Some entertainment attorneys shop the band’s music to record labels and music publishers. These “shoppers” use their industry connections to obtain deals for the band and are paid with a percentage of the band’s income from the deal (typically 5% to 10%). This is referred to as a label-shopping deal, and the income may continue for the life of the deal, or for a limited period of time, depending on the arrangement with the attorney.
For example, an attorney may shop your band’s music around and draft your contract in return for a percentage of the band’s income from that deal. The attorney may charge $5,000 plus 5% of your record deal. Every time your band receives a payment from the record deal, the attorney would receive 5%. Your band may have to continue paying this percentage even after you switch attorneys.
You may wonder why attorneys shop music. After all, this is not a task that requires a legal education—managers and bands themselves often perform the same function. The reason is that attorneys have assumed a unique position of power in the music business: They’re well‑connected and have knowledge about contracts. Since many labels are run by attorneys, this creates a situation that many musicians find very depressing—attorneys shopping music to other attorneys. After all, where are the people who are passionate about music? Unfortunately, you will have to put aside such concerns and accept music shopping by attorneys as a business reality.
On the other hand, some attorneys report that less importance is now placed on music-shopping arrangements. That’s because, as one lawyer told us, “[Labels] have discovered what pathetic taste most lawyers have. Therefore, they don’t pay much attention to the tapes that lawyers send in unless there’s some other evidence that the band has something going for it.”
What Should You Pay for Label Shopping?
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 as to how much the shopper receives.
Attorney shoppers traditionally receive 5% to 10% of the record deal, with most deals closer to 5%. Sometimes (but usually not often) a band can make certain deductions before the percentage is calculated. For example, if the label is advancing $50,000 to the band 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 music 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, your agreement could give the attorney 5% of the income from the record deal up to $20,000. After that, the attorney would receive no more of the payments.
Sometimes the decision of how much is fair is based on the band’s circumstances. As one attorney explained, “If a band has never played anywhere besides the drummer’s garage and they find a lawyer who procures a major label deal based on a demo tape, I would say that 5% over the life of the deal would be a bargain. On the other hand, if they’ve already sold 5,000 units of their [do-it-yourself] record in their hometown, it’s a complete rip-off.”
Potential Pitfalls of Label-Shopping Arrangements
Label shopping used to be a function of the band’s manager, but the lines between managers and attorneys have blurred. There is often a large gray area between managers and attorneys—some managers are lawyers, and some lawyers perform management functions. In the past, when the functions were always separate, a band could use the attorney and the manager as a system of checks and balances. That is, the attorney could review the management agreement on behalf of the band, or the manager could advise the band when to switch attorneys.
Whether the same person should perform both functions is a matter that your band must decide based on your knowledge of—and trust in—the attorney. It can be a boon for musicians who can save money on legal bills, but it can also be a risky proposition, particularly when the manager/attorney is getting a percentage of a record deal. Why? Because whenever the manager/attorney is getting a percentage of the deal, there is always the possibility that the band won’t get the same impartial legal advice as they would if they retained a separate attorney who was paid on an hourly basis. As is often the case in the music industry, it comes down to greed. An attorney who is getting a percentage of a record deal may forgo other contract considerations (such as length of the contract or song ownership) in order to get the highest possible payments.
As you can see, potentially sticky issues may arise when an attorney shops a demo. Consider the following potential situations:
- The attorney does not take a personal interest in your band’s career. Sometimes, an attorney who shops music does not use discretion. The attorney simply dumps demos with many record companies in the hopes that one of them connects.
- The attorney has a conflicting interest. Since the attorney is earning a percentage from the deal, it is possible that the attorney’s major concern is 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.
- The attorney mixes business and legal services. When an attorney performs nonattorney services, such as shopping music, the attorney is mixing legal and nonlegal services. In some states, such as California, the law requires that before an attorney enters into such a relationship, the client must be advised in writing to seek the advice of another (independent) attorney and that the terms of the business arrangement must be in writing and should be in a manner which “should reasonably have been understood” by the client. In other words, you should understand everything you sign and, if necessary, seek independent advice.
- The band overpays 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 unfair in proportion to the services performed by the attorney.
Musicians should also be aware that most states have rules that prohibit attorneys from “soliciting” business. So if a lawyer calls you, or comes charging into the dressing room after a gig with a fist full of business cards, check him out carefully. Interview a few other attorneys before you make up your mind. By the time that happens, you will have come too far to risk trusting your progress to someone unsavory.
Despite these potential problems, attorney-shopping agreements are still common in the record business. It is difficult for bands to obtain access to record companies, and an attorney may be the only available gatekeeper.