Management contracts: Key tips and tricks
by Lale Kemal
A good manager can significantly drive a musician’s career. It is important to find the right manager for your artist — the MMF, the organization that represents artist managers worldwide, provides a good global directory of managers, however it is important to speak to artists, labels, publishers or other contacts within the industry to get some solid manager recommendations. Negotiating a fair management contract is also crucial. This article provides an overview of the key points and pitfalls to look out for in management contracts.
What role should a manager play?
As with any contract of services, it is for the artist to decide what services or specific responsibilities its manager will take on — a manager could mastermind all aspects of an artist’s career trajectory or just take care of an artist’s business for example liaising with labels or publishing companies.
As a general rule, the scope of a manager’s role is broadly drafted to ensure there is a degree of flexibility for both artist and manager to develop into their roles. A manager will ‘manage’ or use all reasonable endeavours to develop an artist’s musical career, to a standard expected of managers within the music sector. This could include negotiating recording or publishing contracts, live appearances, high profile brand sponsorships, merchandise, tours or endorsement deals. He/she has a fiduciary duty to act in the best interests of the artist. An artist may carve out certain exclusions — for example any creative input in the tracks or albums created during the term of a management contract, or playing a role in an artist’s non-music related activities (for example one-off appearances, writing a book, or acting in a film) however to ensure there is room to grow, it is important not to be too prescriptive in defining a manager’s role.
Often managers perform split roles — for example managers may also own publishing companies, or act as concert promoters and may want an artist to benefit from both services. The key concern in this scenario is to make sure the manager still prioritizes the artist’s best interests.
How long do management contracts last for?
A management contract is usually short term (3- 5 years) or it can run for a number of album cycles (e.g. up to the release of 2 albums), subject to the parties and the usual standard in the territory where the agreement is signed. An artist may also want a short trial period (3–6 months) to decide whether it has a good dynamic with its manager.
A 5-year agreement could comprise a 2-year initial term with three 1-year options to extend the term of the contract. For example, an artist may stipulate that the manager’s first option is conditional upon him securing a recording or publishing agreement for the artist. There could also be a chart success condition, whereby the management contract will only subsist for a further year if a manager has helped secure a certain level of chart success for its artist. Options are a useful way to ensure both parties are focused on an artist’s career. It can take time for a musician to make, release and promote an album, not to mention build a fan base, so it is important to be realistic with timeframes.
Artists and managers will also want to include certain other termination events, permitting each party to leave the contractual arrangement if certain obligations are not fulfilled. For example, where an artist fails to pay a manager’s commission and expenses, a manager may reserve its right to suspend its managerial obligations or terminate.
Is the arrangement exclusive?
A musician or group will need to decide whether they want a manager to work exclusively for them.
An exclusive arrangement is beneficial and straightforward — the manager will be focused solely on building one artist’s career. However there is also some benefit to working with a manager who manages and has successfully signed other acts to labels. This experience could open the door to new opportunities and markets and could also minimize the risk of a manager overstepping his boundaries by seeking to control an artist’s creative progression.
If a musician enters an agreement with a multi-artist manager, it is important to expressly state that he/she must still fulfill his managerial responsibilities and spend a reasonable amount of time on helping build the musician’s career. An artist may also want the ability to terminate the contract in the event the manager fails to perform his obligations, or is unavailable for a significant period of time and/or important events (for example the negotiation of recording, publishing or high profile endorsement arrangements).
Should this apply worldwide?
A worldwide management contract may be practical: one manager paid one commission to deal with all global managerial responsibilities. However it is important to weigh up whether this is appropriate for the artist involved. For example, if an artist has a large fan base in the US and tours there annually, it may be useful to have two managers to separately prioritize the artist’s career in the US and elsewhere. The US manager would be paid out of the commission of the first manager. The first manager may want to avoid appointing a sub-manager in the US, however having a separate manager who is familiar with different local laws and practices with key industry contacts could result in new artist opportunities. The management contract will need to clearly define the managers’ differing roles and responsibilities. The artist will also need to ensure both parties are clear about the artist’s direction and how they want to build their brand in each territory.
How is a manager paid?
A manager will receive a commission for services rendered, or work done during the term of a management contract. A commission is a portion of the sales of records, songs or other works completed by the artist during the contract term. It is usually 20% of an artist’s gross earnings (all the income, fees, advances or royalties an artist makes), excluding certain expenses (for example living or tour expenses (lighting, sound, roadies, travel, hotels etc). For tours or concerts, which can be loss making, a manager’s 20% commission will be based on the net income generated from live performances.
It used to be that the commission was derived from all contracts entered into by an artist under a manager’s tenure. This would be acceptable for short term contracts, for example for tours with predefined dates, however if an artist entered into a recording contract and only recorded a few tracks or an album during its 5-year management contract, but later recorded more successful works, the artist’s first manager would still receive a commission even though he is not managing the artist.
To avoid this, it is important to stipulate when a manager’s commission is triggered. For example, a manager may be paid a commission for certain sound recordings (e.g. 2 albums), songs written or other work done during the management term only.
As long as an artist continues to be successful and produces royalties or income for those albums, songs or works, the manager will continue to be paid a commission for the remainder of the copyright term for those works. There is often a sunset provision or a post commission period: for a set period after the end of the contract term, the manager will continue to receive a commission based on the recordings made, songs written or other work done while under contract but after that, all payments will cease. Depending on the bargaining strength of the parties, this could be a 2–3 year period, or even a 20-year period of continuous commission payments. This sounds onerous, however the parties will usually agree a stepped clause, whereby the payments will gradually decrease over time.
Management expenses
A manager is entitled to charge an artist or group for any expenses that have gone towards promoting their career. It is important to request an itemized list of the costs accrued by a manager to ensure all the payments are relevant to his management responsibilities. It may also be worthwhile setting a spend limit for certain activities (e.g. £1000 for travel or other disbursements) and anything above this will require the artist’s prior written consent.
It is usual for an artist and manager to jointly engage an accountancy firm to deal with all income resulting from a management arrangement. The firm will receive all income into a client account and repay (i) the manager to cover its expenses; and, having assessed any gross losses, (ii) pay the remainder of the income to the artist (80%) and the commission to the manager (20%). As stated, a manager’s commission may be split amongst other sub-managers in different territories. However for manager’s performing split roles (e.g. a manager and publisher) it cannot ‘double-dip’ or claim a commission for both functions.
Who is holding the pen?
Before an artist and manager enter into an agreement, each party should instruct a lawyer to get an independent view on the proposed contractual terms and to assess their respective positions. There are a number of legal cases that focus on the reasonableness of management contracts. The terms should be fairly drafted, taking both parties’ interests into account. An artist should not be unnecessarily restricted; it should be free to develop its musical direction, and a manager should support this. Each case should be considered separately, but if a manager is seeking a high commission (above 20%) or a manager’s lawyer purports to act for both the manager and artist, this may point to an unfair contractual arrangement.
This is a basic guide to management contracts. For more detailed advice, we would suggest that you approach a specialist music lawyer, or if you have a specific query for the author, please contact the shesaid.so team directly.
