This is an important one, so keep your eyes open and start taking notes, today we’re talking about the infamous “radius clause”. *Dun dun dun!* The radius clause isn’t a new or novel concept by any means, in fact it’s one of the many methods venues and festivals use to create a demand for the product which they sell to the public (live music.) A radius clause is just the live performance version of a non-compete agreement. (EDIT: For clarification, a radius clause is actually one part of a non-compete agreement in legal terms, but in common form they are often addressed as one in the same, a fastidious, but important, distinction to make.) A non-compete agreement is a binding contract in which an employee or artist agrees to not participate in the business for which they’ve been employed by an employer or festival for a certain period of time and within a certain geographical region.
Now, the courts hear these cases a lot- the idea being that you don’t want employees/potential employees giving up their right to find and utilize employment, so these non-compete agreements have to be “reasonable.” What is reasonable, you may ask. Well that’s where this all gets a little sticky. A few years ago, Lollapalooza was investigated regarding their radius clause, a daunting 300 mile restriction beginning three month before the date of performance and last through six months after the date of performance. Now if my first grade math is correct, that’s nine months, NINE MONTHS, that an artist can’t perform within 300 miles of Chicago. Here are some places within 300 miles of Chicago: Detroit, Ann Arbor, Indianapolis, Milwaukee, Madison, Windsor, Columbus, St. Louis, Iowa City, Green Bay, Dubuque, and the Quad Cities.
Another hot ticket festival, Coachella, had this radius clause in 2010:
“Except for the Festival [(i.e., Coachella)] and unless otherwise agreed to by “Festival” in writing, artist shall not advertise, perform, or publicize any performance:
a) in Los Angeles, Orange, Riverside, San Bernadino, Santa Barbara, Ventura, or San Diego counties from December 1, 2009 until 30 days after the Festival
b) At any festival in the States of California, Nevada, or Arizona until 30 days after the Festival
c) Or announce any other US festival prior to Feb. 15, 2010”
So are those restrictions reasonable? We may never know, lately as these issues are investigated, the investigator seems to punt, and before long the issue is forgotten about by those parties most likely to call it into question.
With that in mind here are five issues to address when reviewing a radius clause or non-compete agreement:
1. Consideration– What is each party getting in return for complying with the agreement? Is the artist/band getting paid? Are there no side gigs which can take away from profitability for the promoter? It’s like any other contract, there needs to be a give and take in order to be binding.
2. Length– How long are we talking? Two months? Nine months? Generally dealing with employment, three years is considered okay while five is considered excessive, but in entertainment three years is longer than some careers! What can each party handle, and what is the extent to which each party is willing to go?
3. Distance– How big of a territory is cut out? Is it a few dozen miles? A few hundred miles? Obviously depending on the circumstances hundreds of miles will suffice, but this is a balancing act. Take into account the trade-off of time and distance, as well as the overall consideration between the parties. What exactly is the purpose of this distance? To ensure profitability and protect party interests.
4. Extraneous Restrictions– If the agreement is for a festival does it bar from all other performances? Are private events and functions okay? How about charity events?
5. Consequences for Breach– What happens when one party doesn’t live up to their end of the deal? Is there a ban on future performance? Potentially a monetary punishment such as damages?
These are all issues which need to be considered in negotiations and some middle line must be approached in order for the limitations within the agreement to be seen as reasonable. I have no doubt everyone will have questions about this, and how you discuss the topic with each party will ultimately decide the enforceability of this agreement. So get out there, talk to each other, and work together to establish a better business of music.
Thomas Leonard Kutz is an attorney at Kreamer Law Firm, PC in West Des Moines focusing on transactional and entertainment law, business and estate planning. He is a Wisconsin native and transplant to Des Moines via London.
For any of your transactional, entertainment law, business or estate planning needs please call Kreamer Law Firm at 515.727.0900.
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