The sports and entertainment industry is littered with stories of deals gone bad. It always raises eyebrows when established talent find themselves entangled in partnerships that are not mutually beneficial. In South Africa, for example, we have witnessed the likes of AKA and Bonang caught in a public spat with their business partners about the nature and spirit of the contract. The latest culprit of such a dispute was Kanye West, for whom the contract made sense until it did not make sense anymore. What is patently clear across all levels is that the expectations never match the actual value of the contract.
The reality is that talent in the creative industry at a certain level needs to have a team of lawyers, accounts and business advisors who are at the heart of servicing them. It is your team of professionals that will be negotiating with corporate executives whose loyalty and interests are to the company and shareholders. Therefore, artists need a team of professionals who will service their interests; and hold them accountable should they fail to capture the essence of their expectations in the contract.
This in essence means you should give instructions to your team regarding your expectations for any deal you want to embark upon. There’s no one size fits all but there are important rules of thumb or guiding principles that artists must be mindful of when negotiating contracts. Below I share two of the core rules that form the point of departure for structuring a deal and negotiating a contract within the sports and entertainment industry.
Rule 1: You must always be willing to walk away from a bad deal.
When a brand approaches you for a partnership the reality is that they see value. They know they will be able to leverage on your brand value for their associated products, thus increasing their profits. It is not a charitable exercise, it’s a business decision with monetary value to them. Your responsibility as an artist is to identify your value in the deal and articulate it. Therefore, if the value proposition is not mutually beneficial (financially) - walk away.
Rule 2: Who owns the rights (copyrights, image rights etc.).
It is important to understand that rights in the industry are at the centre of value and wealth creation. The structure of ownership in the industry can be complex but can be distilled in a way that captures the essence of the artist's interest. To illustrate the essence let's consider the following:
People do not do business with you simply because they like you, they do business with you because they want your service or product. And as a creative your art revolves around self-expression that manifests through your work and public opinion. Therefore, brands want access to your creative work and the brand value it comes with.
As such, for an organization to take ownership of either the copyrights or image rights there are three main distinctions one must make before concluding the partnership:
The first option is when the ownership of the copyrights or image rights are fully/permanently transferred that should translate to future earnings. The artist, therefore, must derive the full value of their image or copy rights including future earnings. The royalty earnings accrue into the future.
The second option to consider is where the ownership exists for the duration of the partnership. However, when the partnership ends or terminated the ownership rights are transferred back to the talent.
The third option is a standard licensing of trademarks and intellectual property to the brand for the duration of the contract. The company (brand) would be responsible for the manufacturing, distribution etc. of the product, for example. This is a similar structure to the Ye and adidas deal which is lucrative but often complex and costly to unbundle.
These two rules are important to securing your interest and will help you steer clear of exploitative deals that harm your brand and integrity, but most importantly deny you its financial gains. When you have protected your intellectual property it lays the foundation for a mutually beneficial deal and contractual terms.
Furthermore, the three options provided under rule two are the pillars of deal structuring especially where copyrights, intellectual property rights, creative rights and image rights are concerned in the business of Sports and Entertainment. However, how such deals are contracted is informed by the unique terms of reference and terms and conditions of each contract that serve to enforce the mutually beneficial interests of both parties.
At ShowUp Sports we offer consultancy services to the Creative Industry - Sports and Entertainment - working with our Legal Associates for deal structuring, contract management and also assist with dispute resolutions where contracts are being contested either legally or otherwise.
For more information contact us at: omphile.ramela@showupsport.com