Hope you’re having a great break! For the Online Performers Group, holiday break means spending quality time with friends & family and, everyone’s favorite activity, contract reviews!
As a livestreamer, it’s important to review your contracts and agreements periodically to make sure you understand their terms and ensure that both sides are living up to them.
A contract you sign today could limit your ability to make money in the future.
It’s crazy to think… but a contract you sign today could limit your ability to make money in the future – and could disqualify you from working with major sponsors or companies like ours.
This is because there can be rules in agreements that prevent you from entering into future relationships – either because they outright forbid it or because contracts you’ve signed are onerous or exploitative, and may put harsh restrictions on future partners.
We, like everyone else in the universe, call these rules red flags. When we see them, we know there’s going to be trouble. Red flags can take many forms, but there are a few we see frequently. Every example on this list comes from a real contract I’ve reviewed.
- No way out: contracts usually contain ways for them to end. There are not a lot of “forever” contracts in the world. If there are no ways to end a contract – or the contract goes on for an unreasonable amount of time – this is something to be concerned about.
- Burdensome rules: be wary of contracts that severely restrict your ability to make your own choices or allow companies to make decisions for you without your approval.
- Severe penalty clauses: if we see a contract that requires someone to pay damages for violating the contract, or allows the company to ‘fine’ you outside of the court system for perceived or actual misbehavior, we always become worried. Why is the company planning for your failure? There are courts and lawyers for a reason – to determine what damage was done by someone violating a contract. When I see penalties written into the contract, I can’t help but think: “maybe this is how they plan to make money.”
- Requires investment: If a contract requires you to pay money up front to be involved or associated, that’s going to be very risky – and could potentially damage or destroy your finances. Not all investments are bad – you just need to know what you’re getting into. You’ll want to talk to legal and financial professionals to assess the level of risk involved.
- Certain types of revenue sharing: Contracts that ask for an ongoing monthly fee or percentage of your existing revenues are high risk and can endanger your financial well-being. To put it another way, it’s risky to work with a company that’s getting paid whether or not their work generates value. If a company is taking a fee for their work with you, that fee should come out of the additional revenue created by working together.
Companies you want to be in business with are reasonable and flexible with their terms.
- Loss of ownership: Contracts requiring you to give up a portion of ownership of your channel are dangerous territory. Your channel is a company that, while smaller, is no different than Apple or Tesla. If someone is asking for a percentage of it, they better be offering you something very compelling in return.
- Tons of restrictions: we’re always on the lookout for contracts that unreasonably limit your ability to work with other companies. For example, if you were being sponsored by xBox, it’s reasonable that they ask you not to promote PlayStation or Nintendo – but if they ask you not to promote anything that competes with Microsoft, that could limit your ability to find sponsors in a broad range of categories.
Remember, the company writing the contract has a tremendous amount of motivation to protect itself – and very little interest in protecting you. Contracts – even good ones – are often written to heavily favor the company that drafted them.
This might all sound scary, but seeing red flags in a contract isn’t the end of the world – you can often ask for them to be removed. Companies you want to be in business with are reasonable and flexible with their terms. If they aren’t – then that’s a red flag all on its own.
Hopefully, these tips will help keep you from signing away more than you intended – and keep your channel a healthy and prosperous business! Have a happy new year!