Module 4

MODULE 4

ENDORSEMENT AND ARTIST AGREEMENTS

4.1 INTRODUCTION TO ENDORSEMENT
Endorsement may be understood as an act of supporting someone or something. It basically
means to approve, accept or recommend a person or a thing. An Endorsement Agreement
enables a company to make use of an individual's name, likeness, and reputation for the
promotion of a company's service or product.
In this chapter for our convenience we will refer to musicians, singers, composers, artists,
performers, bands as celebrities.

4.2. ENDORSEMENT AGREEMENT
An Endorsement Agreement is a contract that lets a company use someone's name, likeness, and
reputation to promote a service or product. Typically the endorser is well known (or at least well
known within a given field). In exchange for the personal recommendation of the company's
product, the personal endorser gets a fee. Celebrity Endorsement Agreement clearly defines the
terms of the endorsement, including how the endorser will use or advertise the endorsed product
or service. Other obligations may include wearing certain clothes, attending press releases,
marketing events, and appearing in advertisements. The Endorsement Agreement also outlines
the warranties, or guarantees, of both the company and the endorser related to the product
endorsement. 1
Celebrity endorsement is a form of advertising campaign or marketing strategy used by brands/
companies which involves celebrities/ influencers or a well-known person using their social
status or their fame to help promote a product/ service. The agreement between the brand and the

1 https://www.rocketlawyer.com/document/endorsement-agreement.rl#/

celebrity is called an endorsement agreement under which the brand engages the celebrity to
render endorsement services for the brand.

While the celebrity endorsement agreement is essentially a service agreement, it exposes the
celebrities to certain risks and hence it is important to have a watertight agreement with enough
safeguards to protect the celebrity from any liability.2

4.2.1. Contents of Celebrity Endorsement Agreement

Typically, an endorsement agreement from a celebrity’s perspective would be structured as
follows:

1) Title clause- this clause provides the contact details of all the parties entering into the
endorsement agreement.

2) Recitals– recitals provide a brief overview of the business of the parties and the intent behind
entering into the agreement.

3) Definitions- Some of the important definitions which should be captured in an endorsement
agreement are as under:

(i) Products– the category of the products for which the celebrity has blocked his/ her services
should be categorically identified in the agreement. If there are any excluded items from the list
of products, the same should be defined as well.

(ii) Competitive Products - Brands typically restrict a celebrity from endorsing competitive
products. Hence it is important to define what would fall under competitive products. A brand
may have several businesses. However, the competitive products should cover only the category
block products and not the other businesses of the brand.

(iii) Media- the media of exploitation of the endorsement materials should be defined. For
instance, the parties may commercially agree that the endorsement materials would be exploited
only on digital platforms or only on Out of Home advertising.

2 https://iprmentlaw.com/contract-gyan/brand-endorsement-agreements/

(iv) Term and Territory- The term of the agreement for which the celebrity is to provide his /
her services, the usage term (if different from the term of the agreement) for which the
endorsement materials are allowed to be exploited by the brand as well as the territory of the
usage should be clearly defined in the agreement.

(v) Days/ Work Days- Celebrities are usually paid on the basis of the number of work days they
agree to provide to the brand. Hence it becomes important to define the number of hours that
would constitute a work day. Further, activities such as dressing, rehearsals, make up, resting,
lunch, etc would be included or excluded from the number of hours defined in the Work Day.

4) Fees, Taxes, Stamp Duty-

(i) Fees payable to the celebrity should indicate whether it is inclusive or exclusive of taxes as
well as the payment tranches within which the fees would be payable. Celebrities may choose to
mention that the fees would be payable on utilization of certain number of Work Days or within
expiry of a certain duration from execution of the agreement, whichever is earlier. Since the
brand benefits not merely due to the celebrity providing services on Work Days but also by the
mere association of the celebrity with the brand, it is not unreasonable for a celebrity to demand
payment in such a manner. If the celebrity is being represented by a talent management agency
and such agency is a party to the agreement, the fees payable to such agency may also be
specified.

(ii) Taxes- the fees should mention that it would be subject to withholding taxes such as TDS
being deducted. It is important to mention whether the fees would be inclusive or exclusive of
indirect taxes such as GST and whose obligation would it be to bear those taxes.

(iii) In India, stamp duty is payable on endorsement agreements. In states like Maharashtra the
stamp duty is as high as 0.5% of the consideration if the consideration exceeds INR 10 Lacs and
0.25% of the consideration if the consideration is below INR 10 Lacs [Article 5(h)(A)(iii) of
Schedule 1]. In other states it is relatively lower. It is therefore important to specify who would
be responsible for payment of stamp duty.

5) Travel, security and insurance

This clause is one of the most important clauses for celebrities. Details of the celebrity’s travel
and accommodation such as first class/ business class air travel, five star suite accommodation,
travel and accommodation of entourage, list of people who would constitute entourage needs to
be clearly specified. For instance, a top-level celebrity may require manager, representative, spot
boy, makeup artist, hair artist, trainer, bodyguard, etc. to be a part of the entourage. Further,
details on the brand providing adequate security for the celebrity while rendering his/ her
services should be mentioned. Celebrities may also choose to ask the brand to obtain insurance
for the celebrity and be responsible to bear any medical expenses if it arises while the celebrity is
rendering services.

6) Services-

(i) Process for allotting a Work Day– It is important to set up a process for allotting the Work
Day as per the mutual agreement of the parties. Celebrities usually have a tight schedule and
therefore sufficient window period should be available for fixing a Work Day.

(ii) Cancellation– Cancellation of a fixed work day by either party with a notice period, without
a notice period, due to force majeure events or any other reason should be captured along with its
consequences. For instance, if a celebrity cancels a work day by giving a mutually agreed notice
period then the parties may decide to agree on another Work Day or if the Brand cancels the
work day without adequate notice period then it shall amount to a consumed work day, etc.

(iii) Services required– the services required from the celebrity should be spelt out in the
agreement. For instance, celebrity may be required to make himself/ herself available for
shooting of television commercials, for social media posts, etc.

7) Usage Rights

(i) Celebrity Approval: Usage rights of endorsement materials should be subject to celebrity
endorsement.

(ii) Ownership: Ownership rights in the endorsement materials should vest with the brand.
However, usage rights should be limited to the usage term of the agreement.

(iii) Cooling off Period: The Parties may choose to have a cool off period post the expiry of the
term of the agreement which period shall enable the brand to remove the endorsement materials
in circulation in the market. However no new materials should be created during the Cool off
Period. Cool off Period is usually granted for a period between 1-3 months. Further, during the
cool off period, the celebrity need not be restricted by any exclusivity clause.

(iv)Exclusivity– a brand would require its brand ambassador to be exclusive during the term of
the agreement i.e. not to endorse any competitive products. However, celebrities such as film
actors and sportsmen are often required in the course of their profession to be shown in the same
frame of a competitive product. For example for a film star, the producer may have an in-film
branding with a competitive brand. As long as the celebrity is shown with such a competitive
product as a character of such a film, such usage should be permissible. Likewise, a sportsman
may be required to wear a jersey with the name of a competitive brand which should not amount
to be a breach of exclusivity. Likewise a singer may be shows using or branding any competitive
product in a music video and the same is also permissible.

(v) Moral Rights – Celebrities being performers are entitled to moral rights under Section 38B
of the Copyright Act. Therefore, a clause on celebrity’s moral rights i.e. to prevent or claim
damages in respect of any mutilation / distortion of their performance which is prejudicial to
their honor and reputation should be added in the agreement.

(vi) Royalties– Performers are also entitled to performance royalties in the event of exploitation
of their performance for commercial purposes under Section 38 (A)(2) of the Copyright Act.
Hence a clause on statutory royalties should be added.

8) Representations and Warranties- After Nestle India’s controversy wherein Maggi noodles
were banned by the Food Safety and Standards Authority of India (FSSAI), questions were
raised with respect to the liability of its past and present brand ambassadors eg. Madhuri Dixit,
Preity Zinta, Amitabh Bachchan. The Consumer Protection Bill, 2018 has proposed that if the
Central Authority is satisfied after investigation that advertisement is false or misleading and is
prejudicial to the interest of any consumer or is in contravention of consumer rights, it may
impose penalty on the endorser which may extend to INR 10 lacs for first offence and upto INR
50 Lacs for subsequent offence. Further, the Central Authority may by order, prohibit the

endorser of a false or misleading advertisement from making endorsement of any product or
service for a period which may extend to one year and for subsequent contravention for a period
up to three years. The Bill further proposes that no endorser shall be liable to a penalty if he has
exercised due diligence to verify the veracity of the claims made in the advertisement regarding
the product or service being endorsed by him.

The Advertising Standards Council of India (ASCI) provides for a mechanism for taking ASCI
Advice, these Guidelines provide that if the Celebrity either directly or through the concerned
Advertiser/Agency chooses to seek Advertising Advice from ASCI on whether the advertisement
potentially violates any provisions of the ASCI code or not and if the Advertisement is
developed fully following the Advertising Advice provided by the ASCI, then the Celebrity
would be considered as having completed due diligence. In view of the proposed penalties on
endorsers under the Consumer Protection Bill, it is now important for celebrities to seek ASCI
Advisory on their endorsements to safeguard themselves and absolve themselves from liability.

The Celebrity may thus require the brand to obtain such ASCI Advisory on behalf of the
Celebrity.

Further, adequate representations must be taken from the brand to ensure that the endorsement
materials would be in accordance with applicable laws, there would be no misleading
advertisements. An acknowledgement should be taken that the celebrity has no way of
ascertaining and verifying the products and would be relying on the representations of the brand.
Further, that the Celebrity has no control on the manufacture, sale, distribution and advertising of
the products of the brand and therefore would not be responsible for any claims in relation to the
products.

9) Indemnity– A contract by which one party promises to save the other from loss caused to him
by the conduct of the promisor himself, or by the conduct of any other person, is called a
“contract of indemnity.” Brand must undertake to indemnify the Celebrity from any and all legal
claims, civil and criminal, with respect to the Celebrity endorsing the Brand.

10) Force Majeure-Force Majeure events are acts of God which are beyond the reasonable
control of any party. Neither party should be responsible for non-performance of obligations if it
is due to a force majeure event.

11) Celebrity Disability– a clause on celebrity disability should be added which should include
events by which the Celebrity is prevented or hampered from performing his/ her obligations by
virtue of any disruptive events which are beyond the Celebrity’s control including illness,
disfigurement detracting the Celebrity from making an appearance, mental and/or physical
incapacity.

12) Termination-

(i) Termination by the brand-the brand should have the ability to terminate if the Celebrity
fails to fulfill his/ her obligations, commits breach of representation and warranties and fails to
rectify it within a cure period. Further, events such as Force Majeure Event and Celebrity
Disability extending beyond a certain duration could be added as events of termination. The
Celebrity being convicted for any criminal activity punishable under the Indian Penal Code could
also be added a ground for termination.

The consequences of such termination should be pro-rata payment to the Celebrity for the
services rendered until such date.

(ii) Termination by the Celebrity- The Celebrity should have the ability to terminate the
agreement in events such as breach of representations/ warranties of the brand, insolvency/
bankruptcy of the brand, brand committing an act which would bring the celebrity into disrepute,
scandal, etc.

The consequences of such termination could be payment of the entire consideration to the
Celebrity.

13) Confidentiality- each party should be required to maintain confidentiality of the terms of
the agreement and any confidential information shared.

14) Boiler plate clauses– Standard boiler plate clauses should be mentioned such as:

(i) Governing law and jurisdiction- the governing law and jurisdiction should be mentioned. If
the parties agree to arbitration as a dispute resolution mechanism then an arbitration clause
should be added and the jurisdiction clause should be subject to such arbitration clause.

(ii) Assignment-Neither party having the right to assign the agreement or any of its rights and
obligations without the prior written consent of the other party.

(iii) Relationship of parties– Each party remaining independent with respect to the other and
nothing in the agreement amounting to partnership, agency, joint venture, etc.

(iv) Waiver – failure of any party to demand strict performance by the other of any of the terms,
covenants or conditions of the agreement shall not be construed as a continuing waiver or
relinquishment thereof and either may at any time demand strict and complete performance by
the other party of the said terms, covenants and conditions.

(v) Modification-No modification or amendment of any provision shall be valid or binding
unless executed and delivered by the parties in writing.

(vi) Severability– in the event any provision of the agreement is declared to be void, invalid or
unlawful by any court or tribunal of competent jurisdiction, such provision shall be deemed
severed from the remainder of this agreement and the balance shall remain in full force and
effect.

(vii) Notices– all notices should be in writing. Mode of sending the notice and the contact details
should be mentioned3

4.3. MUSIC ENDORSEMENT DEAL

In simple words, music endorsements are when an artist is directly affixing their name to a
certain company or product. It means the artist is endorsing and approving that product and
confirming to the audience that they use it exclusively. Through this, the company or product
benefits from the exposure that an artist is giving it and the artist then benefits in payment. The
bigger the value of the deal, the more money, an artist will receive.

Some major brands have entered into multi-million dollar endorsement deals with artists such as
Beyonce, who has a $50 million deal with Pepsi.

3 https://iprmentlaw.com/contract-gyan/brand-endorsement-agreements/

But it’s not as blatant as it sounds, and there are a lot of potential loopholes and issues that could
arise. By endorsing a product, the fans of that celebrity are putting their faith in him or her that
this product is as good as it is, and is worth spending money on. So, it’s important that artists
protect the interests of their brand and that they team up with companies and products whose
values, ideals and perceptions are not detrimental to their own.

4.4. DIFFERENCE BETWEEN ENDORSEMENT AND SPONSORSHIP DEAL
Endorsing a product would mean saying to the audience “I use this and I use it exclusively”. It
means that they dictate a greater responsibility than sponsorships.
Sponsorships work differently. It means that the brand is aligned with the artist in a broader
sense. For example, a company’s logo on a poster, or on a tour bus, or on the stage. The
sponsorship deals are worth less because the artist is not endorsing the product and claiming that
they use it and they do not hold that same responsibility for the firm’s reputation.

4.5. TOP MUSICIANS & ENDORSEMENT DEALS
4.5.1 Instrument and Equipment Brands
A great example is Ed Sheeran’s partnership with Lowden guitars. Together with the brand, Ed
Sheeran’s created his own Sheeran acoustic guitars, offering aspiring guitarists, “A unique
design played by Ed Sheeran himself on the road, at home and at his huge live shows.”
Popular companies that endorse or sponsor musicians:

• Lowden guitars
• Gibson guitars
• Yamaha
• Cassidy Guitars

• Noseminster LLC

The list can go on and on. With respect to the present scenario, mostly all brands which might
include established as well as upcoming always resort to endorsement by musicians and artists as
their first step towards value addition and goodwill.

4.5.2 Clothing and Fashion Brands

Beyonce, has her own fashion brand Ivy Park, collaborated with Adidas. The deal includes
footwear, apparel, and the re launch of Beyoncé’s Ivy Park brand. She called the collaboration,
“The Partnership of a lifetime for me.”

Another example is Rihanna’s collaboration with Puma, Fenty X Puma.

Companies that endorse or sponsor musicians:

• Yves Saint Laurent

• Nike

• Adidas

• Dirtbag Clothing

• Puma

Also, in this case the list can go on and on. Particularly any company under the sun might
approach an artist for endorsing them.

4.5.3 Food and Drink Brands

Justin Timberlake inked deals with Pepsi and McDonald’s, the latter of which he created a jingle
as part of a multi-tiered sponsorship deal. While, Maroon 5 have also endorsed Coca-Cola and
Snapple, and Jessie J reps for Pop-Tarts and Cadbury’s.

Companies that endorse or sponsor musicians:

• Pepsi

• Coca Cola

• Red Bull

• McDonald’s

• Wrigley’s

• Nabisco4

4.6. WORKING OF A DEAL

The most important part of this process is ensuring that there must be a written agreement which
clearly articulates all the points of the deal. In most cases, brand sponsorship or endorsement
deals are very similar and sees both the musician and brand agreeing to certain factors in
exchange for the other party’s performance. This means that the artist has the responsibility of
completing a list of duties which are recognized as “deliverables”. In exchange for the artist
carrying out these duties, the artist will be entitled to compensation through a different manner of
forms. That could be free goods, money or product discounts. What an artist receives could
totally differ from one deal to the next. The contract may include a certain number of shows,
performances or appearances that an artist must do on behalf of the company during the term of
the agreement. It could include product placement in a music video or photo shoot or while
taking part in an interview or during a live performance.

Most arrangements are similar with both the musician and brand agreeing to certain obligations
in exchange for the other party’s performance. This means that the artist is responsible for
fulfilling his deliverables. In exchange for the artist’s fulfillment of its “deliverables,” the
musician is entitled to the compensation agreed upon in the agreement. This compensation could
be the sponsor providing the artist with free goods, product discounts, money, or a combination
of these. What an artist may receive from a sponsor differs based on a variety of factors,
including the notoriety of the musician, the brand’s “ask,” and the length of the activation. In this

4 https://www.openmicuk.co.uk/advice/what-is-a-music-endorsement/

context, the “ask” is what the artist is obligated to do (its deliverables) on behalf of the particular
sponsor.

An artist’s “deliverables” differ based on what the musician is contracted to do. For example,
the written contract may specify the particulars, such as a certain number of shows and
appearances that the artist must make on behalf of a company during the agreement’s term. The
document may also list the musician’s other obligations, including potential product placement
in the artist’s music video, while conducting interviews or photo shoots as well as any “branded”
stage signage at any live performances or appearances.

The talent may also be required to include a brand’s logo on the musician’s website, its social
media platforms as well as possibly conducting “in-store” events or other personal appearances
on behalf of the company. It is therefore prudent for an agreement to list the frequency and
content of any published statements made by the artist on behalf of the brand. This includes the
company potentially providing the musician with pre-drafted “copy” of the text for any social
media posts that the artist is contracted to make.

It is also practical that any expense related to a brand promotional campaign is enumerated in the
agreement. For example, if the sponsor requires the displaying of any banners or creating of
specific “branded” giveaways, the contract should specify who is responsible for providing the
items and at whose cost. Generally, the sponsor will be paying for these items, or at least
supplying them to the artist at no charge. However, this may not always be the case, so it is
essential that this information is decided in a signed writing.

When determining the deliverables an artist will provide, one important consideration for a brand
is category exclusivity. This enables the sponsoring company to ensure that another competitor’s
brand is not also displayed, used, or an additional sponsor of the artist. Generally, a musician can
and will only have one endorsement deal for each type of product. For example this means that
the artist only has one non-alcoholic beverage, one alcoholic beverage, one clothing line, and one
instrument sponsor.

Since the actual language utilized determines the extent and scope of the brand’s exclusivity, a
musician should aim to tailor the language to be as narrow as possible to not prevent them from
working with additional brands. For instance, an energy drink, such as Red Bull, could be seen as

different from a non-alcoholic beverage, such as Pepsi, which could be categorized as (a juice or)
soda. In addition, one brand could be your band’s official guitar while another company could be
the band’s official drum provider. Thus, the actual language included is essential and any
agreement should be drafted with that in mind.5

4.7. APPROACHING SPONSPORSHIP AND ENDORSEMENTS

Sponsorships and endorsements are hard work to procure. Soliciting corporations should not be
seen as an easy method to raise funds for albums.

A sponsorship or endorsement deal is a business arrangement, which yields a commercial return
for the sponsor/endorser and in exchange provides an ‘in kind’ or cash benefit to the artist. An
artist will have to prove to a prospective sponsor/endorser that they are a worthy partner that will
deliver tangible benefits and genuine results.

Before deciding to go down the sponsorship or endorsement route, artists should consider the
following questions:

In this example we will consider the case for a band.

• Will all band mates’ support entering into the sponsorship or ‘collective’ endorsement
arrangement? Or will they fear being perceived as having ‘sold out’? It is essential that
all band members and crew are willing to support the sponsorship/or ‘collective’
endorsement.

• Does the band have a Sponsorship Policy? If not, creating one ahead of soliciting deals is
a crucial first step. A policy outlines: -collective objectives; and administrative processes
involved with a sponsorship e.g. approvals, contracts, review and evaluation; -
accountability and responsibility; -and specific issues relevant to the bands ethos such as
exclusions e.g. tobacco industry and limitations.

5 https://www.tunecore.com/blog/2018/06/brand-sponsorship-endorsement-agreements-for-artists-part-1.html

• Does the band have a nominated person and resources to conduct a successful
sponsorship/endorsement? Who will: -sell the sponsorship; -be the primary contact; -
ensure all funds are accounted for; -maintain and service sponsors; -report on and acquit
the arrangement.

• Does the band have a marketing and promotions plan? Is the audience/market segment
known (demographics/psychographics – existing/potential)? What are similarly placed
artists doing? What sponsors/endorsees have they procured? Are the artists core brand
values clear to every member of the band and fan base? What are the artists brand values?
What is the unique selling proposition of the artist?

4.8. NEEDS OF SPONSOR/ENDORSER

In general terms, a sponsor/endorsee wants three things from an artist:

• Image Association: to be associated with the artists core values and attributes with the
intention being to introduce or reinforce those attributes within its company or product.

• Target Audience: to access one or more of the artists target markets and to reach these
music lovers with the sponsor’s/endorsee’s marketing message in a meaningful (and
often interactive) way.

• Tangible Benefits: to gain a range of benefits from the artist, ensuring the impact of the
previous two points is maximized and provides mechanisms and tools to achieve specific
marketing outcomes.

An artist can maximize their odds of establishing a strong brand alignment and creating a
receptive response with a sponsor, if they understand fully what they can offer (in a tangible
sense) in each of these areas. The more precisely they can define these benefits, the better.

Artists need to grab the butcher’s paper and draft a benefits inventory to establish what they have
to offer. Resource low, high perception benefits are the essential glue in corporate dealings, with
often cash poor artists.

The essential driver to an exceptional benefits inventory, is creativity. Artists need to detail
unique ‘money-can’t-buy’ opportunities alongside the complimentary basics such as corporate
hashtags and logo inclusion. For example: Meet & Greets post gig for 20 of their sponsor’s
competition winners or a Pot n Parma with the band after sound check. These have virtually no
costs associated with the benefit.

4.9. WORTH OF SPONSORSHIP
Usually, the most difficult step in the ‘package stage’, is confirming what the artists sponsorship
benefits are worth. This can be assessed in the following ways:

• What is the real cost to the artist? (Benefits provided, administration, actual costs). As
a general rule, any notable direct costs that result as part of the sponsorship ‘rights’
arrangement should be billed back to the sponsor. For example: An artist may offer a
sponsor ‘signage rights’ in the form of a banner at their album launch. These rights are
what the sponsor is paying for, not the banner itself. They either supply the banner or the
artists has the banner manufactured (with their sign off of course) and bills the banner
cost back to the sponsor in addition to their sponsorship fee.

• What is the market price? Make sure that the sponsorship is correctly valued in the
marketplace. What are similar artists/or event properties charging? How does the artists
sponsorship opportunity measure up (benefits, audience reach, profile, marketing
support)?

• How does the artist marketing benefits compare to mainstream media costs? How
much would it cost a sponsor to reach the artists audience, through digital advertising,
TVCs, street press and radio channels etc.?6

6 https://musicindustryinsideout.com.au/music-industry-endorsements/

4.10. CONCLUSION

It is evident from this chapter that endorsement and sponsorship play a huge benefit to both the
parties who are offering the deal and the party accepting the deal. The party that offers the deal
mostly receives benefits in the form of goodwill, brand value, reputation and connection of the
followers of the celebrity. This results in revenue generation on their part.

The celebrity/artist on the other hand receives monetary awards along with other services as per
the agreement entered by the parties.

However, it is always advisable to read and take legal assistance before any celebrity enters into
a deal with a brand.