Artists may (or may not) have noticed YouTube’s implementation of the “TipJar.” When I heard the news, I didn’t think much of it, as TipJar has become one of many – Kickstarter, Patreon, Indiegogo, etc. It wasn’t until I received a call from one of my favorite writers at Billboard Magazine who asked the question – “how is the money allocated with major Label Artists” – that I took an interest. It’s a valid question – where does this money go and how is it allocated? The answer is grey, and it comes in layers. This particular writer forced me to think about a seemingly insignificant issue.
The inevitable will occur – some indie Artist will generate large revenue from TipJar, ultimately leading to a record deal. Much like Vine sensations, the fight is over the Vine account, not necessarily the Artist. Possibly a major Label Artist will generate tip money that goes unpaid to the Label, and the Label sues for lost revenue. In short, Tipjar will be a problem – for somebody. I don’t mean this in a negative sense; rather it’s an issue that has yet to be framed. Under current Recording Agreements “Tipjar” isn’t addressed in specific language, so what happens if (a) you’re an indie Artist who gets signed, or (b) you’re a major Label Artists that starts using the service? Where does this money go? It comes down to four (4) key concepts, so if faced with the situation, you’ll know what to look for and the right questions to ask.
Without diving into TipJar’s operational guts, know it’s a fan-funding component designed to give back to content creators. A viewer can show creators love by tipping any amount between $1 and $500 simply by clicking a link. The tip is deposited directly into the creators Google Wallet. Here’s a quick video analysis for reference. If you’re a creator, don’t wrongfully assume you’re receiving all (or any) of that “tip” – as that’s contingent upon the Recording Agreement structure. Indie Artist, if you’re not signed with a Label, allow this to be a guide on how to crack the Tipjar label/code before it becomes an issue.
1. Control Social Media & Control The Wallet
Which party has access to the Google Wallet? In most Recording Agreements, Artists will relinquish certain rights to social media accounts (Facebook & Twitter.). Pending on the Label, some demand more than others (YouTube, Instagram, Facebook, Twitter, Tumblr). In short, know what you own. If you retain the rights to YouTube, make sure you control your Google Wallet. Meaning, you’re in direct control of all accounting. If the Label owns it, they’re in control of the purse, so it’s important to understand what type of “revenue” you’re dealing with, otherwise they’ll apply the more unfavorable method. Somebody will control accounting for Google Wallet and you want that somebody to be you.
2. Video Budget
Assuming the content in this case to be a music or lyric video, what happens if someone leaves a tip? Is the tip allocated to the video creator (i.e. the Label), and the Artist receives nothing? To answer that question, it must be determined if the video project itself was a recoupable expense or non-recoupable expense. If it’s a non-recoupable expense, the Label isn’t entitled to tip money generated by Artist’s fans. If it is a recoupable expense, is all, or part of the tip being allocated towards video expenses? Have this defined, and more so know how much the entire video cost so you know the specific amount that needs to be recouped. Once recouped, how is the tip revenue divided and/or allocated?
3. Marketing Budget
Similar to the above situation concerning video, has the Label laid out a marketing budget? The answer will be YES, but is that marketing budget a recoupable or non-recoupable expense. Is the “video” part of the marketing strategy? If so, and in the event the marketing budget is non-recoupable, the Label has no entitlement to tip money.
4. *Collateral Entertainment Activities
Most labels will likely claim tip income to be a residual income – therefore governed under a particular section in label agreements. Pending on the Label, the language will vary (i.e. multi-rights, collateral entertainment activities, collective agreements) however the globally accepted term is “360 rights.” More so, pending on the Label, the percentage allocated towards 360 income may range between 10% – 30% (to the Label). It’s important to know if the Label considers “tip income” as “360 income,” therefore expecting their applicable percentage from Google Wallet. In some cases, it may be best to apply the 360 amount (the lower percentage allocated towards the Label), if the Label takes the position that tip income is the same as recorded music sales (which is the lowest percentage allocated to Artists).
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