Please Advise - Had An Offer To Join Co-op Record Label As Producer!

[Mudchild]

Hey all.

I need some advice. Currently I am a freelance producer/composer/music tech tutor in the UK. I am just beginning the second year of self-employment, so things are still kind of small scale yet. But going OK.

A guy I knew at Uni (when we studied Music Tech) has just approached me to be in his big project, which is nice of him, but I’m not famed for my business acumen, so I need to get some advice and do some research before I decide whether to take his offer.

In a nutshell, what he’s trying to do is make some headway in the modern world of digital music, in the climate of filesharing and all that tricksy business. His project is to create a record label which allows free downloading and copying of its music to signed-up members (no fee) through a kind of MySpace-esque portal. All the music will have music videos, and all the funding is to come from advertising attached to the music videos. There are various ingenious strategies to encourage repeat visits, increase popularity, etc etc, blah-de-blah... and ideally, go ‘viral’.

The company is to be a co-operative. I believe they need 7 people on the Board of Directors for this to happen – he has most of these people, he is inviting me to be one of them, as well as to be the producer guy who takes the acts away to record and mix in whatever way I see fit to get a good job done. I would get 5% of any income (from the advertising revenue) before recoupment. Then of the remainder, after recoupment, the act would get 50% and the co-op (the seven people including me) would share the rest.

He has good established web marketing expertise on board, good video creation skills in the team, good design person etc etc. He seems to be receiving good advice from some experienced sources. The acts involved in these early stages seem to be of a good quality. I perceive the guy to be trustworthy, intelligent, and level headed.

However, the offer raises a lot of questions:

What will my liabilities be?

How tied in would I be?

What will the deadlines be like?

Earnings are likely to be pretty small at first, in return for quite a large chunk of my time. Can I deal with that? Will it interfere with other more viable pieces of work I get?

Will it go anywhere?

What would be my reasons for doing it? Well it would be exciting, good production experience, good networking – I would have a lot of control over who gets recorded, and how.

Maybe it could be successful. Maybe it’s a clever bit of forward thinking stuff.

Maybe it would just be another microscopic drop in the digital ocean. Maybe it will go nowhere and I will be liable for losses. Maybe it will eat massively into my time, prevent me taking more lucrative contracts, and I will rue the day I joined.

I need to do a lot of thinking about this, and certainly legal research, before I meet again with him with a list of questions. But I wanted to pick the brains of some of the more knowledgeable and experienced types around here. What would your concerns be? What might you do in my situation?

I’d be grateful for any constructive input.

Muchos gracias.

[Lazz]

Hello Mud.

That sounds exciting and frightening in equal measure.

Good luck with your considerations and mulling and measuring.

I think it's about time you subscribed to Bob Lefsetz's Newsletter - which appears at irregular intervals in my inbox - sometimes thrice daily.

He is an annoying and opinionated bastard at times - but he has been around, a long-time industry insider, knows everybody, is obstinately beholden to none of them, and in amongst his spiel there are regular nuggets of insider business intelligence which could very usefully inform the way you are able to evaluate the potential of this opportunity.

Good luck with it.

[Steve]

However, the offer raises a lot of questions:

What will my liabilities be?

How tied in would I be?

What will the deadlines be like?

Questions you should be asking your potential new partners I would think?

Earnings are likely to be pretty small at first, in return for quite a large chunk of my time. Can I deal with that? Will it interfere with other more viable pieces of work I get?

Will it go anywhere?

Questions you should be asking yourself!

Whatever you decide! I wish you luck.

Edited November 14, 2008 by Steve

[john]

Hi

Reasoning aside for actually pursuing it it all comes down to the contract. It should stipulate liabilities, commitments (time/task etc), duties and financial and other benefits.

Contracts can be quite different and business dependent.

Reasons for doing it? I think you have to consider the tangible benefits, money etc but also the less tangible... does it get you other paying work, enhance your reputation, give you more contacts etc. Likewise you should look at the reputation of the company and consider if associating with them will enhance your reputation or detract from it. If you are not being paid much, or being paid by the promise of possible future income then more falls on the less tangible benefits and drawbacks i mentioned above, if they are not clear and acceptable I'd walk away.

There has to be a clear advantage to you taking the contract otherwise you are flattering your own ego (which is partly what they will be relying on if current financial benefits are low).

Worth considering seriously, and in detail.

Just my two cents.

Cheers

John

[Lazz]

it it all comes down to the contract. It should stipulate liabilities, commitments ....

Hold on John.

Mud said he'd been invited to join a co-operative company as a director.

Although we don't know exactly which style of company formation has been adopted, it all comes down to company law and the particular constitution and articles of association that have been written.

It may be, for eg, that it is a 'company limited by guarantee', and so directors' personal liability can be limited to one single squiddly.

(Though I doubt that would be the case because it seriously restricts borrowing)

Mud - pragmatically, I find this a potentially fascinating business model and conundrum but - with respect - what I find significantly disturbing here is your misplaced expectation that you are going to find constructive input from any forum such as this.

It suggests to me that maybe this might not be for you.

Have you no counsel closer to home ?

No university resources ?

Why here ?

[korniceman3000]

I'm no expert at this but I think the most important stipulations regarding this co-op agreement should all be spelled out completely in black and white, signed and agreed upon by both parties in the form of a contract. I'm not sure if this company you speak of is a partnership split amongst the board or a limited liablity corporation. It's best if a drafted contract was presented and that you seek some form of legal counsel to ensure that everyone's demands and requirements are met and that all parties agree on the matter with no disputes or misunderstandings or assumptions. Don't make any immediate oral agreements and review all proposals and documents with great caution as small details and hidden loopholes could spell trouble in contracts. Also trust your gut feeling. If something doesn't feel right, be sure to ask for clarification and even after that, spend some time to reconsider everything. Also, as Lazz had posted above, everything depends upon the company law and how that is structured with respect to your role as director and so forth. It would be best if you become extremely familiar with that and what entitlements/duties/obligations you are required to fulfill as director etc. before doing anything. Make sure you ask your friend plenty of questions before considering anything. Most of all, be careful. Business entanglements can often become complicated and riddled with problems. Trust your instincts and if you don't feel comfortable, chances are, something isn't right....