|
Part
Three
By Harlington L. Hanna
Jr.
|
Beware of Groups
It is particularly important for the entertainment
entrepreneur to minimize the risks and potential
problems. While collaboration is an important skill to
learn and use in the business, too much collaboration or
the wrong kind of collaboration could actually increase
these risks and problems. In the music industry for
example working with a musical group presents additional
legal and business problems which is better avoided if
possible. While it is important not to exclude the
opportunities many excellent groups may provide, dealing
with the contractual and legal problems presented can
turn probable success into certain failure.
Publishers, Producers, Managers, Record Companies and
other acquirers who are involved with musical groups,
theatrical groups and plays, etc., should make every
effort to gain legal control or at the least secure
protection of the Group name. This is essential to ensure
the continued ability to function should there be a split
among members of the group as often happens.
Dealing with groups introduces all of the potentially
troublesome aspects of human nature and behavior. All of
the potential for problems are magnified and multiplied.
The egos and family involvement of the group members
always seem to become more intense.
A most important element of the potential for
interference from family members of the group members
becomes important. While members of the group may
individually get along, they may be under constant
pressure from family members who urge them to protect
themselves from being **ripped of** by other members. In
addition, long after the group relationships have expired
there exists the probability that family members and or
heirs of the group members may seek relief for what they
perceive to be their interests in the particular project
or group fortunes. These kinds of problems just tend to
be magnified the larger the group membership becomes. The
very nature of who owned elements of the group holdings
can come into question years later.
For these reasons wise entertainment entrepreneurs
should stay away from group deals as much as possible.
When it is inevitable that group involvement becomes
necessary as usually occurs, the entrepreneur must take
the extra steps necessary to ensure the significantly
increased risks are avoided through adequate legal
contracting and business practices. These special
measures must be undertaken to protect their interest,
that of the individual members, and the group itself.
Each member of the group should be specifically
protected by contract. These contracts should be
carefully constructed to foresee and deal effectively
with issues of the estates of each member. The wise
entrepreneur should ensure that such agreements and
contracts in and between the members are in place before
there is any investment in time and resources. It is not
unusual for members of the group to believe that because
they are close friends and work together well that they
or their families and heirs will have no problems. They
may even have written agreements between themselves which
they feel is appropriate and may not like the
entrepreneur meddling in their personal relationships.
The entrepreneur must however insist on the careful,
detailed analysis and protection of the legal
relationships of the members. In the long run it is in
the best interests of all involved. The following
questions and more must be answered in this regard:
1. Who actually owns the group name
2. How was the name developed
3. How has the name been protected
4. What written agreements exists between the group
members
5. Who actually owns the rights in the songs written
and /or produced by the group 6. What is the basis of
the ownership in the name and the songs
7. What is the business structure of the group
(corporation, partnership, Sole proprietor,
independent contractors etc.)
8. Are there any written operational policies for
group operations and decision making
9. How are financial matters and accounting handled
within the group
10. What kind of formal estate plans are in place
within and for the group
Obviously some of this information is important even
when considering a deal with individual artists.
Determining whether you deal with groups will be a
function of what they bring to the table, and how these
questions are answered. In the long run most small
entrepreneurs with limited resources may be better off by
passing most groups and emphasizing their acquisitions
and deal making with individual artists who may produce
similar profit margins. In a buyers market the
entrepreneur usually has other alternatives on which to
spend his resources.
Beware of production
The acquirer of entertainment intellectual properties
must face the important determination of whether he or
she will get involved with production of the physical
applications of the intellectual property. The production
aspect of the business is absolutely the most rewarding
for many entertainment oriented types. This is so because
it sits at the heart of entertainment. The record, Movie
or book that every one is attracted to and the thing that
every thing seems to evolve around is indeed absolutely
essential to eventually success, but again if your
ultimate goal is to make money you don't have to be
involved with the actual production of it, if you can
acquire the rights in it in some other way. The acquirer
should resist the temptation of getting involved with
production at all costs unless he is prepared to
undertake some extremely important risks. It is much
safer to acquire already completely marketable properties
assuming the posture of an investor and/or marketer than
to add the problems of production to your plate.
Production involves lots of time, money, frustration and
pitfalls along the way. The wise entertainment
entrepreneur will attempt to acquire the intellectual
property rights in entertainment properties by purchasing
them, leasing them or otherwise negotiating
collaborations which provide for ownership or control of
them. If your goal is primarily a money making one then
producing additional products in an already crowded
marketplace is generally not a smart idea no matter what
business you are in. Acquirers must be careful not to
contract themselves into a position where they must
finish a product or reproduce a product. If possible the
I.P. and its associated physical application should be in
completely finished and marketable form as much as
possible. To contract for, and acquire a non finished
product can be a major problem even though the future
prospects and potential may be tremendous.
Understanding and undertaking some production however
may become a necessity for the entertainment
entrepreneur. When undertaken by the small entrepreneur
production generally occurs in a very informal way which
may lead to a wonderful artistic production but one
flawed with so many legal and business deficiencies that
it makes the product effectively unsaleable. The
production process must be undertaken with great care.
Every element of production should be carefully planned,
legally sanitized, timed, and budgeted. If the project is
to be ultimately saleable it must be produced with
careful attention to the ownership and control rights
involved. Typically the music business has been the area
of entertainment where most of the problems of this type
has occurred in the production process. Musical
productions many times are the result of collaboration
among several musicians, lyricist and arrangers who
operate in a love triangle with the music making process.
Often little attention is paid to formalities of
production and ownership and it is assumed that ownership
is a clear-cut item or its details can be dealt with
later. This is a dangerous way to produce a song or album
in that the major element of ownership lies in the
composition and sound recording copyrights which attach
themselves respectively at the time of creation and not
at the time of registration with the copyright office.
This may mean that all collaborators involved at the time
of production may have some ownership in the copyrights
to the composition and the recording. Unfortunately these
possibilities do not become recognized until there is
significant money being made and then potential owners
and their families, friends and cohorts arise from the
woodwork looking to collect on their interest.
It is important for the production efforts to be
limited to the smallest group of individuals possible.
Fortunately today with the use of computerized equipment
much of the pre-production and production in a song can
be effectively done with very few musicians, sometimes
with only one good electronic keyboard player.
Even more important to the legal sanitization of the
production is the practice of making everyone involved
sign an agreement as to his scope of involvement and the
legal consideration offered for his involvement. Most of
the time this agreement will entail a "work for hire"
agreement, which must be in writing and which establishes
that the involvement is one done as an employee on the
project where no rights of ownership in the copyright
attaches. Work for hire agreements can take many forms
and provide several different types of legal
consideration for the work involved, however the most
import element is that it is executed before any aspects
of production is started. A good rule of thumb is that
such agreements should be executed outside of the studio
environment at some point in time prior to the studio
work beginning.
Some problems exist with the production of live and
extemporaneous recordings. However if there exists any
possibility that a live or extemporaneous recording will
occur prophylactic type agreements should be executed. In
some cases properly drafted releases and post production
documents may be executed to protect the ownership rights
in the project, but these should only be used where there
is no other alternative, and as a last resort.
The work for hire agreement is extremely important
because it establishes that the ownership rights which
may otherwise rest in all of the collaborators, will
always rest with the employer from the moment of
creation. This is significantly unlike an assigned right
where the collaborator had ownership rights actually
vested in him which he later assigned away. The holder of
assigned ownership can have contingencies implied to his
ownership and can also have his rights revert back to the
original creator after a period of thirty-five years
under the current U.S. copyright law. In addition
international rights in the production may also be
affected based on the customs and laws of the country or
jurisdiction involved.
Part Two
----- Part
Four 