1. No category

SAVING THE MODERN RECORD INDUSTRY:
PARTNERSHIP AND FIDUCIARY DUTY BETWEEN LABELS AND
ARTISTS
By, Tyrone Scott, Case Western Reserve University School of Law
I.
Introduction
“It was the best of times, it was the worst of times.” 1 This is the state of the music
industry right now. There are more avenues than ever for artists to distribute and disseminate
their music to a wide group of people. 2 But record sales are down and the record industry is in
trouble. 3 This has led to a mad dash to snatch up profits wherever anyone can.
For some artists today, it is clear that the most profitable venture to undertake is touring. 4
Album sales have dwindled so drastically that making albums has become secondary to touring,
with the album produced being relegated to a formality. 5 For labels, the root of profits is based
around album sales. The continued decrease in sales over the last decade has prompted dramatic
lay-offs of employees at the labels and record label closures 6 and consolidation 7. Universal’s
recent acquisition of EMI moves the number of major record companies from four to only
three. 8This has pushed the labels to encroach upon the artists’ other revenue 9 in 360 deals. 10
360 deals allow record labels to participate in revenue streams generated by their artists
that the label did not necessarily establish for the artists nor actively participate in managing. 11
1
CHARLES DICKENS, A TALE OF TWO CITIES 3 (James Nisbet & Co., Ltd 1902) (1859).
Josh Catone, The Future of the Music Business: Soulja Boy, SITEPOINT, Jan. 8, 2009,
http://www.sitepoint.com/the-future-of-the-music-business-soulja-boy.
3
Sara Karubian, 360 Deals: An Industry Reaction to the Devaluation of Recorded Music, 18 S. CAL. INTERDISC. L.J.
395, 398 (2009).
4
Id. at 413.
5
Michael Arrington, 360 Music Deals Become Mandatory as Labels Prepare for Free Music, TECH CRUNCH, Nov.
8, 2008, http://techcrunch.com/2008/11/08/360-music-deals-become-mandatory-as-labels-prepare-for-free-music.
(“[Warner Music Group CEO Edgar] Bronfman, an outsider to the music world until recently, sees the writing on
the wall – music downloads will eventually be free, and will serve as little more than marketing collateral to other
revenue streams”).
6
Shirley Halperin, RCA's Peter Edge, Tom Corson on the Shuttering of Jive, J and Arista, BILLBOARD.BIZ, Oct. 7,
2011, http://www.billboard.biz/bbbiz/industry/record-labels/rca-s-peter-edge-tom-corson-on-the-shuttering1005394732.story.
7
Ben Sisario, EMI is Sold for $4.1 Billion in Combined Deals, Consolidating the Music Industry, N.Y. TIMES, Nov.
12, 2011, at B, available at http://www.nytimes.com/2011/11/12/business/media/emi-is-sold-for-4-1-billionconsolidating-the-music-industry.html?_r=0.
8
Id.
9
Brian A. Bloom, Jordan Fensterman and Alex Leibson, 360 Deals: The Wave of the Future or Has the Future
Come and Gone?, 21 N.Y. ST. B.A. ENTM'T SPORTS L.J. 64 (2009).
10
DONALD S. PASSMAN, ALL YOU NEED TO KNOW ABOUT THE MUSIC BUSINESS 93 (Free Press 7th ed.) (2009).
11
Id.
2
Though these deals have been criticized for their bias toward the labels, they have become
increasingly common. 12 360 deals will likely remain for the time being, so the best response is to
provide solutions to fix their implementation; partnership is one solution.
In contrast to traditional record deals, 360 deals lend themselves more easily to a
partnership finding between labels and artists. Profit sharing, joint control, and intent, the factors
of partnership, 13 are all present now that record label contracts have engulfed the ancillary
revenue streams of artists. Thus parties should begin to look at 360 deals as partnerships because
it will help save the record labels and a dying industry by solving issues of opportunistic
behavior and efficiency via the fiduciary duty that arises from finding a partnership. Many 360
deals 14 carry the partnership factors thus partnership law should apply. Some courts have even
left the window open for finding fiduciary duty when a special relationship is present. 15 These
cases point to a spectrum of circumstances that produce fiduciary duty when extremes are
reached on either side of that spectrum. The result is still the same fiduciary desired as in
partnerships.
II.
Finding Partnership and Fiduciary Duty
A.
Traditional Partnership Analysis
Though not uniformly recognized, the Revised Uniform Partnership Act (RUPA) is
widely used by courts and legal scholars. 16 Its basis is the Uniform Partnership Act (UPA) of
1914. 17 Today, the UPA is in force in 49 states and the District of Columbia 18and the RUPA has
been adopted by majority of states. 19 The RUPA defines “partnership” as “an association of two
or more persons to carry on as co-owners of a business for profit.” 20
It is imperative that certain factors exist to find a partnership. These factors are viewed in
the “totality-of-the-circumstances” and the agreement to a partnership does not necessarily need
to be in writing. 21 Such factors are vital in distinguishing a partnership from the finding of
12
See id. at 95.
UNIF. P'SHIP ACT §202 (1997).
14
Though not all 360 deals may fit the partnership framework, since there is not a standard industry-wide 360
contract format. PASSMAN, supra note 10, at 96.
15
Apple Records, Inc. v. Capitol Records, Inc., 137 A.D.2d 50, 57 (1998).
16
Douglas Okorocha, A Full 360: How the 360 Deal Challenges the Historical Resistance to Establishing A
Fiduciary Duty Between Artist and Label, 18 UCLA ENT. L. REV. 1, 4 (2011).
17
1 ALAN R. BROMBERG & LARRY E. RIBSTEIN, BROMBERG & RIBSTEIN ON PARTNERSHIP §1.02 (1988).
18
Uniform Law Commission, Legislative Fact Sheet - Partnership Act, UNIFORM LAWS,
http://www.uniformlaws.org/LegislativeFactSheet.aspx?title=Partnership%20Act (last visited Nov. 5, 2012).
19
Notable exceptions to the RUPA adoption include Louisiana and New York. Id. Because most recording contracts
are governed by California and New York law (M. WILLIAM KRASILOVSKY & SIDNEY SHEMEL, THIS BUSINESS OF
MUSIC: THE DEFINITIVE GUIDE TO THE MUSIC INDUSTRY 14 (Billboard Books 8th ed. 2000), it is worthwhile to
note that New York’s partnership laws are rooted in the UPA, but many of the relevant aspects of the RUPA for
purposes of this paper’s analysis are similar unless specified otherwise. See 1-12 Business Organizations with Tax
Planning § 12.02 Zolman Cavitch ,Matthew Bender LexisNexis 2001 (most of the main policies of the UPA were
maintained in the RUPA). See also Application of Lester, 1976, 87 Misc.2d 717, 386 N.Y.S.2d 509. (Though it is
worth noting that fiduciary duties are not codified in the UPA; New York has codified and upheld within common
law a fiduciary duty standard).
20
UNIF. P'SHIP ACT §101 (1997) (which adds the language “forms a partnership, whether or not the persons
intended to form a partnership”, predecessor of law, or comparable law of another jurisdiction”).
21
Southex Exhibitions, Inc. v. Rhode Island Builders Ass'n., Inc., 279 F.3d 94, 100 (1st Cir. 2002).
13
similar relationships, such as that of employer and employee. 22 But once a partnership is found,
partnership law establishes the proper responsibilities and duty owed by partners to each other. 23
B.
Profit Sharing
Profit sharing may be the most important indicator of a partnership. 24 A finding of shared
“net” 25 profits pushes the presumption to the presence of partnership generally. 26 Sharing profits
equally is not a necessity if the parties agree to another distribution proportion. 27 The
presumption of profit sharing does not apply when profits are paid as part of a debt, for wages,
rent, and several other conditions. 28
Finding an obligation to share in losses also favors a partnership finding. 29 Lack of profitsharing does not mean that a partnership does not exist but only that those challenging a
partnership’s existence will have less burden in proving otherwise. 30
Profit sharing is fairly straightforward to assess in 360 deals. “360” refers to the fact that
the label has its hand not only in traditional deal revenue streams, but many ancillary ones in
which it does not necessarily actively manage or partake in. 31 In 360 deals labels receive a
percentage, generally 20%-30% of net profits, 32 of recorded music sales, touring income, and
merchandise. 33 But agreements can also designate percentages of profits to record labels in
music publishing, modeling, acting, endorsements, fan clubs, and even book publishing. 34 Profit
sharing terms like these can be found in numerous 360 agreements providing the prima facie
evidence for partnership. 35
22
Fenwick v. Unempl. Compen. Commn., 44 A.2d 172, 174 (N.J. 1945).
UNIF. P'SHIP ACT §101 (1997).
24
See Peoples Bank v. Bryan Bros. Cattle Co., 504 F.3d 549, 557 (5th Cir. 2007).
25
To find sufficient profit sharing, it is explicit in the RUPA and found by courts (Warren J. Apollon, D.M.D., P.C.
v. OCA, Inc., 592 F. Supp. 2d 906, 913 (E.D. La. 2008); See BROMBERG & RIBSTEIN, supra note 17, at §2.07(b) that
the sharing of profits refers to net profits rather than gross revenues. See UNIF. P'SHIP ACT §202(3) (1997).
26
BROMBERG & RIBSTEIN, supra note 17 at § 2.07(c)(1).
27
“The sharing of profits between partners need not be in equal portions since they may agree on any proportion or
formula. An unequal sharing of income can indicate a nonsharing of profits, unless evidence discloses that some of
the income going to one party in a larger portion is used, or supposed to be used, for the payment of expenses of the
operation.” 59A Am. Jur. 2d Partnership § 151.; “It is not necessary that partners share profits equally as they may
agree on any proportion or formula.” Gangl v. Gangl, 281 N.W.2d 574, 579 (N.D. 1979).
28
These other conditions include profits being for an annuity or other retirement or health benefit to a beneficiary,
representative, or designee of a deceased or retired partner; of interest or other charge on a loan, even if the amount
of payment varies with the profits of the business, including a direct or indirect present or future ownership of the
collateral, or rights to income, proceeds, or increase in value derived from the collateral; or for the sale of the
goodwill of a business or other property by installments or otherwise. UNIF. P'SHIP ACT §202(c) (1997).
29
Kidz Cloz, Inc. v. Officially For Kids, Inc., 320 F. Supp. 2d 164 (S.D. N.Y. 2004); See also Ellsworth Paulsen
Const. Co. v. 51-SPR-L.L.C., 2008 UT 28, 183 P.3d 248 (Utah 2008).
30
UNIF. P'SHIP ACT §202 (1997).
31
Id.
32
PASSMAN, supra note 10, at 96.
33
Jonathan Basofin, 360 Deals and What They Indicate About the Future of the Music Industry Structure 14, 23
available at http://www.kentlaw.edu/perritt/courses/seminar/Basofin-360%20Deals-FINAL.pdf (last visited Nov. 26,
2012).
34
DINA LAPOLT AND BERNARD RESNICK, Multiple Rights Deals in the US: 360 and Beyond…, in MULTIPLE RIGHTS
DEALS IN THE MUSIC INDUSTRY 7 (Five Eight/Frukt Iael 2009).
35
See Karubian, supra note 3, at 427.
23
C.
Control
Control is also imperative to co-ownership and thus partnership. 36 Joint control of the
business venture is what courts have assessed. 37 Because control varies so much in each
agreement, there is no specific standard. 38
Some traditionally recognized activities include extensive participation in business
management and managerial powers. 39 The right to make meaningful business decisions can be
the basis of establishing joint control as well. 40
In 360 deals the labels either take an active or passive interest in the ancillary terms and
control is the distinguishing feature. Implied by its name, active interest indicates the record
labels have a more hands-on approach in dealing with the non-album related activities. 41
Passive interests indicate the label merely receives a percentage of net profit from
ancillary revenue streams, with no control rights. Most 360 deals are structured with labels
having passive interests in ancillary terms. 42
Joint control was conspicuously missing from traditional record contracts 43 but it is at the
forefront of 360 deals, particularly in passive interest relationships. The artist takes on
management of the non-album revenue streams, while the label maintains its traditional role of
album production and promotion; joint control is present. 44 And even in active interest
relationships, the artists still have valuable input into their new found career opportunities.
D.
Intent
The intention of parties to form a partnership is not required by the RUPA for a
partnership to exist but is still a major factor for determining if a partnership is present. 45 To
examine the presence of intent, it is not necessary to determine the subjective intent of the
parties’ willingness to form a partnership, but rather the intent of the parties to perform acts that
constitute partnership under the law. 46
“The requisite intent to establish a partnership is inherent in most 360 deals. The crucial
question…is whether the parties intend to create a relationship that includes the essential
elements of a partnership; the right to share profits and joint control of the business.” 47 The
36
UNIF. P'SHIP ACT §202 cmt. 1 (1997) (“To state that partners are co-owners of a business is to state that they each
have the power of ultimate control.”).
37
Equal control is merely the default and it need not be equally divided. UNIF. P'SHIP ACT §204 (1997).
38
“Participation in the control of the business is indicative of whether a partnership exists.” Dority v. Driesel, 75
Or.App. 180, 706 P.2d 995, 998 (Or.Ct.App.1985). “Control is associated with the requirement of co-ownership.
However, it is difficult to determine when one has the control sufficient to establish partnership. Control by itself is
not the exclusive indicator of partnership.” Smith v. Redd, 593 So. 2d 989, 994 (Miss. 1991).
39
BROMBERG & RIBSTEIN, supra note 17, at §2.07 (c).
40
Fenwick, 44 A.2d at 172 (in which the court said that a receptionist had no meaningful control over the salon
where she worked to be deemed a partner even she partook of net profits, because the owner and manager had all the
power to make business decisions).
41
PASSMAN, supra note 10, at 96.
42
Id. at 98.
43
See generally Ryan Brockington, Where’s the New Jojo Music?, NEW YORK POST, Jan. 13, 2011,
http://www.nypost.com/p/blogs/popwrap/jojo_an_expose_Ohz4GmJ5sHRUpjzzGnl1sM#axzz2GvhJemZZ.
44
PASSMAN, supra note 10, at 98.
45
BROMBERG & RIBSTEIN, supra note 17, at §2.05.
46
Kindergartners Count, Inc. v. DeMoulin, 249 F. Supp. 2d 1233, 1246 (D. Kan. 2003).
47
Okorocha, supra note 16, at 25.
agreement and actions that flow from it are the important indicators of partnership intent. Profit
sharing and joint control are both present in 360 deal terms and the fact that both label and artist
agree to the terms satisfies the intent factor.
E.
Intra-partnership Fiduciary Duty
Establishing a partnership triggers the level of duty owed to that of fiduciary duty. 48 This
duty requires that partners not only act in their best interest but for that of the partnership. 49 The
RUPA codifies the fiduciary standard in §404, specifically pointing to the duty of care 50 and the
duty of loyalty51, while §403 requires partners to provide access to records. 52
Fiduciary duty under the UPA is hinted at, rather than directly addressed, in §19, §20,
and §21, but its importance was made clear by Justice Cardozo in Meinhard v. Salmon, 164 N.E.
545, 546 (N.Y. 1928). Also important, is that though certain acts may be permitted in partnership
agreements that may normally violate fiduciary duty, the duty cannot be waived outright by the
partners. 53
F.
Fiduciary Spectrum Analysis
While the partnership framework seems to fit well with 360 deals, it is not the only way
to elicit fiduciary duties. Though there has yet to be a court that has recognized a partnership
between labels and artists, several courts have found label-artists fiduciary relationships. These
cases have relied on the fact that fiduciary parameters have not been explicitly defined 54 by
courts.
In Apple v. Capitol, 137 A.D.2d 50 (N.Y. App. Div. 1988), the Beatles sought relief from
their record label of twenty years, EMI Records Limited (EMI), for money owed to them. The
Beatles entered into a standard form agreement with EMI in 1964 where they granted EMI the
exclusive right to distribute Beatles' recordings worldwide, in return for which the Beatles were
to receive certain royalty payments. After several contract extensions the band sued for unpaid
differentials.
The band set forth several causes of action 55 in its 1979 complaint including a breach of
fiduciary duty claim. The claim was not dismissed and the court found for the Beatles declaring
48
UNIF. P'SHIP ACT §404 (1997).
BROMBERG & RIBSTEIN, supra note 17, at §6.01.
50
The duty of care requires that the partners not engage in grossly negligent or reckless conduct, intentional
misconduct, or a knowing violation of law. UNIF. P'SHIP ACT §404(c) (1997).
51
The duty of loyalty includes but is not limited to the duty to refrain from competing with the partnership and
having adverse interests to the partnership. UNIF. P'SHIP ACT §404(b) (1997).
52
UNIF. P'SHIP ACT §403 (1997).
53
See Springfield Oil Services, Inc. v. Conlon, 77 Conn. App. 289, 823 A.2d 345 (2003) (agreement providing that
affiliate would do drilling for partnership and be compensated did not negate fiduciary duty in connection with
assignment of partnership assets by defendant partner to affiliate); 1515 North Wells, L.P. v. 1513 North Wells,
L.L.C., 1515 North Wells, L.P. v. 1513 North Wells, L.L.C., 392 Ill. App. 3d 863, 913 N.E.2d 1 (2009) (general
partner breached fiduciary duty by taking fees and profits that should have gone to limited partnership despite
agreement permitting general and limited partner to “engage in whatever activities they chose,” relying on Labovitz,
below this note); Labovitz v. Dolan, 189 Ill. App. 3d 403, 136 Ill. Dec. 780, 545 N.E.2d 304 (1989).
54
CBS, Inc. v. Ahern, 108 F.R.D. 14, 25 (S.D.N.Y. 1985).
55
The claims included but were not limited to breach of contract, fraud, conversion, and unjust enrichment.
49
that “from such a long enduring relation was born a special relationship of trust and confidence,
one which existed independent of the contractual duties.” 56
The amount of business dealing in Apple was nearly the same as other cases 57 where
fiduciary duty was denied by the courts. But the Apple court found that a long term relationship
paired with relatively little to normal business dealings equated to fiduciary duties. Taken the
other direction, why should not a shorter relationship with much more business dealings create
the fiduciary duty as a long term relationship and low business dealings? The effect and goal is
the same in either case; an unusually close relationship where more than an ordinary standard of
care is expected.
The court in CBS v. Ahern took a similar approach to the abstraction advocated above.
The band Boston was sued for breach of contract by their label CBS for not completing the
number of albums required under their contract. Boston counterclaimed breach of fiduciary duty
by CBS. The court found for Boston on this claim because the label had moved outside of its
traditional role by acting as accountant and investor for the band when the two agreed that the
label would put aside royalties earned in “special accounts…[to be] invested and reinvested from
time to time in securities selected by an investment advisor.” 58 The relationship length was not
important but the increased business dealing brought the relationship into the realm of fiduciary.
Fiduciary duty is imposed in close relationships such as partnerships where opportunism
is likely since traditional contracting cannot cover all of the individual actions that are not in the
best interest of the business relationship. 59 360 deals are as close as the relationships in the cases
where fiduciary duties were found between artists and labels. The 360 relationship is similar to
that in CBS, increased business dealings without regard for the length of the relationship between
the label and artist. 60 Thus, it seems there may be a sliding scale on which business relationships
are placed to determine if fiduciary duty is owed by the parties to each other. On one end is the
extreme of a very long relationship, paired with limited business dealings. On the other extreme,
there is a significantly shorter relationship paired with much business dealings. Either extreme
triggers fiduciary duty due to their close nature, whereas the relationships that are more toward
the middle are regulated by traditional contract theory and remedies. See Figure 1. 61
III.
Solution
Partnerships benefit artists and labels, and the music industry in general because of the
responsibility to act in the best interest of the partnership, rather than the individual person. 62
The mindset for many years has been for the record labels to act only in their best interest. 63
Senator Hatch said it best, “This is the only industry in which, after you pay off the mortgage,
56
Apple Records, Inc. v. Capitol Records, Inc., 137 A.D.2d 50, 57 (1998).
The record label-artist relationship exhibited the traditional dealings of labels handling production and promoting
and distributing royalties.
58
CBS, 108 F.R.D. at 23.
59
TAMAR FRANKEL, Fiduciary Duties, in 2 THE NEW PALGRAVE DICTIONARY OF ECONOMICS AND THE LAW 127,
128 (Peter Newman, ed. 1998).
60
Even though Boston’s relationship (7 years) was probably longer than the average 360 record deal today.
61
Attached as Figure 1.
62
Regarding the label as a person under RUPA §102.
63
Ian Brereton, The Beginning of a New Age: The Unconscionability of the 360-Degree Deal, 27 CARDOZO ARTS &
ENT. L.J. 167, 168 (2009).
57
the bank still owns the house.” 64 This has meant many times that as the label makes million off
of the artists’ hard work, the artists themselves end up with very little of the entire pie of
profits. 65
Now one might argue that because the label takes on most of the risk in investing money
into an artist that hasn’t proven themselves, that they should receive most of the benefit of the
success. But with logic like that, it would be completely undermining the value of creativity,
implicating that artists aren’t really artists at all but products of a factory that produces a
particular brand, persona, and sound, and places an able body as the face of the final product.
This is not so, considering that many of the most successful singers and musicians in history
were working hard at their craft long before a major label deal was involved. 66
Labels bring large amounts of capital, expertise in marketing, branding, and distribution
to the table but artists counterbalance with equally important creativity, character, ideas, and
originality. 67 All these factors are needed to make an artist successful. Some particular issues that
fiduciary duties could solve are that of disclosure, accounting, and generally acting in the interest
of the label instead of the artists.
A.
Opportunism and Self-Interest
Viewed through the lens of transaction cost economic theory, the behavior of record
labels toward artists is not very surprising. This theory assumes that human agents are given to
opportunism acting in their own best interest when dealing with others. 68
For labels, taking a piece of more revenues streams while maintaining the core
components of the previous iteration of record deals adds up to more profits in the short term.
But the effects of this action have long term implications. Years of abuse has caused artists to
question the usefulness and purpose of record labels, leading some to abandon them. 69
Some of the particular behavior that fiduciary duty could help prevent and curb, is that of
the poor accounting of royalties owed 70 and appropriating partnership opportunities such as those
in new media formats. 71
B.
64
Efficiency
Id.
Glenn Peoples, OK Go Splits with EMI, BILLBOARD.BIZ, Mar. 10, 2010,
http://www.billboard.biz/bbbiz/content_display/industry/news/e3id98ddd2a7feb2ad800e58a6a9d37d36d.
66
See Gil Kaufman, Destiny's Child's Long Road to Fame (The Song isn't Called 'Survivor' for Nothing), MTV, Jun
13 2005, http://www.webcitation.org/654NZ02Cg.
67
Id.
68
OLIVER WILLIAMSON, ECONOMIC INSTITUTIONS OF CAPITALISM 30 (1985).
69
Rachel Burke, From Disc to Digital: A Case Study on Radiohead's "Name Your Own Price" Method, HUB
PAGES, http://rb101182.hubpages.com/hub/From-Disc-to-Digital-Music-Industry-Business-Practices-in-the-21stCentury (last updated: April 15, 2012).
70
See Chuck Philips, Auditors Put New Spin on Revolt Over Royalties, L.A. TIMES, Feb. 26, 2002, at A15, available
at http://articles.latimes.com/2002/feb/26/news/mn-29955. See also Timothy Quirk, My Hilarious Warner Bros.
Royalty Statement, TOO MUCH JOY, Dec. 1, 2009, http://www.toomuchjoy.com/?p=1397.
71
Helienne Lindvall, Where did all the money go? It's in the Black Box..., THE GUARDIAN, May 20, 2008,
http://www.guardian.co.uk/music/musicblog/2008/may/20/anastutebusinesssenseand.
65
Court battles involving large sums are generally expensive and somewhat lengthy when
neither side can prove their case right off the bat. But this is even truer in the situation where
artists take their labels to court for money and rights they believed are owed to them. 72
Imposing fiduciary duty on the label and artists will be a signal from the beginning of the
relationship, working as a preventive measure. Courts are more likely to resolve cases about
duties owed to persons doing business together quickly and with less cost when the relationship
is one that holds fiduciary duty as the standard.
Also the ways for recovery increase when fiduciary duty is found. The artists could sue
for the right to an accounting, conversion, constructive trust, or rescission. 73 With these added
remedies, fiduciary duty serves as a preventive measure for opportunistic behavior, leading to
more problem solving and less litigation.
IV.
Conclusion
Considering the courts and record labels have not yet adjusted to this pivotal change in
the industry, it is no surprise that artists are finding ways to make it on their own. One of the
most famous recent examples is the band Radiohead who self-released “In Rainbows” in 2009
after leaving EMI. Radiohead let fans pay whatever price they thought was fair, 74 eventually
selling over three million albums. 75 Since this could only work for a more established band, it is
worthwhile to acknowledge other successful independent artists such as singers Ingrid
Michaelson, 76 Ani DiFranco, 77 and rapper Macklemore 78 who have all reached the top of the
Billboard charts without major label support.
But rising Canadian R&B singer, The Weeknd, has recognized the benefits of working
with a record label. The Weeknd’s recent deal with Universal Republic gives hope for
partnerships in the label-artist deals. The Weeknd signed a “strategic partnership” deal with
Universal’s Republic Records and his own label, XO. Some industry commentators are calling
this deal a “historic partnership” and saying “it's the beginning of what will undoubtedly become
an influential paradigm and a paragon for trend-setting art.” 79 The Weeknd will provide the
creative side of the equation while the label will specialize in distribution and marketing, 80
reaffirming that those in the music industry are looking for a solution to an ailing model;
partnership and fiduciary duty is that solution.
72
See Corrina Cree Clover, Accounting Accountability: Should Record Labels Have a Fiduciary Duty to Report
Accurate Royalties Artists?, 23 LOY. L.A. ENT. L. REV. 395, 395-397 (2003).
73
Wendy V. Bartholomew, Note Fiduciary Duty Can It Help Calm the Fears of Underpaid Artists?, 6 VAND. J.
ENT. L. & PRAC. 246, 257 (2004).
74
Burke, supra note 70.
75
Daniel Kreps, Radiohead Publishers Reveal "In Rainbows" Numbers, ROLLING STONE, Oct. 15, 2008,
http://www.rollingstone.com/music/news/radiohead-publishers-reveal-in-rainbows-numbers-20081015.
76
Devan Sipher, Singing Her Way From Obscurity to Fame on the Internet, N.Y. TIMES, Dec. 18, 2007,
http://www.nytimes.com/2007/12/18/nyregion/18singer.html?_r=1&oref=slogin.
77
Biography, RIGHTEOUS BABE, http://www.righteousbabe.com/pages/ani-biography (last visited Dec. 5, 2012)
78
Sebastian Schmidt, Independent Artists Macklemore and Ryan Lewis’s album reaches #1 on iTunes, The
GUARDIAN EXPRESS, Oct. 12, 2012, http://guardianlv.com/2012/10/independent-artists-macklemore-and-ryanlewiss-album-reaches-1-on-itunes/.
79
The Weeknd to Release Trilogy 11/13 via Republic, REPUBLIC RECORDS, Nov. 29, 2012,
http://www.republicrecords.com/the-weeknd-to-release-trilogy-1113-via-republic/.
80
Id.
Partnership may not solve all of the issues within the music industry, but fiduciary duty is
a viable solution to a rapidly changing business where each player is primarily self-interested. As
new technologies and mediums of expression develop, music labels and artists will be in a
constant struggle if there is not a mutual understanding that they are co-dependent and that
severely biased deals will lead to the record labels’ ultimate demise.
Maybe the end of the label-centric era is the logical and proper course for the industry.
But until artist become multi-millionaires, expert marketers, producers, sound engineers, and
networking machines, there is something to be said about the specialization that each side brings
to the table. The industry will not continue as it has. Compromise is in order or profitability,
professional musicians, and efficiency from specialization will be relics of the past as artists
struggle to do what billion dollar companies have been doing for the past 50 years.
Figure 1- Recording Contract Fiduciary Duty Spectrum