As the music business has developed and changed, the income earned by bands and artists as a result of brand sponsorships and endorsements has, for many, become an essential source of revenue. Here we look at how to break down and understand these agreements.
Guest post by Justin M. Jacobson, Esq. of the TuneCore Blog
This the first in a two-part series.
With the evolution of the music business in today’s digital age of streaming and downloads; the ancillary income that musicians generate from brand sponsorship and endorsements have become of paramount importance to an artist’s overall earnings. For instance, “sponsorship spending on music tours, festivals and venues is expected to total $1.54 billion in 2017,” which is an increase of “4.8 percent from 2016.” In addition to this spending, many major brands have also entered into multi-year, multi-million dollar endorsements arrangements with musicians, including Pepsi and Beyoncé’s $50 million deal.
With the increased frequency of these types of arrangements and the potential large sums of money associated with them, an artist should ensure that all of the endorsement deal “points” are clearly articulated and negotiated. This is typically best accomplished through the use of a written agreement. We will now explore some considerations and provisions included in many endorsement and sponsorship contracts.
Most sponsorship arrangements are similar with both the musician and brand agreeing to certain obligations in exchange for the other party’s performance. This means that the artist is responsible for fulfilling a list of stated duties known as “deliverables.” In exchange for the artist’s fulfillment of its “deliverables,” the musician is entitled to the compensation agreed upon in the agreement. This compensation could be the sponsor providing the artist with free goods, product discounts, money, or a combination of these. What an artist may receive from a sponsor differs based on a variety of factors, including the notoriety of the musician, the brand’s “ask,” and the length of the activation. In this context, the “ask” is what the artist is obligated to do (its deliverables) on behalf of the particular sponsor.
As already mentioned, an artist’s “deliverables” differ based on what the musician is contracted to do. For example, the written contract may specify the particulars, such as a certain number of shows and appearances that the artist must make on behalf of a company during the agreement’s term. The document may also list the musician’s other obligations, including potential product placement in the artist’s music video, while conducting interviews or photo shoots as well as any “branded” stage signage at any live performances or appearances.
The talent may also be required to include a brand’s logo on the musician’s website, its social media platforms as well as possibly conducting “in-store” events or other personal appearances on behalf of the company. It is therefore prudent for an agreement to list the frequency and content of any published statements made by the artist on behalf of the brand. This includes the company potentially providing the musician with pre-drafted “copy” of the text for any social media posts that the artist is contracted to make.
It is also practical that any expense related to a brand promotional campaign is enumerated in the agreement. For example, if the sponsor requires the displaying of any banners or creating of specific “branded” giveaways, the contract should specify who is responsible for providing the items and at whose cost. Generally, the sponsor will be paying for these items, or at least supplying them to the artist at no charge. However, this may not always be the case, so it is essential that this information is decided in a signed writing.
When determining the deliverables an artist will provide, one important consideration for a brand is category exclusivity. This enables the sponsoring company to ensure that another competitor’s brand is not also displayed, used, or an additional sponsor of the artist. Generally, a musician can and will only have one endorsement deal for each type of product. For example this means that the artist only has one non-alcoholic beverage, one alcoholic beverage, one clothing line, and one instrument sponsor.
Since the actual language utilized determines the extent and scope of the brand’s exclusivity, a musician should aim to tailor the language to be as narrow as possible to not prevent them from working with additional brands. For instance, an energy drink, such as Red Bull, could be seen as different from a non-alcoholic beverage, such as Pepsi, which could be categorized as (a juice or) soda. In addition, one brand could be your band’s official guitar while another company could be the band’s official drum provider. Thus, the actual language included is essential and any agreement should be drafted with that in mind.
Below are sample provisions listing potential artist deliverables to a brand as well as language granting the company category exclusivity.
As discussed above, in addition to the unique deliverables an artist owes, the length of the term of the sponsorship agreement is also very important. In particular, the “term” or duration of the agreement is essential to determine in advance. This is true especially if the sponsorship is exclusive for a certain category. Typically, a shorter time period favors an artist as it provides them with the opportunity to explore other brand sponsors, including a potential competitor.
Conversely, a brand aims for a longer period in an effort to lock the musician in and prevent them from using or promoting a competitor’s item. It is also prudent for a brand to have an “option” to extend the sponsorship for additional time.
Below are provisions looking at the term of the agreements and exploring an additional option period that may exist.
In the second part of this piece, we will explore some other related clauses utilized in many sponsorship agreements.
This article is not intended as legal advice, as an attorney specializing in the field should be consulted. Some of the clauses have been condensed and/or edited for content purposes, so none of these clauses should be used verbatim nor do they act as any form of legal advice or counseling.