1. Skip to navigation
  2. Skip to content
  3. Skip to sidebar

Ginuwine Concerns for Management Contracts

[We proudly offer a guest post authored by esteemed colleague and articling student Ben Iscoe, with an assist from yours truly. I'm proud to say that I actually knew Ginuwine's real first name before I read this article.]

Elgin Baylor Lumpkin (the performing artist better known as “Ginuwine”) is being sued by his former manager.  For those familiar with the R&B star, one could make the (terrible) pun that he is being asked to “Pony” up dough for outstanding royalties.[1]  But how did this lawsuit come about?  It is unlikely that Ginuwine and his manager entered into their artist/manager relationship with the expectation that it would culminate in litigation.  What went wrong?  Could Ginuwine have done anything differently to avoid this costly and time consuming ordeal?

Musicians, generally speaking, are not business people; they are musicians.  Elvis, “The King”, may be one of the most iconic musicians of all time, but behind the scenes Colonel Tom Parker was managing his way (in the extreme case) to half of The King’s earnings.  Was this a good deal for the King?  The answer depends on one’s point of view.   Elvis himself said “I don’t think I’d have ever been very big if it wasn’t for [Parker]” reminding one of the adage “50% of something is better than 100% of nothing.”

So how does an artist know if they are entering into a favourable, or even equitable, manager/performer relationship?  How do future Ginuwines minimize their risk of litigation or more generally, entering into an unfair agreement?  Artists spend their time composing that addicting hook coming out of the bridge; Business 101 is likely on the backburner.

Below are general guidelines for artists when contemplating whether to enter into a management agreement.  This list is not exhaustive, but merely meant to be a helpful tool and should not be interpreted as a substitute for obtaining legal advice.

1. Defining Expectations

Almost all artists will say that they want their manager to help them grow/make a livelihood performing their art.  What does this mean?  Vague terminology is a recipe for future tension.  For instance, does the artist want to handle their own merchandise or have the manager handle this?[2]  Does the artist want to plan their own tours and just have their manager shop their album?  It is impossible to include every detail, but artists should be as specific as possible to ensure that all parties are of the same understanding.  It is better to disagree on specifics up front (when there is little or no commitment) as opposed to when the relationship is long established.

2. Duration

How long do you want the artist/manager relationship to last?  It is probably advantageous for the artist to enter into a short term contract, and then renew if the manager is delivering to the artist’s satisfaction.  However, if the artist is unknown, it is unlikely that much income will be generated in the first couple of years.  Therefore, the manager will want a longer contract as they would find it unjust (and a horrendous commercial practice) to allow another manager to reap the fruits of their labour (i.e. they spend the first couple of years helping the artist establish themselves only to have another manager start collecting 20% once the artist begins generating significant revenue).

This is an area where the artist, especially an unknown artist, will have to give the manager some slack.  Whatever the case, specify a period of time.

3. Exclusivity

Does the artist expect to be the manager’s sole client?  If so, it is important to specify.  For an unknown artist, this is an unrealistic ask.  As mentioned above, it will likely be a while until an unknown artist will start to generate significant revenue.  Asking a manager to rely on a percentage of a minimal (or perhaps non-existent) income for any period of time is unreasonable.

4. Territory

Where does the manager have connections?  Are they a mover and shaker locally, but not nationally?  Perhaps they have every domestic record exec on speed dial, but have no international connections.  In a smaller market, Canada being a prime example, artists may have interests in growing outside their national borders (i.e. in the US).  In such a situation, the artist may want to be mindful to specify what areas are covered by the management agreement?  For instance, emphasize that one manager will be the artist’s exclusive representative in Canada, but not the US.

Keep in mind, people respond to incentives.  If an artist wants to penetrate the US market and their manager will not generate any revenue from the artist’s activity there, why would the manager make any efforts south of the border?  Carving up territories should be used if the artist believes that they can establish themselves in a specified market without the manager’s assistance.  This may be accomplished by either (a) the artist’s own connections to the market; or (b) another manager who will have exclusive responsibility to that other market (i.e. the artist will have multiple managers to cover multiple markets).

5. Expenses

As mentioned above (and to be reiterated throughout), a manager is unlikely to be making much money off of the artist in the artist’s early days.  Despite this lack of revenue, the manager may need to spend money to assist the artist’s career.  If the manager is going to survey a venue, s/he will need to drive to the venue and park; who should pay for their gas and parking?  If the artist is hoping to have their manager arrange a tour, the manager will likely need to call a plethora of out of town venues; who should pay for their long distance calls?

These trivial sounding expenses may rapidly culminate in a bill the artist is ill equipped to pay.  At the start of the relationship the artist and the manager should specify what expenses the artist will cover.  It is not feasible to cover all possible scenarios, but a management agreement should attempt to cover general categories (like those identified above) to avoid future disagreements.  The artist may also consider creating caps for certain categories.  For example, in a given month, if long distance costs exceed ‘x’ dollars, then additional permission from the artist is required.  It is important to consider how much discretion or oversight the parties want built into the relationship.

Whatever your arrangement, it is crucial that any expenses require receipts.

6. Compensation

The days of Colonel Parker and managers receiving 50% are over.  Seemingly, a manager’s commission floats between 15-20% of the artist’s gross income.  This may seem significant, but in the early stages of the artists career 20% of nothing is still nothing.  This number may only lead to significant income for the manager once the artist has made it big, and there is likely a direct correlation between the rise in the manager’s income and the value the manager has added to the artist’s career.

There is no reason for a manager to receive any payments upfront.  A manager’s revenue should derive from the fruits of their labour, not an artist’s vain desire to say “I have a manager.”  Artists should be mindful of indirect attempts for managers to elicit money up front.  For example, artists should be wary of the manager who has a financial interest in the studio where (a) s/he wants the artist to record their next album; or (b) have promotional photography done.  That is not to say that these facilities should never be used, but rather that artists should be cautious to ensure that the rates at which they are being charged remain competitive with the industry norm.  If in doubt, artists may be wise to use other facilities (and see if their manager maintains their interest in representation).

Compensation should also specify for what activities the manager should collect a commission.  What about merchandise?  What if the artist begins writing with or producing for other artists?  What if the artist gets into acting?  What about the artist’s pre-existing revenue streams (e.g. endorsement deals)?  Or as in the case of Ginuwine, how should royalties be determined?

7. Option/Exiting

A management agreement will likely contain a provision that allows a manager to extend the relationship.  Such a provision is somewhat standard, but the nature of the option to extend must be clearly defined.  The option should specify (a) how often the option may be extended; and (b) for how long the relationship may be extended with each option.

Conversely, the management agreement should state how either party may exit the relationship.  The desire to exit the relationship may be difficult to visualize at the time of formation; at this time the manager and the artist should be enthusiastic about one another (if not why enter such a trusting relationship).  The terms of the agreement should address what happens when this relationship is no longer harmonious, more specifically what are each parties’ obligations when either party wants to end the relationship.

What compensation will the manager be entitled to once the artist/manager relationship has concluded?  The manager will argue that a portion of the artist’s revenue received after the artist and manager have parted ways derives from the labour of the manager (e.g. the manager secured the recording contract that continues after the conclusion of the artist/manager agreement).  Consequently, the artist and manager should consider sunset provisions.  These provisions entitle the manager to a certain declining percentage of the artist’s revenue in the years following the conclusion of the contract (e.g. 15% for the first year after the conclusion of the contract; 10% in the 2nd year; 5% in the 3rd year; and no compensation going forward).

8. Power of Attorney

Does the artist want the manager to be able to sign on their behalf, or only after checking with the artist first?  Can the manager sign on the artist’s behalf when it comes to certain contracts, but not others?  Include in any management agreement a power of attorney that clearly demonstrates under what circumstances the manager may sign on the artist’s behalf.  For logistical reasons, this type of provision may prove helpful; sending an email to a manager to give them permission to sign a document on the artist’s behalf could save valuable time and money.



[1] For those unfamiliar with the R&B Star, 1996’s “Pony” was the name of arguably Ginuwine’s most well-known single.

Ginuwine Concerns for Management Contracts

Canada’s Anti-Spam Law – New Guidance on Offering Apps, Software

Canada’s Anti-Spam Law (CASL) targets more than just email and text messages 

CASL also prohibits installing a “computer program” – including an app, widget, software, or other executable data – on a computer system (e.g. computer, device) unless the program is installed with consent and complies with disclosure requirements.  The provisions in CASL related to the installation of computer programs will come into force on January 15, 2015.

Application outside Canada

Like CASL’s email and text message provisions, the Act’s ”computer program” installation provisions apply to persons outside Canada.  A person contravenes the computer program provisions if the computer system (computer, device) is located in Canada at the relevant time (or if the person is in Canada or is acting under the direction of a person in Canada).

Penalties

The maximum penalty under CASL is $10 million for a violation of the Act by a corporation.  In certain circumstances, a person may enter into an “undertaking” to avoid a Notice of Violation.  Moreover, a private right of action is available to individuals as of July 1, 2017.

CASL’s broad scope leads to fundamental questions - how does it apply?

The broad legal terms “computer program”, “computer system” “install or cause to be installed” have raised many fundamental questions with industry stakeholders.  The CRTC – the Canadian authority charged with administering this new regime – seems to have gotten the message.  The first part of the CRTC’s response to FAQ #1 in its interpretation document CASL Requirements for Installing Computer Programs is “First off, don’t panic”.

New CRTC Guidance 

The CRTC has clarified some, but not all of the questions that industry stakeholders have raised.  CRTC Guidance does clarify the following.

  • Self-installed software is not covered under CASL.  CASL does not apply to owners or authorized users who are installing software on their own computer systems – for example, personal devices such as computers, mobile devices or tablets.
  • CASL does not apply to “offline installations“, for example, where a person installs a CD or DVD that is purchased at a store.
  • Where consent is required, it may be obtained from an employee (in an employment context); from the lessee of a computer (in a lease context); or from an individual (e.g. in a family context) where that individual has the “sole use” of the computer.
  • An “update or upgrade” – which benefits from blanket consent in certain cases under CASL – is “generally a replacement of software with a newer or better version”, or a version change.
  • Grandfathering – if a program (software, app, etc.) was installed on a person’s computer system before January 15, 2015, then you have implied consent until January 15, 2018 – unless the person opts out of future updates or upgrades.

Who is liable?

CRTC staff have clarified that as between the software developer and the software vendor (the “platform”), both may be liable under CASL.  To determine liability, the CRTC proposes to examine the following factors, on a case-by-case basis:

  • was their action a necessary cause leading to the installation?
  • was their action reasonably proximate to the installation?
  • was their action sufficiently important toward the end result of causing the installation of the computer program?

CRTC and Industry Canada staff have indicated that they will be publishing additional FAQs, in response to ongoing industry stakeholder questions.

See:  fightspam.gc.ca  and consider signing up for information updates through the site.

 

, , ,

Canada’s Anti-Spam Law – New Guidance on Offering Apps, Software

A Clarifying Development – “Canadian Content” Tax Credit Regulations Amended

The October 4, 2014 Canada Gazette (being vol. 148, no. 40), contained something of note for Canadian film and TV lawyers: amendments to the Income Tax Act regulations which govern the “Canadian content” tax credits for audio-visual productions. The full text of the amendment in the Gazette can be accessed here.

What Was the Problem?

Before the October 4, 2014 amendments, it was not entirely clear who was to be considered an “owner” of copyright in a production, and there was further uncertainty regarding whether licensing someone exploitation rights or granting them a right to share in the revenues of a production could make them qualify as an “owner” of “copyright”. That led to confusion surrounding how to properly structure ownership, licenses and revenue participations so as not to inadvertently fall afoul of the regulations (and thereby render the production ineligible for “Canadian content” tax credits). The confusion was further compounded by some inelegant drafting.

So What Has Changed?

To borrow from the Gazette‘s description of the amendments, the regulation has been changed so that:

  • “copyright owner” is now a defined term in the regulation – one which uses terminology found in the Copyright Act (e.g., the definition uses terms such as “maker” and “copyright” that have particular meanings under the Copyright Act);
  • it is now definitively stated that a person having the right to share in revenues generated by a production is not in and of itself an interest or a right held by a copyright owner;
  • it is now definitely stated that the grant of an exclusive license does not constitute an assignment of copyright for purposes of the tax credit analysis
  • the definition of “excluded production” has been re-worded to make it clear that a production will be deemed to be an “excluded production” (and therefore ineligible for “Canadian content” tax credits) if someone other than a “prescribed person” owns copyright at any point during the first 25 years after the production has been completed; and
  • the list of “prescribed persons” has been expanded to include Canadian individuals, Canadian taxable corporations, and partnerships of prescribed persons.

The amendments will take effect forty days after October 4, 2014 (so, November 13, 2014), and will not be retroactively applied to any production if before November 13, 2014 (a) the Minister of Canadian Heritage has revoked or refused to issue a certificate of completion for it or (b) the Minister of National Revenue has assessed a return of income on the basis that the production is not a Canadian film or video production and that assessment’s basis is not vacated or varied on or after that date.

That’s Nice. So?

While not changing very much on a substantive level, these changes provide some comfort and further guidance on structuring elements that many of us rely on in structuring productions:

  • entering into a license or distribution agreement does not constitute a transfer of copyright
  • granting rights to participate in revenues (such as “back-end” or “net profit” participation) will not, in and of itself, cause the production to go “off-side” – while such “back-end” participations have often been granted to individuals providing services in connection with projects (such as directors or actors), these amendments appear to permit “hands-off” investors to be granted such participations as well, something which historically was regarded as somewhat risky
  • there is now greater flexibility in structuring productions because the list of acceptable (or “prescribed”) persons who can own a copyright interest in the production has been expanded to include not just Canadian corporations, but also Canadian individuals and Canadian partnerships (all of whose partners are prescribed persons)

Fine. Now Say Something Really Nerdy.

These amendments do something interesting with the term “maker”, which is defined in the Copyright Act as “the person by whom the arrangements necessary for the making of the work are undertaken”. The amendments, in the way that they define “copyright owner”, seem to imply that the “maker” of a production is the first “owner” of copyright in the production – however, a close reading of the Copyright Act reveals that the term “maker” is something of an analytical dead-end: being the “maker” of a production has no bearing on the ownership or authorship of that production for copyright purposes. In other words, by trying to tie “maker” and “owner” together, the amendments do something that not even the Copyright Act does. It’s not a problem – ownership for copyright purposes and for tax purposes can be different things – but it is interesting to note that the regulatory instinct is to rely on “maker” status in a way which is not present in the underlying copyright regime.

A Clarifying Development – “Canadian Content” Tax Credit Regulations Amended

Ken Dhaliwal: The Zenith (Award) of His Career

October 2, 2014 marked an important day in the history of the Dentons Canada LLP entertainment law practice group: David Steinberg wore a suit and tie for the entire day, and he was not scheduled to attend either a funeral or bar mitzvah.

Later that day, we were thrilled to attend the Lexpert Zenith Awards ceremony, at which, among other luminaries, our own Ken Dhaliwal was feted for his achievements during the course of his entertainment law career.

The photo below, taken at the event, features all of the lawyers in the Toronto entertainment group, because none of us could bear to cede the spotlight to Ken for even a minute we wanted to show our support for our good friend and colleague. It was a complete coincidence that we are arranged, from left to right, in descending order of height.

Zenith Award

(L to R: Jim Russell, Bob Tarantino, Ken Dhaliwal, Jayme Alter, some random guy who stumbled into the photo David Steinberg)

 

Ken Dhaliwal: The Zenith (Award) of His Career

The Challenge of the Unlocatable Copyright Owner – Checklists!

As this blog has documented on numerous occasions (first; second; third), Canada’s Copyright Act contains an “unlocatable owner” licensing mechanism (sometimes referred to as the “orphan works” mechanism), which enables prospective users of copyrighted works to apply to the Copyright Board for a license to make use of a work where the user has been unable to find the owner of the work in question. As set out in Section 77 of the Copyright Act (Canada), if the Copyright Board “is satisfied that the applicant has made reasonable efforts to locate the owner of the copyright and that the owner cannot be located”, the Board can issue a license.

We’ve previously discussed in detail (see here) some of the limitations of the unlocatable owner mechanism, but if someone did want to make use of it, one issue which historically has remained unclear is what constitutes the “reasonable efforts” required by the Act as a condition to issuance of a license. (To make things more confusing, the Board’s own brochure which provides guidance on how to make unlocatable owner applications states that the Board must conclude that an applicant has “done everything you could to find the copyright owner”, which seems like a much higher bar to clear than “reasonable efforts”.)

While we still don’t have much more clarity on the issue from the Canadian Copyright Board, the United Kingdom’s Intellectual Property Office (which operates a similar unlocatable owner mechanism) has published three different brochures and checklists which sets out that office’s views on what constitutes a “diligent search” for unlocatable copyright owners. There are brochures and checklists for each of three “groups” of copyrighted works:

The checklists, in particular, offer very detailed guidance about potential sources of information regarding copyright owners – as such, though these guides are published for a UK audience, they offer some good inspiration for anyone undertaking clearance activities for any kind of project, including film and TV projects which incorporate pre-existing works.

The Challenge of the Unlocatable Copyright Owner – Checklists!