Record Label-Shopping Lawyers

QUESTION:

I have a band. We're off to a pretty decent start -- our songs have played on five radio stations so far. A DJ advised us to speak with a well-known music lawyer. We need a lawyer who can represent us to labels to get signed. We have a nice song demo I can give him, but we do not have any capital to compensate his service. Do you have any advice for us?

ANSWER:

If you do not have any legal problems and you are seeking an attorney primarily to assist in obtaining a record deal, it sounds as if you want an attorney who does "label-shopping." These shoppers, often former musicians themselves, use their industry connections to obtain deals for the band and are paid with a percentage of the band's income from the deal they secure.

There are several important variables when determining how much to pay a label shopper:

• the size of the percentage
• what deductions are made before the percentage is calculated, and
• whether there is a limit on how much the shopper receives.

Shoppers traditionally receive 5% to 10% of the record deal -- with most deals closer to 5%. Sometimes, a band can make certain deductions before the percentage is calculated, but they are likely to be limited. For example, if the label advances you $50,000 with which to make a video, the band should try to exclude such payments from the shopper's income.

The total amount to be paid to the shopper is also an important factor. Many shopping arrangements are for the length of the record deal. Therefore, if you sign a six-record contract, each time your band receives an advance, the person who shopped the tape would get a cut. For that reason, some bands attempt to limit the total payments by placing a limit or "cap" on the money paid to the shopper. For example, the attorney receives 5% of the income from the record deal up to $20,000; after that, the attorney receives squat.

Finally, you should be aware of common pitfalls when an attorney shops a demo tape.

The shopper might not take a personal interest in your band's career. Sometimes, an attorney who shops tapes does not use discretion. The attorney simply dumps demo tapes with many record companies in the hopes that one of them connects.

The shopping attorney may have a conflicting interest with your band. Since the attorney is earning a percentage from the deal, his or her major concern may be the size of the advance. Your band may have other priorities such as obtaining a higher royalty rate, getting a guaranteed second record, or getting a good royalty rate for songs written by the band.

And last, you may overpay for the shopping services. The attorney may continue to earn a percentage of the band's income for years -- even after the band breaks up. This sum may be unconscionably disproportionate to the services he or she actually performs, but unless you give some forethought to the issue, you could be stuck.