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Internet Distribution - Artist Beware
By Aaron Minsky a.k.a. Von Cello
(more articles from this author)
2000-10-18
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They act like they are the artist's best friend. They portray the traditional record companies as the enemy. They claim that the internet is the great equalizer. They say, "Distribute your music through our web site and millions of people will be able to download your music all over the world. The opportunities are endless." Who are they? The internet distribution companies. Are the opportunities endless? Yes, the opportunities for them to make money from your music are endless, and the opportunities for you to get hurt are also endless.

I was optimistic about the potential of the internet and was looking forward to signing on with internet distributors as a way to sell my music to the public. I had gone to some interactive music conventions and had gotten excited by the pitches of internet entrepreneurs. They used words like "non exclusive" and "fifty - fifty split". It all seemed so easy, and I was feeling quite happy...until I spoke to a lawyer. Afterwards, I felt like I had been saved from jumping into a snake pit.

The sad reality is that the internet is a breeding ground for a new generation of greedy, manipulative business people who take advantage of trusting musicians. In a way, they are worse than the record companies because at least with the record companies, you know they're out to take advantage of you. These people speak soothing words and then take even more advantage of you. Of course, there are honest companies out there that have fair, artist friendly contracts, but there are many that don't. Let's look at some examples.

One prominent internet distributor offers a contract with the following sentence: "You grant us throughout the territory and during the sales period the non-exclusive right to sell...your recordings". That sounds fine, doesn't it? I thought so too...until my lawyer pointed out that they define "sales period" as forever and "territory" as the universe. In other words, they want the right to sell your CD for the rest of your life and beyond. They also say, "You agree to furnish us with your CD's promptly upon our request." This also sounds reasonable, until you realize that there is no end to this responsibility. You could be retired and living on social security and yet you are still responsible to supply them with your CD's, at your expense. Now you may think that that's not so bad because you'll be making money...Think again.Though the contract states that you are entitled to a percentage of the sales, it also states that they can deduct "any costs related to those sales". What does that mean? Suppose they take a trip to Hawaii to make a"business" contact, isn't that a cost "related to those sales"? If they also soak up some sun, well I guess that's just part of the cost of doing business. Fairness dictates that the musician know specifically which costs are deductible, and that those expenses have a cap.

They also reserve the right to "assign" the agreement to anyone they choose, so you may become responsible to someone you never dreamed you would do business with. Of course, you can't assign the agreement. On top of this you also agree to indemnify and defend them from any legal action arising out of any claim by any third party concerning any breach of the agreement by you.

Scary stuff, isn't it? On the other hand, I have seen contracts that look perfectly benign...except for this one little clause called "Modification". One contract states, "We may amend any of the terms and conditions in this agreement at any time solely at our discretion". Furthermore, they will email any changes and unless you respond within 5 days you accept the change. What if the change is, "You give us the rights to the copyrights on all the music on your CD"?! If you sign this contract you better hope you never get in a situation where you can't check your email every 5 days.

I even saw a contract recently that said the company can make modifications at any time and it was your responsibility to check their site daily. If 24 hours pass after a change and you don't notify them, you accept the change! Since it is unreasonable to expect that someone will be able to check a web site every day for years to come, this clause will in most cases have the effect of making the contract non-binding on the company while remaining binding on the musician. True, actual modifications may tend to be minor, but unless the potential changes are specified, the musician is placed in a position where he just has to trust the beneficence of the company (or its future assignees), or be on constant guard. Maybe I'm old fashioned, but I thought the whole purpose of signing a contract was to set out the complete agreement in writing for the protection of both parties!

For those internet music entrepreneurs who would like advice on what constitutes a fair, artist friendly contract, I offer the following: 1. Don't ask for ownership of our copyrights or for permanent rights to distribute our music (non-exclusive or not). This can hurt us later in our careers. Always put a clear and complete termination clause in your contracts. 2. Don't be vague about how the money will be split. Specify any deductions, or better yet, figure them in, and just give a straight percentage. 3. Modification clauses should be outlawed. If you are afraid that things will change in your business then make your contracts of shorter duration. If you feel you must have some flexibility, then severely limit what can be modified. (Ex. Only the following things in this contract may be modified: ...) And always give us adequate notice of a change and a fair chance to terminate the contract when you modify it. Would you sign a contract giving the artist the right to modify it without adequate notice to you, and a chance for you to opt out if you didnít like the change? (If so, then please contact me immediately!) The bottom line is this: don't ask an artist to sign something you would not sign yourself!


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