One of the things that sets Stem apart from many other distributors is our payment splitting. We want to make sure everyone who is entitled to get paid actually gets paid in a timely manner. And we don’t want you to deal with the accounting headache. Because of this, we sometimes run into delays because all parties can’t agree on splits or ownership. It’s so important that you get all the business necessities out of the way early on, so you don’t run into issues when you’re down to the wire needing to get your music out.
The following is an excerpt from Ari Herstand’s new book, How to Make It in the New Music Business (Second Edition) which is the #1 best selling music business book in the world right now. Get it here.
Remove any confusion. Create a band agreement. If you can’t afford to hire a lawyer, write out guidelines that everyone agrees to. Use the list below as a guide.
1) Songwriting Credit and Copyright Coldplay splits every song equally 4 ways no matter who actually wrote the song. The Beatles didn’t. How will you split songwriting credit?
2) Compensation It’s best to split all (non-songwriting) income equally. But make sure you designate what percentage of the net income (after all expenses) you’re going to keep in the bank account each month and what percentage you will pay the members. Make a point to revisit this breakdown every six months.
3) Responsibilities and Expectations Include that everyone will follow reasonable instructions from the manager or band member manager (BMM) and carry out agreed-upon duties diligently. You should outline some general expectations every member will follow. Show up on time. No vomiting on stage. Those kinds of things.
4) Termination If a member quits, (s)he loses all rights to future earnings of any kind (except songwriting royalties paid out by his/her own admin publishing company and PRO, and this member is void of having to cover any expenses or current debt. If a member is voted out, give the member his/her percentage of the value of all band gear and current cash on hand. If the band breaks up, split up everything equally.
5) Who Covers Expenses Initially, you may have family members helping cover expenses. Will they get paid back? If so, how? Will every member cover expenses out of pocket or only from the band bank account?
6) Band Gear Costs I recommend every member covers 100% of the expenses for their personal equipment (strings, drum heads, amps, etc.) and every member splits group gear expenses equally (PA, lights, van, trailer).
7) Power of Authority You should designate one person who has the authority to sign contracts on behalf of the band (the BMM), but require that nothing can be signed without group consent.
8) Decision-Making Every group decision must be voted on by the entire group. If there is an even number, give the manager the tie-breaking vote. Or give the BMM two votes.
9) Side Projects Are members allowed to participate in side or solo projects?
10) Hiring New Members Bring all new members in by unanimous decision. Make clear that all new members are entitled to all new revenue (including all future royalties of past albums), but not ownership/compensation for songs they didn’t write.
11) Rights to the Name If (when) the band breaks up or a member leaves, who gets the right to use the band name? You should have a stipulation that if a member leaves (or is voted out), that member loses all rights to the band name.
Ari Herstand is the author of How To Make it in the New Music Business (second edition), a Los Angeles based musician and the founder of the music business education company and blog Ari’s Take. Follow him on Instagram @ariherstand.