Future major entertainment properties and media brands are being created by streamers, influencers, and online creators on platforms like TikTok, Roblox, Twitch, and Minecraft. As a result, visionary creators like Mr. Beast, Ibai, Charli D'Amelio, Addison Rae, and Dream are expanding their individual entertainment platforms into multifaceted and multi-channel companies, and in the process creating extremely lucrative licensing and merchandising programs.
With that in mind, here are key considerations for creators looking to grow their companies, solicit investment, and ultimately build their wealth:
1. Get Your Corporate Affairs in Order
As an individual creator, you may contract with brands and partners as an individual or through a loan-out company. Contracting through a loan-out company can provide substantial benefits in the form of protecting personal assets of the creator and tax savings that would not otherwise be available to an individual. However, even influencers who are accustomed to contracting through a loan-out company will need to pay more attention to corporate setup and formalities once they grow out their business ventures.
Companies must be properly formed and in good standing to enter into licensing and distribution agreements with third parties, while creators seeking to take on third-party financing need to pay attention to appropriate entity choice (e.g., LLC vs. corporation), jurisdiction (e.g., Delaware), and taxation status.
One additional note: creators seeking to produce guild content (e.g., SAG-AFTRA, DGA, WGA) will need to pay specific attention to corporate structure to avoid inadvertently subjecting the company's non-guild projects to guild jurisdiction.
2. Be Strategic With Third-Party Financing
At some point, a creator may want or need to take on third-party financing to help them grow their company — which may involve the sale of equity, debt, or a combination of both. This can be an important inflection point, because it will implicate issues of ownership and control. Creators should consult with expert lawyers and accountants to determine how much money they need, how they would use the money, and what they are prepared to give up in exchange for financing. This is often a good time for creators to think about their preferred end goal – such as an "exit" via a sale to a third party. As above, tax questions usually arise at this stage.
3. Secure Your IP
Much of the value of a media company lies in its portfolio of intellectual property, which can be exploited across platforms and products. To that end, creators who transition into media companies must protect their IP. This can include registering copyrights in creative works, securing trademarks for brand indicia, and ensuring agreements clearly deal with ownership of IP. However, it is equally important to ensure that the new company enters into adequate work-for-hire agreements with all personnel rendering services. That's particularly important for creators, who often collaborate informally with other creators without paperwork. It is a good idea to formalize things in a way that makes everyone comfortable and certain of their rights and responsibilities.
4. Think About Rights and Exclusivity
As the new company starts contracting with third parties – whether traditional media companies, streaming TV services, apparel manufacturers, or video game publishers – it will have to pay close attention to dealmaking. In particular, the company needs to think about which rights are being granted in each deal, as well as the scope of exclusivity. If a deal has upside potential (e.g., music or merchandising royalties, film/tv profit participation), then they should focus on applicable definitions and payment terms, as well as accounting and audit. Additionally, the company will have to think about the role of the "figurehead" creator in deals. Third parties will still want an active involvement from that creator – but will need to strike a balance that doesn't impede the ability of the company to scale and execute deals without having full time, hands-on services from the creator on everything.
Because content agreements can be extremely complex and have wide-ranging repercussions, it's important to engage experienced and knowledgeable negotiators to assist with dealmaking when seeking to grow out a company. A company may live with the terms of an agreement indefinitely, so engaging the right business affairs and legal advisors to assist may be the best investment that a company ever makes.
5. Get Your Personal Affairs in Order
Although not directly involved in the formation of a media company, creators should think about getting their personal affairs in order as their businesses grow. If the creator intends to get married, they may want to enter into a prenuptial agreement to ensure that the company is protected in event of divorce. Likewise, it may be the right time for the creator to start estate planning (particularly, in advance of any potential windfall from a subsequent sale). These kinds of formalities are a key part of developing as a creator, and as a company.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
