There’s too much formalism in music business articles already, but here we go. The purpose of this article is to discuss a business transfer agreement format. In business law, a business transfer agreement (‘BTA’) is an important piece of legal documentation. It is used in many businesses and industries, music industry included. In fact, the music industry has more examples of business transfer agreements in circulation than you may realize at first glance. Since many of them are contractually bound with a non-disclosure agreement, very few of them see the light of day. For my purposes, I’ll present an abbreviated outline of the BTA below so you can get a more functional understanding of what it is.
Item 1: Definition of a Business Transfer Agreement A business transfer agreement is a document used when one business buys another business. Its purpose is to outline the details of the purchase. This ensures that one party has agreed to do what they were supposed to do in exchange for the compensation they were due. It also ensures that the seller of the business actually sold everything they were supposed to sell.
Item 2: Typical Usage of a Business Transfer Agreement in The Music Industry For example, if a Master Recording Label (‘record label 1′), buys the rights to a band’s master recordings, it may be wise to enter into a business transfer agreement prior to the purchase. That way, record label 1 can ensure that it receives all of the rights to the recordings, including the rights to the royalties. If another label or person owned part of the rights to the recordings, it could end up causing a paternity dispute as to who owns the rights to the babies they create. Manufacturers and distributors have the same concerns whenever they purchase inventories of new recordings to distribute to stores and retailers.
Also, many major distribution companies outsource big purchases to independent contractors in order to save money. If the independent contractor fails to receive payment for the new inventory, the manufacturer or distributor would be out of a lot of money.
Item 3: Purchase of Record Labels as Consideration in A Bill of Sale In other instances, there is straight cash; money exchanging hands between the two parties. However, some distributors are not big enough to purchase a record label or indie label; instead, a bill of sale might be appended to the business transfer agreement. In that case, the record label might say, ‘I’ll give you a cash payment equal to 20% of gross revenues for the next 5 years and 30% gross revenues for all 8s and 8+aba albums sold in exchange for the rights to your master recordings and compilation catalog’.
Item 4: Record Labels Preserving Artist Rights Most major record labels no longer allow their artists to maintain a ‘360 deal’, as lawsuits and charges of mismanagement ultimately cost them business. However, an artist can preserve their rights through a BTA:
Item 5: Artists Taking A Chance On a New Business Transfer Agreement When a band enters a new business transfer agreement, they could be taking a calculated risk. It is important to see what other projects the record label is handling at the time and whether those projects have been successful. If another band on the record label is successful, it may look good on the new artist. But, if another artist on the label is NOT successful, then the artist may hit a log jam as the record label allocates its funding to artists that generate revenue now.
Item 6: Comparing the Business Transfer Agreement to Other Music Business Contracts The business transfer agreement is similar to a recording contract. In either case, the artist maintains certain rights to their work while generating a profit from the label. However, a recording contract often grants wide-scope ownership rights to the record label, such as the right to full creative control of the music. On the other hand, there may be restrictions on a BTA to limit the sovereignty of the record label.
Item 7: Example of A Band That Used A Business Transfer Agreement In late 2015, the record label Interscope Records bought the rights to the musical group Interpol. They may be to blame for Interpol’s disappointing sales numbers. No, really. Interpol’s relationship with the label has been fraught with tension. In 2011, Interpol signed a new deal with Warner Music Group’s Rhino Entertainment Co.; however, the terms of the deal have been hotly contested by the two parties. Rhino attempted to move Interpol’s distribution from the now-defunct RCA Label Group to Sony Music (which was rumored to be interested), but the frontman of Interpol greatly opposed the transfer. Do you see how powerful a music business contract can be in the hands of a musician? Of course you do. Now that you know what a business transfer agreement is, you can begin to apply it more broadly.
For more information on business transfer agreements, you can visit the Wikipedia page.
