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Assuming in both of the above examples the parties are in fact able to work things out, guess which management contract is going to be more favorable to the band and which contract will favor the manager? It ain't necessarily only about how "good" the respective lawyers are - mainly, it's the difference in leverage that results in the difference in the outcomes.
Please don't misinterpret these examples as my advocating messing around vs. not messing around. Again, if people really need to work together, then they shouldn't mess around and jeopardize their situation - the
other side's needs must be considered and factored in....and, as they say (more cliches...sorry):
a bird in the hand is worth many MANY MANY in the bush - particularly today. But again: this is not a game, whether you're in a band or are the CEO of a record company, this is your professional life and it's serious. But you can easily see that there are things that you can do - or not do - which not only will help make my job easier- or harder - to help you accomplish your goals and which will ultimately highly influence - if not downright determine - the final result.
One last thing: Remember I said above ad nauseum: "in the beginning...", " in the beginning..", "in the beginning"? Have you ever heard about people renegotiating their deals?
Have you ever wondered how that's possible? Well, it's about...GUESS WHAT... in this case, the GUESS WHAT is because of a specific legal principle which I'll illustrate with two more examples:
Let's say I'm a
builder and you hire me to build a $400,000 home for you and we sign a valid construction contract.
Let's also say that after I started to build your house, the price of bricks goes so far up, I now realize I'm going to lose money on your deal and so I stop building your house. What do you do? You really don't want to sue me - it'll cost you a lot more money and could take years - you don't want that...you just want me to do what I contracted to do: build you a house for $400,000 so you can move in as soon as possible. Well, you can go to court and seek the equitable remedy known as "specific performance" for my breach of this type of construction contract, i.e., you can go to court and get an order from a judge making me do what I promised to do.
Now, flip over to the world of entertainers where their contracts provide that they will furnish their personal services to the record company for the purpose of making records, etc. These types of contracts are
generically referred to as "personal service contracts". Here's the legal key:
Judges don't grant specific performance orders for failure to perform personal services under personal service contracts - it's like slavery or forced labor - imagine a court order that says: "You must deliver a record full of hits just like your last one by next Tuesday, and if you don't, I'm going to grant an order making you do it". First of all, how is a judge going to possibly enforce this and make it happen? It's not practical and just doesn't work and they don't do it. Although there are other possible remedies which may be available to the record company for this type of contract breach, more important than legal principles, the record company doesn't want to be hung up in litigation for the next 2 years on a case they know they can't really "win". Their business is to sell records and keep whatever momentum you have going. So, let's say the "baby band" that signed the "standard" (usually) one-sided "baby band" record contract (usually in the favor of the record company... in the beginning... because of GUESS WHAT...) now all of a sudden has just sold 18 million albums and is making the record company lots of money. But the band is not - and never really was - happy with the original deal. Now, when the record company business affairs guy calls me to proudly announce that his company is wonderfully ecstatic to exercise their option for the next record under the original terms of the deal - and by the way, can he have the record today so they can start selling it tomorrow? - guess which client of mine has a sudden major league headache and has writer's block and can't do any more records for the foreseeable future? When I mention this to the biz affairs guy and then I say, "Gee, I got another phone call, so, Bye...", guess what happens next? Since I'm not the only attorney in the world who knows the legal principles regarding the lack of specific performance as a remedy for the breach of personal service contracts, the biz affairs guy - who also knows about it - bigtime - calls me back - fast - and he asks me the following question: "How much aspirin will it take to make your client's headache go away?"....and, my response then might be, "Oh, $5 Million worth"...and then (sometimes after major jumping up and down, screaming or other major histrionics, bemusement [e.g., "You've GOT to be kidding..."], etc.) - he usually says (more-or-less): "Uh, OK". He may want something else for it, like more albums on the "back-end" of the deal. My response is: So what? Every time they exercise another option, it means the band is doing well, so the band has even more of GUESS WHAT and, depending on the level of the band's success, I can usually get the band more of what they want - money, creative control, a label deal - almost WHATEVER. This is leverage at work.
And that's the way it goes in the real world of contract negotiations.
So the moral of the story is: your behavior as well as the fruits of your efforts - taken in context of certain legal principles - directly increases or decreases your leverage - and your leverage - or lack of it - is what ultimately primarily determines the final outcome of any negotiation.
So, if you're a band signing your first deal, don't worry too much about what it says now about the amount of the recording fund for the third album as laid out in your original "baby band" contract.
I tell my band clients that although I always try to do the best I can do for new artists "in the beginning...", if they hit a home run - make a hit record - I'll go back in and, among other things, start adding lots of zeros at the end of the figures originally in the contract.
If you're a record company or a production company, realize that a band that achieves success will most probably - or should I say definitely? - be renegotiating its contract with you. Since
your risk will be lower than "in the beginning" and hopefully you'll be making even more money, you can now probably afford to give them more of what they want - in any event, no matter what - the reality is that probably the only way you can get another (hopefully more) profitable record out of them is to "do the dance" and "keep 'em happy".
Why does all this stuff work the way it works in the "real world" of contracts? Now you know....and repeat after me: L-E-V-E-R-A-G-E.... L-E-V-E-R-A-G-E.... L-E-V-E-R-A-G-E.... L-E-V-E-R-A-G-E....
For
more information and - I promise - no more cliches, please feel free to contact me at paul@paulbungar.com
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