digital Rights 294
Tour Support 294
Merchandising 295
Contents
The Truth About the Music Business: A Grassroots Business and Legal Guide
xvii
Recording Costs
295
Video Budget 296
Marketing and Promotions 297
Advances 298
Budget/Recoupment 299
Cross-Collateralization 302
Publicity Rights 302
Reasonable Appearances 304
Unions 304
Assignment of Contract 305
Key Man Clauses 306
Indemnification 307
Suspension Clauses 308

Accounting 309
Right to Audit 310
Most Favored Nations 310
Termination 311
Deal Points for an Independent Deal 313
Assignment of Contract 317
Joint Ventures 317
Assignment of Trademark 318
What If You Do It Yourself? 318
Online Deals 321
Summary 323
Chapter 10 Making Demos versus Masters 325
Picking the Studio 328
Picking the Engineer 330
Picking the Producer 331
Executive Producer 334
Studio Musicians 334
Recording Budget 335
Be Prepared! 339
Preproduction 340
Load-In and Setup 341
xviii
Basic Tracks
343
Overdubs 345
Mixing 346
Mastering 348
Negotiation Points 349
Clearances 350
Who Owns the Masters? 351

What If You Can’t Pay for Your Recording? 352
Bootlegs/Unfinished Masters 353
Graphics/Content 354
UPC Codes 357
Manufacturing 359
Starting Your Own Label 359
Distribution 360
Shopping Your CD or Demo 361
Joint Ventures 362
Internet Distribution 362
Summary 363
Chapter 11 Management—Ancillary Services 364
Personal Manager 365
Business Manager(s) 370
Road Manager 371
Road Crew 373
Booking Agent 37 4
Publicists or Public Relations Firms 376
Personal Assistants (PA) 377
Accountants 377
Attorneys 379
Ancillary Services and Products 379
Summary 380
Chapter 12 General Principles of Contracts 382
Contract Basics 384
Oral versus Written Contracts 386
Contents
The Truth About the Music Business: A Grassroots Business and Legal Guide
xix
Parole Evidence

387
Statute of Frauds 388
The Parties 388
Agency 389
Signatures 390
Term 390
Implied or Express Contracts 391
Quasi-Contracts 392
Elements of a Contract 392
Offer, Acceptance, and Consideration 392
Meeting of the Minds 394
Good Faith 395
Reasonableness 396
Expectation, Reliance, and Forbearance 396
Conditional Contracts 403
Condition Precedent 403
Condition Subsequent 403
Option Contracts 404
Oral versus Written Modifications 405
Attorney’s Fees and Cost Clauses 405
Arbitration or Mediation 407
Breach of Contract 407
Adequate Assurance of Performance 407
Duty to Cover 408
Specific Performance 408
Injunctive Relief 409
Rescission 410
Repudiation 410
Damages for Breach 411
Compensatory Damages 411

Consequential Damages 412
Punitive Damages 413
Nominal Damages 413
Liquidated Damages 414
Pain and Suffering 414
xx
Defenses to Contract
415
Mistake of Fact 415
Misrepresentation or Deceptive Conduct 416
Duress 416
Lack of Capacity 416
Unconscionability 416
Violation of Public Policy 417
Statute of Frauds 417
Impossibility of Performance 417
Force Majeure 417
Illusory Promises 418
Transfer of Contracts 418
CYA Letters 419
Negotiating Tips 422
Summary 423
Chapter 13 Negotiating 42 4
Negotiating Tips 425
Who Is Making the Offer, and Why? 426
What Is the Offer? 427
Do Your Homework 428
Prepare Options 434
Don’t Be Confrontational 434
It’s Not About Winning or Emotions 435

Understand the Other Person and his Personality 435
Solicit Responses and Clarifications 436
Be Clear About What You Want 436
Look for Positive Signs 436
Negotiate Upward 437
Understand the Give and Take 437
Be Creative 438
Don’t Tip Your Hand 438
Know When to Quit 439
Put Your Agreement in Writing 439
Summary 440
Contents
The Truth About the Music Business: A Grassroots Business and Legal Guide
xxi
Chapter 14 Questionable Practices
442
Song Sharks 444
The Numbers Game 446
Custom Label Deals 447
Custom Producers 449
Independent Music Charts 450
Internet Companies 451
Bogus A&R Services 451
Bogus Talent Scouts and Talent Agents 452
Bogus Seminars 453
Pay-to-Play Clubs 454
Aren’t These Practices Illegal? 455
Can You Sue Them? 455
Consumer Protection Acts 457
Summary 458

Chapter 15 Collecting Your Money 459
Too Far Away from the Money 460
Exhausting All Possibilities 462
Getting an Accounting 463
Writing a Demand Letter 465
Defenses to Court Actions 469
Statute of Limitations 470
Statute of Repose 471
Laches 472
Accord and Satisfaction 473
Summary 47 4
Chapter 16 If All Else Fails, Sue 475
Diminishing Returns 476
Arbitration and Mediation 478
What’s Involved in Going to Court? 480
What Types of Courts Are There? 480
How Much Justice Can You Afford? 482
Who Are You Suing? 483
xxii
Where Do You Sue?
485
What Do You File? 485
What Do You Ask For? 486
Service of Process 487
Pretrial Preparation 490
Your Day in Court! 491
Default Judgment 493
“The Rule” 494
Opening Statement 495
Rules of Evidence 497

Begin to Make Your Case 498
Direct Exam 499
Cross-Examination 501
Redirect 502
Recross 503
The Plaintiff Rests 503
Voluntary Non-Suit 504
Defendant’s Case 504
Closing Argument 505
Rule 11 Sanctions 506
The Right to Appeal 507
Collecting Your Judgment 508
Just Because You Go to Court, Don’t Expect Justice 511
What to Do If You Are Being Sued 511
What to Do If You Just Can’t Pay Your Bills 512
Summary 513
Chapter 17 Organizations 514
American Federation of Musicians (AFM) 515
American Federation of Radio and
Television Artists (AFTRA) 516
Screen Actors Guild (SAG) 517
Academy of Country Music (ACM) 519
American Guild of Musical Artists 520
Contents
The Truth About the Music Business: A Grassroots Business and Legal Guide
xxiii
American Society of Composers, Authors, and
Publishers (ASCAP)
521
Broadcast Music International (BMI) 523

Country Music Association (CMA) 525
Dramatists Guild of America 526
Gospel Music Association (GMA) 527
Harry Fox Agency 529
International Association of Fairs and
Expositions (IAFE) 530
Information Entertainment Buyers Association (IEBA) 530
International Fan Club Organization (IFCO) 531
Nashville Songwriters Association (NSAI) 531
National Academy of Recording Arts and
Sciences (NARAS) 532
National Association for Campus Activities (NACA) 534
Recording Industry Association of America (RIAA) 535
Society of Composers and Lyricists (SCL) 535
Society of European Stage Authors and
Composers (SESAC) 536
Songwriters Guild of America (SGA) 537
Performing Rights Societies 538
Summary 539
Chapter 18 Music Conferences, Festivals, Trade Shows, and Seminars . 540
Music Conferences 547
Worldwide Markets: The International Music Conference
and Festival (MIDEM) in Cannes, France 547
Regional Markets: South By Southwest (SXSW) in
Austin, TX 54 8
Fairs and Festivals 549
Trade Shows 550
Seminars 551
Summary 552
xxiv

Chapter 19 Insurance
554
Agents 556
Underwriters 558
Claims Adjusters 558
How to Shop for Insurance 559
Replacement Value versus FMV 561
Changes to Your Contract 563
Exclusions 563
Rate Hikes 563
Types of Insurance 564
Auto Insurance 565
Homeowner’s Insurance 567
Renter’s Insurance 568
Premises Liability 569
Inland Marine/Personal Property Floater 570
Specialty Insurance 570
Errors and Omissions Insurance 571
Inventory Insurance 571
Health Insurance 571
Dental Insurance 572
Disability Insurance 572
Life Insurance 573
Burial Insurance 574
Workman’s Compensation Insurance 574
Licensed and Bonded Workers 575
What to Do If You Have a Claim 576
Statute of Limitations 577
Is There a Standard Procedure of Denial? 578
Bad Faith 58 0

Hiring a Lawyer 58 0
Summary 581
Chapter 20 Wills, Trusts, and Estates 582
Who Can Write a Will? 584
Types of Wills and Trusts 585
Contents