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Music Industry — Shopping Agreements

A shopping agreement is an arrangement that a musical artist makes with a “shopper” (usually an agent or a manager), who then uses his industry connections to obtain deals for the musical artist. A shopping agreement does not guarantee a deal.

Responsibilities of Shopper


A shopping agreement should state the shopper’s obligations, which consist mainly of contacting and soliciting potential licensees or music industry companies on behalf of the musical artist. Often, a shopping agreement requires a shopper to provide a monthly report to the musical artist listing the companies solicited, the name of the person to whom the solicitation was made, and the manner of the solicitation. This is important because proof of solicitation later determines whether the musical artist has to pay the shopper. To ensure that the shopper does his best, he should be given exclusive right to solicit on behalf of the musical artist because such exclusivity will eliminate any concern that he could be undermined by another shopper.

Term


A shopping agreement should make clear how long it is in effect. The time period given for the shopper to search should be long enough to give the parties a chance to assess their ability to work together, but not so long that they are trapped in an incompatible arrangement.

Compensation


For his services, a shopper usually receives a percentage of the musical artist’s income from the deal. Such payment is called a “commission” and is typically around 5 % of the deal. However, there are several important variables when determining how much to pay a shopper. Consider:



  • the size of the percentage
  • whether there is a limit as to how much the shopper receives (a “payment cap,” which stops a shopper from earning an unfair amount because the payments stop after a certain amount)
  • what (if any) deductions are made before the percentage is calculated

Income that “passes through” the musical artist and is used to pay for vital expenses should be subtracted from the musical artist’s income before the shopper takes his commission. These costs may include:



  • video production
  • tour shortfall advances
  • payments to other musicians performing with musical artist
  • pension or health contributions

Shopper’s Expenses


The musical artist is usually required to pay the shopper’s reasonable expenses that were sustained while searching for a deal. A shopping agreement should set limits on how much the shopper can spend before being required to obtain the musical artist’s permission for expenses.

Termination


If the shopper terminates the shopping agreement, the musical artist is not obligated to pay for the shopper’s services. However, if the musical artist ends the agreement early, he or she has to pay the value of the shopper’s services.

Copyright 2012 LexisNexis, a division of Reed Elsevier Inc.

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