I discussed the issue of an injunction in the current dispute between Kiss Daniel v. G-Worldwide Entertainment. Click here for that discussion and also my disclaimer. This is part two and my conclusion of my discussion regarding this specific dispute.
Here, there are two things I want to focus on. They are:
- The length of the contract i.e. seven years; and
- The accounting clause.
1. Length of Contract: 7-Year Deals Are Bad for Nigerian Indie Labels & Artists
The first thing that struck me when I saw the statements shared by both camps on social media was the length of the contract, seven-years, that Daniel signed with G-Worldwide.
Most recording contracts are for a term based on the delivery of a specified number of recordings by the artist to the label with option renewal rights granted to the label. Nevertheless, there are still recording contracts that are based on years plus options to renew the contract for an additional year.
In this case, G-worldwide chose to use years, and specifically a seven-year contractual term.
Where have we seen this movie? We’ve been here before in the case of Wizkkid v. EME contract dispute which was resolved without a court intervention. There, I discussed why you as an artist should not sign a seven-year deal, especially in the current Nigerian music business climate. I will also add that an independent label that is focused on the business of music in Nigeria, for its own economic interests, should not require seven-year contractual terms with artists.
Let me preface my discussion with this. I am a firm believer that Nigeria and Africa must carve out their own solutions to their own local problems. I do not believe in using western solutions to fix African problems. I also believe that while a broad knowledge of what western counterparts are doing in a specific industry is necessary, the solutions are not necessarily an automatic fit for Nigeria and Africa. I think this applies in this case.
In my view, an independent (indie) label in Nigeria, under the past and current climate, should not present a seven-year contract deal to an emerging artist, and an artist should not sign such contract.
What does it mean for an artist to sign a 7-year contract deal with a label in Nigeria?
- It means the artist was desperate when they signed the agreement and did not fully understand it. That is not an excuse to get out of your contract for artists reading this. It just means too bad so sad. Read my article on the 7 deadly sins to avoid when signing a recording contract.
- It means most likely the artist is signed with an indie label with very limited resources. The indie label is usually comprised of the artist and the label owner, and perhaps one more artist signed at a later date. Most indie labels, G-Worldwide Entertainment included, are one-man shows where the indie label owner uses his financing to fund an artist’s career. If the label owner does not have the financial resources, then he is dependent on an affluent business tycoon who can easily decide he does not want to continue funding the label.
- It means if the label owner has his own creative interests, other business ventures, life drama and other personal shenanigans, the artist has to sit and wait for all of these to play out within that 7 year period or longer. For example, you all already know how strongly I feel about Niyola who is signed to EME, and has been there for years and is yet to produce an album. In the meantime, Banky W has gone to NY Film Academy, became a video director, produced his own music, gone through his own personal life drama, acted in Wedding Party 1 & 2, married Adesua Etomi, and Niyola is still waiting in the wings. (I do not know whether Niyola signed a 7-year contract like the alleged scenario when Wizkid was with EME, but the point is her career has simply been stale, for lack of a better word, and to me, that is a tragedy for a beautiful and talented artist).
- It means that while the indie label has such limited resources, it nevertheless ask for rights and makes promises in the contract it simply cannot fulfil. This includes asking for a 360 deal, like the western major record labels, when the Nigerian label lacks access to capital, proper infrastructure, skilled employees, and highly important, control over distribution channels to effectuate any real results even when it is granted the multiple rights by the artist.
- It means an artist, even if it is the sole artist on the label, can be stuck on the roster of the label for a long time because the label does not have the resources to help manufacture, promote and market albums. It is not unusual to see very long lapses of time where albums take many years to be manufactured and distributed. So if you have a 7-year deal and you are to produce five albums, by year four, it is not unusual to find that a label is just now getting around to manufacturing, distributing, and marketing of an album that has been completed and submitted years ago simply because it does not have the resources to push the project. With only one album in four years and four more to go, needless to say, 7-years can become 10, 15 or longer.
- It means you most likely will be dealing with a label owner who does not understand the business of music, even if they were once a talent turned label owner. This has an impact on everything related to the artist, including diversifying the streams of income. By the way, I understand taking business risks and going against the grain. But I am unclear why Geezy Emperor, owner of G-Worldwide, publicly stated his artist was prevented from any kind of collaboration with even the biggest artists in Nigeria like Wizkid and Davido. Again, I get trying something new. Daniel has been wildly successful under his leadership within Nigeria but I don’t get that specific approach.
What does it mean for a label to sign a 7-year contract deal with an artist in Nigeria?
- It means you have not factored into account a long history of Nigerian record labels investing in artists and artists, whether for valid reasons or not, walking out on their labels. The label loses out on all investments, and the artist wins by either setting up their own label or joining another independent label. Yes. You can always sue but lawyers and lawsuits cost money, there is no guarantee you will win, your reputation is injured because most of the Nigerian public is not educated on the music business and just believe you are strangling the artist, and you are also running expenses rather than making profits. Focus in on your local market and think outside the box to create a business model and contract that best suit your unique market and needs.
- It means you are overpromising your artist things you can’t deliver and believe that running a record label is as easy as funding the artist to get into the studio and produce music, paying the necessary OAPS you need to pay to have his music played on air, and then having him perform at live shows.
- It means you are not approaching things from a very practical local business climate and taking into account the realities of your local market. Across all industry sectors, one thing is clear about Nigerians, we like to emulate everything western. In fact, if it is not western approved, it is not valid or good enough. This is a problem and this mentality is hurting our business environments, country and people. Zoom in on your local markets and use your creativity and independence to fashion solutions unique to your local environment.
- It means you are oblivious to the fact that you do not have control over traditional distribution channels in your local market and have not cut your coat according to your size.
- It means you do not have control over modern distribution channels. Most likely you will outsource digital distribution because it is efficient to do so and the data you receive if you can correctly interpret the data, will demand resources that you do not necessarily and immediately have to push the artist forward and will delay the artist’s projects.
- It means at some point the artist will figure this out, listen to what everyone is telling him or her and walk out on you.
This brings me to the second issue I want to discuss in this contract dispute. The accounting issue.
2. The Accounting Clause/Issue
For a long time, most Nigerian label owners have signed contract deals with artists but they have not had to defend those contracts in a court of law. In fact, there has been no real case law focused on the entertainment industry until in recent times that we have seen label owners such as Chocolate City lead the way in holding the feet of the artist to the fire. In the Chocolate City v. Brymo case, we saw the artist fight back. Subsequently, we have now seen artists fighting back by getting lawyers involved to determine the meaning of contractual terms as the parties understood it. Examples include Eric Many Ltd. v. Runtown, and Vibesland Entertainment v. Burna Boy (this is a promoter vs. artist case but applicable).
Label owners, an artist recording contract, if the artist is smart enough to ask for it, will require an accounting. Even if they do not, you the label owner as a decent human being will put the clause in your contract. The problem, however, is how the clause is drafted. Is it drafted where you clearly tell the artist that he or she has a specific time frame to complain about the accounting, and if he or she doesn’t then they have waived the ability to do so? If so, then you are protecting your company, especially when the artist comes years later to ask for an accounting after you have provided a statement. If not, then you have a problem.
If you do not have that provision i.e. a right to audit your books, or you have the provision and do not comply with its terms, an artist can sue you asking for that accounting. It is also a smart move for an artist looking to get out of a bad deal. Often, many indie labels in Nigeria keep poor records or don’t keep them at all. So when an artist sues you for a lack of accounting, especially when you promised to give the accounting and fail to do so, there is a high probability that they may prevail and that will allow them to effectively terminate the contract and move on.
The question in this case, however, is can Daniel terminate his contract due to lack of accounting or is his termination a breach of contract as G-Worldwide is claiming?
This is where it gets tricky. Daniel is taking a high risk by treating the alleged failure to account to him as a material breach of contract and using that as a basis to walk out on his label. This is because unless there is explicit language making that a condition for termination, his label can oppose him as they have, and a court may side with the label.
So, artists, as a general rule, you want to have an explicit clause saying that if your label does not provide an accounting, or refuses to allow you inspect the books or records of the label, it will give you an automatic right to cancel the contract. On the flip side, the label should negotiate a clause that requires notice, and an opportunity to remedy the problem before termination.
Daniel’s attorney explains in an exclusive to AML that Daniel met his end of the bargain but G-Worldwide has not. Daniel also gave the label the chance to fix the problem but they have not, hence him moving forward to first file his claim against the label for accounting and to terminate the contract. We will see what a judge says.
By the way, why would the label receive notice of Daniel’s lawsuit against them, answer it, yet go to a different court and attempt to file an injunction against Daniel? *Confused face.*
In any event, see what Daniel through his lawyer has to say. NOTE: I reached out to Daniel and G-Worldwide attorneys. Daniel’s attorney sent the requested information and G-Worldwide’s has not. Should they send theirs, I will share, if I deem it necessary to do so if the story is still of relevance and interest to the AML audience and the public.
Exclusive Statement to AML of Claim and Background from Daniel’s Attorney
Our claim in our suit is basically for an Order of Mandatory Injunction compelling the Defendant and its directors to provide the Kiss Daniel or his representatives with unrestricted access to inspect the books and records of his record label in respect of all financial transactions made pursuant to the Record Contract Agreement between the two parties.
This claim is based on clause 7 of the Recording Contract between the parties, which imposes an obligation on the Label to wit:
“Company shall maintain proper accounting books and or records at its principal office, in relation to revenue generated, or expenditure expended in the course of the performance of this Agreement. Such books and or records shall include, but shall not be limited to, any documents or records which evidence the receipt and or disbursements of royalties and other monies generated in the course of the performance of the Agreement.
The Artist shall, at any time during the term of this Agreement and upon prior written notice to Company, Artist or his/her designated representative shall gain unrestricted access to inspect the books and records of the Company relating to this Agreement and shall be entitled to make copies thereof.”
This is why we feel it is not only legally wrong but a bit unethical for them to go behind us to apply for an ex-parte injunction when we are already before another judge on a similar matter and they have entered (an) appearance and filed their pleadings. There was also no urgency. We wrote to them to terminate the contract on the 30th of October 2017 and they attempted to procure an ex-parte injunction on 30th of November 2017. A month after. Meanwhile, the artist has been performing all over Nigeria to their knowledge in those 30 days. He has been posting his new activities online. Yet, they did not do anything until almost a month after.
We actually tried to discuss and resolve this issue with the label but they refused all our entreaties. Kiss Daniel’s main grouse was lack of accountability and transparency in the way they manage the revenue. Find below the sequence of event to enable you (to) understand our viewpoint.
Based on clause 7 above, we wrote to them on the 18th of July 2017 giving them notice of Kiss Daniels’s intention (through a chartered Accountant) to inspect/audit the books and records kept by them in respect of the revenue generated/expenses made including royalties payable.
“This is to inform you that in accordance with the Recording Contract between the parties, our client wishes to send his Accountants (WYZE Associates) to inspect/audit his accounts with your client.
Kindly confirm your convenient date from next week when the Accountants can come in for the inspection/audit.”
They failed/refused to respond to the above email and we had to send a reminder on the 24th of July and also called their solicitors. They finally responded on the 25th of July 2017 saying:
“I somehow missed your initial email. Apologies. I will discuss your request with my client and will revert with a response before CoB tomorrow.”
As usual, they failed to respond on the 26th of July 2017 as promised and we had to send another reminder by way of email and telephone call. It took them another one week before they responded on the 1st of August 2017 through their solicitor claiming that the audit cannot be done immediately because the G-Worldwide’s Chief Executive Officer (CEO) is about to get married and would also proceed on honeymoon immediately thereafter. This is what the lawyer sent to us:
“Regarding the date for the “audit”, can we agree on a date in late August or early September? An earlier date will not be ideal- Emperor Geezy is getting married on Saturday and will be unavailable for some time after the wedding (for obvious reasons).”
Of course, we were surprised by the above statement and could not fathom how and why the oncoming wedding of “Emperor Geezy”(CEO of the Record Label), who is not the accountant should affect the inspection of books of account or ground the life of our client to a halt. Based on the above, we responded as follows:
“It is our understanding that we are dealing with a company (G-World Entertainment Ltd) and not an individual. Therefore, the unavailability of Emperor Geezy would not affect the audit. Please note that the audit will only involve G World Accountants and our Accountants. Therefore, the presence of Emperor Geezy is not very important at this stage. In view of the above, we can schedule the audit to an earlier date. Kindly confirm when our Accountants can come for the audit within this week or next week.”
Unfortunately, they responded by creating a new excuse. This is what they sent to us the 4th of August 2017:
“While the company is happy to assist your client’s accountants with their audit request, unfortunately due to ongoing activities involving the relevant company’s personnel, the time proposed by you will not be convenient for the company (whose assistance you require to carry out the audit).
In the circumstance, we suggest that we should agree on a day in the last week of August for the audit exercise. We will wait for you to propose a specific date during the said period for the audit.”
It was clear to us at this point that they did not want us to inspect the books and will do everything to frustrate this legitimate demand, which is expressly provided for by the Contract between the parties. Based on the above and in order to avoid further delays/arguments, we conceded to the time frame insisted by them and wrote them on the 7th of August 2017 informing them that we have agreed to the end of the month::
“Our accountants will be available on 28th and 29th August 2017 for the audit. Kindly confirm that the dates. Also confirm your client’s address.”
Again, they failed/refused to confirm the dates for the inspection or the venue as requested and after waiting for almost 3 weeks we were forced once again to send another reminder for confirmation of date and venue. They deliberately failed to respond until the 28th of August 2017, which is one of the dates fixed for the inspection and agreed to the 29th of August 2017 for the said inspection/audit. Thereby giving the Claimant less than 24 hours’ notice.
Unfortunately, when the inspection/audit finally held, our Accountant was denied unrestricted access to the “books/records” in clear breach of the unambiguous provisions of the Contract between the parties. We were surprised that they did not come to the venue of the inspection/audit with any physical books, receipts, invoices e.t.c. but only brought a mere laptop! And even refused to allow our Accountant to make a copy of the said “books/records” contrary to our rights under the Contract. We also discovered that their representative who brought the laptop is not an accountant and did not know anything about the transactions recorded in the laptop he could not answer any of the questions/queries posted to him by our account.
In light of the above failure to allow us inspect and make copies of the books of account as provided in clause 7 of the Record contract between the parties amongst other breaches, we gave them 14 days’ notice to remedy the breach as provided by Clause 16 of the Contract and when they failed to do so within the 14days, we proceeded to terminate the Contract as we were empowered to do under the contract.
– Oluwaseye Lawal
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