Your artist career is getting traction – you’re doing more shows, you’re recording strong material, people want to work with you. And now you’ve been offered a management contract. Should you sign it? This question comes at us several times a month.
This may be the most momentous decision a budding artist makes. Get the right manager and sign the right management deal, and the future is bright; but make the wrong decision and you may have handcuffed your career and thrown away the key. So what should you be looking for?
First, regardless of any deal points, you must be comfortable working with and have confidence in your manager. What is the manager’s track record? Has s/he worked with other (successful) artists? What’s her/his communication style, screamer or persuader? You will be working closely with this person, perhaps for many years, so it’s important that the relationship be a good ‘fit.’ Spend some time in person or in conversation and get a feel for the manager’s style and how s/he plans to promote your career.
Second, bear in mind that with management agreements, like all contracts in the entertainment industry, your negotiating leverage is a function of where you are versus where the manager is in your respective careers. A new artist cannot expect to strike a sweetheart deal with a successful, experienced manager; instead, the artist might look to negotiate on certain points that limit a manager’s ability to endlessly extend the deal through options. If the manager is able to boost your career, and there are reasonable safeguards in place, then everybody’s happy.
A management contract may run many pages with plenty of boilerplate, as well as substantive, provisions. What are the major deal points and what does a favorable management agreement look like for the artist? In no particular order, most management agreements address the following issues:
- Scope of services – What services will manager provide and what areas of your career will the manager represent? Most agreements provide a very broad array of management services, so that manager has control over most every aspect of your entertainment career. Most of these provisions aren’t negotiable and the manager will maintain s/he needs a broad mandate to optimize the artist’s career potential.
- Term – Potentially how long will the contract run? You can expect an initial period of one to three years, followed by a succession of options (the manager will want more options, you want fewer). The shorter the initial period, the better chance the artist has to end a relationship that is not working; but the manager wants a longer initial period because s/he believes that such time is required to jump-start the artist’s career. Most management contracts presented by managers allow options to be exercised automatically, with no input from you. You should look to require that the manager meet certain agreed-upon milestones before s/he can exercise any option. You could ask for performance markers, such as income milestones or events such as obtaining a record contract or distribution deal, before the manager may exercise an option to extend the contract. A manager may agree to certain milestone because, after all, s/he is in the deal to make money; if it’s not working out, everyone should have the ability to cut their losses.
- Exclusivity – The manager will expect that s/he will exclusively act as your manager, while s/he manages other clients non-exclusively. There is not much room to negotiate this point because managers will not agree that you can have multiple representatives, and they won’t agree to limit the stable of artists they manage.
- Assignability – The manager will insist that the contract be assignable to another manager, while you will have no right to assign the contract to anyone. There’s no room to negotiate your ability to assign your agreement – after all, it’s you the manager has chosen to manage. But you should look to limit the manager’s ability to assign the agreement except to another management company in which the manager has a significant business interest (after all, it’s that manager you have chosen to work with). This way, you have some assurance that the new management group will have similar interests as the prior manager.
- Manager’s Authority – Managers look for broad authority to make decisions on your behalf, but you will want to require manager to get your approval prior to making anything but the most basic decisions about your career. Typically, you will give advance approval for manager to use your name and likeness, but you should approve beforehand what those images will look like. Likewise, manager will want to be able to advance monies on your behalf (which will be fully recoupable – more on recoupment later), but you should require your approval for any expenditures over a reasonable dollar amount ($100, $500?). Also, be wary of any power of attorney contained in the agreement that can give the manager the right to act on your behalf without your knowledge or permission.
- Compensation – While the manager’s commission is certainly important, you shouldn’t focus too much on this percentage to the exclusion of other, perhaps more critical, components. Typical commissions range from 18 to 22 percent of artist’s gross earnings (that means before any deductions are taken off the top); the more experienced the manager, the higher rate s/he can command. Here, while you want the lowest commission rate possible, an equally important issue is to limit the streams of money that are considered a part of gross earnings. Look to carve out monies that you receive that don’t actually go into your pocket: e.g., actual recording costs, income that you must pay to others, reimbursement of touring expenses, etc. Often, a manager will require a letter of direction from you, where you direct another person to pay money that you’re owed to your manager, and the manager will then take her/his commission from this and pay you the balance. Bear in mind that manager will have the right to recoup, or recover, all of her/his expenses (other than basic overhead) from all monies before you get paid.
- Post-term Compensation – After the agreement ends, how long is your former manager entitled to continue receiving commissions? First, all commissions should be based only on deals actually entered or substantially negotiated during the Term of the contract, and not from deals you brought into the relationship or which you negotiated after the Term. But the commission obligation in most management agreements doesn’t end when the contract ends; you must look to limit the tail-end payments so that you don’t end paying the old manager forever, or paying a new manager in addition to the old one. A sunset clause addresses this concern for the artist, and typically sets up a diminishing rate of commission over a number of years, such as Post-contract Year 1 = 18%; Year 2 = 10%; Year 3 = 5%; and Year 4 and after = 0%.
- Group Provisions – If the artist consists of multiple members, then manager will expect the right of first refusal to manage any leaving member, on the same terms as the agreement with the remaining members. There isn’t much room to negotiate this point, as managers see this as a fair arrangement in case a key person leaves the group.
- Default – Management contracts tend to provide ways for the manager to extend the contract while holding your feet to the fire; you generally have very few reciprocal rights. Look to create conditions where the manager’s failure to perform is a breach of contract – e.g., manager must obtain a record or distribution agreement by a certain date, or manager must generate a certain level of income during the period. Then include a provision for putting the manager on notice that s/he is in default of the contract and if s/he doesn’t cure the default within a reasonable time, you may terminate the agreement even if the Term has not fully run. Make sure that any notice that manager must give you will actually reach you: require that notice be served by mail as well as by email, to improve the odds that you learn of any claimed default.
- Jurisdiction and Dispute Resolution – The contract will state where any legal disputes must be handled. You will want this to be in your state, but the manager will want it in her/his state. If these states are not the same, you will likely have to agree to resolution in manager’s home state. There is a trend requiring that legal disputes be settled by binding arbitration, as opposed to litigation. As a general rule, arbitration is less expensive and time-consuming than litigation; the flip side, though, is you don’t get your ‘day in court before a jury of your peers.’ If that’s important to you, negotiate for the right to litigate disputes. But keep in mind that disputes in these agreements often arise over technical terms and interpretations and a jury may not be who you want making a decision about your rights.
- The Right to Legal Counsel – The agreement will tell you that you should get legal counsel to review, explain and negotiate the agreement for you. But why? All this is easy, right? You don’t need any legal help deciphering and negotiating this deal, do you? If you decide you’d like a hand with this, Mark A. Baker Law is one-step away – reach out today!