Contract Terms Question

[Alan]

I’m going over a contract for non-exclusive and would like some opinions regarding the licensing fee split. Here is the paragraph in question:

“Composer shall be entitled to 50% (Fifty Percent) of all Net License Fees received and collected by LIBRARY X as a result of the Licensing by LIBRARY X of Composer’s Catalog. Net License Fees for purposes of this Agreement shall mean moneys actually paid to and received by LIBRARY X as a result of the Licensing by LIBRARY X of Composer’s Catalog, less all refunds, discounts, write-offs, set-offs, expenses, taxes (excluding LIBRARY X’s income taxes), disbursements and/or other costs associated with or relating to the generation of License Fees hereunder. Non-refundable advances received and collected by LIBRARY X will be treated as License Fees to be distributed pursuant to this Agreement. LIBRARY X shall account to and pay Composer the portion of the License Fees due Composer hereunder on a semi-annual basis on or before September 30th of each year for the prior six (6)-month period ending June 30th and on or before March 31st of each year for the prior six (6)-month period ending December 31st, based on collections. No accounting is required for any period in which no payment is due Composer.”

Now it seems to my little brain that “less all refunds, discounts, write-offs, set-offs, expenses, taxes (excluding LIBRARY X’s income taxes), disbursements and/or other costs associated with or relating to the generation of License Fees hereunder.” means they can deduct pretty much whatever they want from the license fees. I think they could deduct their website costs, office electric bill, employee salaries, etc.

Am I completely wrong?

[Art Munson]

I don’t think you are wrong but I’ve seen these kinds of clauses in a lot of contracts. Never did like them.

[Blind]

I’ve never signed a contract like that simply because it’s too one-sided.

[MichaelL]

Yeah, that’s a bit of a smokescreen.

Language like that comes from traditional recording industry contracts, where recording artists get paid for “net” sales. Record companies deduct the costs of manufacturing, packaging, distributing and promoting CDs BEFORE paying the artist.

Many writers on the forum complain about libraries that take a 60/40 cut. Here, it appears that you’re getting a good deal because it’s 50/50 on its face. However, when all is said and done, after they deduct their “expenses,” you’ll probably end up closer to 60/40 or LESS.

We may not like giving libraries a 60/40 split, but you’ve got to respect those that are upfront about it, and let you you know that it’s the cost of doing business.

Generally, any contract that I’ve seen, with those terms, also contains a clause allowing the contractee to audit the contractor’s books (with notice). In other words, you get to see where your money went, and they have to prove it.

[Alan]

I was hoping you would chime in on this MichaelL. I reread the contracts I currently have and some say 5o% of gross, others net. None had wording like this one though.

It is from a multimedia company with over 10 years in business. They appear to be getting ready to open a music licensing division.

They placed and ad on Berklee’s job board. I sent them a link and they replied within hours, said they wanted my stuff and sent me a contract. Of course my ego was thrilled, but I dug into the legalese of their agreement because if it’s too good to be true …

I was invited to ask questions about their terms. I brought up my concern about this and I haven’t gotten a reply after two business days. Hmmm. I think I’m going to leave this one alone unless someone from MLR suggests otherwise.

Thanks MichaelL

[Alan]

FYI on my follow up. The company looks impressive on the web and I was afraid I could be blowing an opportunity. I made a phone call and was told he wasn’t available and the best way to contact him was via e-mail.
I guess it wasn’t meant to be …

[Author]

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