VTuber and Creator Agency Contract Practice: Outsourcing Structure and Freelance Act Compliance

Hello, I am Noriaki Asato, Managing Attorney of LegalAgent.

Relationships between VTuber or creator agencies and their talent or creators are almost always structured as service outsourcing agreements rather than employment contracts. Working under an agency affiliation, performing as a character and streaming under the agency's brand can resemble the relationship between an entertainment agency or record label and a performer, but the legal framework remains a contract between independent businesses. If contract drafting and dispute handling do not start from this structure, both the terms and the response when problems arise can miss the mark.

The Outsourcing Premise and Rules Under the Freelance Act

Under an outsourcing arrangement, talent are not automatically covered by labor law protections for employees under the Labor Standards Act, such as minimum wage, working-time limits and dismissal restrictions. Although employee status may still be found depending on the degree of direction and supervision and the nature of the remuneration, most agreements are structured so that activities, streaming frequency and revenue sharing are set by agreement between the parties.

That does not mean an agency can set terms entirely at its discretion under an outsourcing contract. A key statute here is the Act on Ensuring Proper Transactions Involving Specified Entrusted Business Operators (the Freelance Act), which took effect on November 1, 2024. It establishes rules for businesses that entrust work to individuals operating without employees, and many contracts between agencies and talent or creators fall within this framework.

The Freelance Act requires immediate disclosure of transaction terms in writing or by electronic means, setting a payment due date within 60 days from the date of receiving performance and paying within that period. It also prohibits reducing remuneration, refusing acceptance of performance and demanding unreasonable changes to performance or rework. For working conditions, it requires accurate recruitment information, consideration to balance work with pregnancy, childbirth, childcare or nursing care, consultation arrangements for harassment, and advance notice and disclosure of reasons for midterm termination or non-renewal. Even if an agreement is titled a management contract or affiliation agreement, these obligations apply where the substance is a business outsourcing transaction. We also explain term disclosure and payment due dates in Service Agreements, the Subcontract Act (Now the Small and Medium-Sized Enterprise Transaction Fairness Act) and the Freelance Act.

It is also important to distinguish this from the Small and Medium-Sized Enterprise Transaction Fairness Act (renamed from the former Subcontract Act), which took effect on January 1, 2026. That Act covers manufacturing, repair, information-product creation and service-provision outsourcing transactions using capital and employee thresholds, so smaller agencies often fall outside its scope. By contrast, the Freelance Act does not use capital thresholds for the ordering party and turns on whether the counterparty is an individual who does not employ workers. Relying only on the view that a transaction falls outside the Transaction Fairness Act because capital thresholds are not met risks overlooking obligations under the Freelance Act.

On September 30, 2025, the Japan Fair Trade Commission and the Cabinet Secretariat also published guidelines on ensuring proper transactions between performers and entertainment agencies, broadcasters and record companies. Those guidelines call for greater transaction transparency from an Antimonopoly Act perspective. Even if the text does not explicitly state whether VTuber agencies are directly covered, they reflect increasing public scrutiny of transaction practices in the entertainment sector.

Ownership of Characters, Channels and Accounts

The most common source of dispute in VTuber contracts is ownership of the character (often called the avatar or model), streaming channels and social media accounts.

Under the Copyright Act, the illustrator or modeler who actually creates a character illustration or 3D model is the author in principle. For an agency or talent to treat the character as its own, the contract with the creator must either assign the copyright or clearly define the scope of the license. Looking only at the agreement between the agency and the talent does not reveal the full rights chain. Clarifying who may use what requires checking three layers together: the contract with the illustrator or modeler, the contract with the talent and the internal allocation of rights within the agency. For a closer look at structuring rights clauses, see Checkpoints for Reviewing Intellectual Property Ownership Clauses.

In the agreement with the talent, handling upon contract termination needs particular attention. Where the agency bears the production cost of the character, one common structure is for the agency to hold the copyright and grant the talent a license to use the character for activities during the contract term. Under that structure, the talent generally cannot continue performing as the same character elsewhere after the contract ends. Conversely, some arrangements allow the individual talent to hold the rights and grant the agency a license only during the affiliation period, leaving broader room for the talent to continue using the character after termination.

Choosing between these models is a business decision, but proceeding without stating the choice clearly in the contract often leads to conflicting expectations at the time of graduation or transfer. Channel administration rights, subscriber and viewing data, management of social media IDs and passwords, and monetization settings should also be addressed separately from character copyright, including who holds them during the term and how they are handed over or closed when the contract ends.

Graduation, Transfers and Advance Notice Procedures

Disputes over taking a character after departure become sharpest when the contract ends. The agency often wants to protect the development costs it invested and the fan community built around its roster, while the talent has brought the character to life through voice and personality and wants to maintain relationships with fans.

Key points that should be addressed in the contract include:

• Who holds copyright in the character
• Whether and under what conditions the character may be used after contract termination
• Alternative arrangements if the character cannot be used (such as whether the agency will support a relaunch under a new character)
• Whether the streaming channel may continue to be used
• The notice period and procedure for ending the contract

Under the Freelance Act, where an outsourcing contract that has continued for six months or longer is terminated midterm or not renewed, the ordering business must in principle give at least 30 days' advance notice and must disclose the reasons if requested by the talent. When an agency initiates termination or non-renewal, its timeline and communications need to follow these notice and reason-disclosure rules.

Even where character rights remain with the agency, some contracts specify how the graduation or termination will be explained and announced on stream. Because announcements in this field strongly affect fans, setting out the communication process in the contract helps keep the response consistent if a dispute arises.

Revenue Sharing and the Reasonableness of Activity Restrictions

VTuber revenue comes from multiple streams, including streaming ads, superchats or tips, merchandise sales and corporate sponsorships or tie-ups. If the contract states only a single percentage, it often becomes unclear which revenue streams are covered and how deductions are handled.

For streaming revenue, the settlement timing differs depending on whether platform payouts pass through the agency or are paid directly to the talent. For merchandise sales, the calculation formula depends on who bears planning, manufacturing and inventory risk. For corporate sponsorships, failing to clarify whether projects are governed by individual orders or a master agreement can also leave gaps in term disclosure under the Freelance Act. A practical contract breaks down each revenue category by the calculation base (gross receipts or net of platform fees), revenue-share ratio, payment timing and treatment of expenses.

Exclusivity clauses—such as prohibitions on dual affiliation with other agencies, restrictions on outside activities and prior check requirements for stream content—are also common. Setting restrictions in an outsourcing agreement is not prohibited in itself, but from the perspective of abuse of a superior bargaining position under the Antimonopoly Act, the restrictions should be checked to ensure they do not go beyond what is needed to protect the agency's legitimate interests. Specifying the restricted scope of activities, the applicable period and whether any obligation continues after termination helps the talent understand their freedom of activity and makes it easier for the agency to assess potential breaches.

Contract Reviews and Practical Operations

When reviewing agency agreements, a practical starting point is to check whether ownership clauses for characters, channels and accounts are clearly stated. Where terms are missing, agencies can add them from new contracts onward and propose updates for existing talent at renewal. Because a single master agreement does not always satisfy the Freelance Act's term-disclosure requirements for individual projects, it is also worth checking purchase orders and email confirmations used for individual campaigns and standardizing their templates where needed.

Once an agency works with multiple talent and each character has different production arrangements or IP licensing plans, uniform boilerplate often fails to match actual operations. When contract wording no longer reflects how activities are run in practice, sorting out the rights structure with outside counsel helps prevent avoidable friction.