Merchandising
by Ben McLane, Esq.
Signed artists, as well as unsigned artists that tour and have a strong following,
can make a considerable amount of money by selling merchandise such as T-shirts,
jackets, buttons, bumper stickers, posters, etc.
When an artist is preparing to tour, the artist will enter into a merchandising
agreement with a merchandiser. The artist licenses to the merchandiser the right
to use the artist's name, likeness or logo for the manufacture and sale of
merchandise. In exchange for the license, the merchandiser pays the artist
a royalty on the goods sold. Artists and their representatives beware because
many record companies try to obtain the exclusive merchandising rights to
the artist when the artist signs a recording contract.
The merchandising agreement consists of a few basic deal points:
Royalty. The royalty will either be a percentage of the gross sales of the item
sold (usually from 30-50%), or it will be in the form of a flat fee per unit sold.
Advances. Although the amount of the advance depends upon the stature of the
artist, it can range anywhere from $10,000 to over $1,000,000. As with record
royalties, merchandising advances are recoupable from royalties.
Term. This period is usually one year, or until the advance is recouped. The
artist should make sure it has the right to repay the advance so that the deal
does not drag on if sales are slow. The merchandiser will want to have a
sell-off period (generally six months) after the deal ends in order to finish
selling the goods that were manufactured. However, there should be no right
to manufacture any further items.
Territory. The territory can be worldwide or rights can be licensed on a region
by region basis.
Creative Control. The artist should insist that it has approval over any artwork
which will be marketed so that shoddy or negative merchandise does not enter the
marketplace.
The sale of merchandise can be very lucrative depending upon the type of artist
because some forms of music lend themselves better to the sale of merchandise.
Yet, since most signed artists will enter into some type of merchandising
agreement, knowledge of the parameters of the contract will help ensure a
fair deal.
Copyright 1998, Ben McLane
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