Management Contracts

Noted entertainment attorney and author Donald Passman describes an artist’s support team as including a personal manager, attorney, business manager, booking agent, and groupies. Passman, D.,All You Need to Know About the Music Business, pp.31, 47, Simon & Schuster (1994). Of these, the personal manager is clearly the most important member to the artist’s professional life. Your first contract may be with a manager, so you should have a working knowledge of the issues addressed in management contracts.

Manager’s Duties. A personal manager’s duties include advice and counsel in any or all areas of the artist’s entertainment career, such as:

  • representing the artist in business negotiations;
  • supervising professional engagements;
  • coordinating publicity and promotion;
  • soliciting recording, publishing, merchandising and endorsement contracts;
  • directing and supervising the business aspects of the artist’s career;
  • coordinating relations with record companies;
  • song selection;
  • assembling a professional support staff;
  • being available to confer with artist;
  • acting as a buffer between the artist and the rest of the world;
  • shaping the artist’s image

The management contract should spell out the manager’s duties and should, (but often does not), specify that the manager will use reasonable or best efforts in performing those duties.

Territory. This is usually the universe, although managers may compromise and limit the territory to the world.

Exclusivity. The manager is the artist’s exclusive personal manager, but the manager may have other artist-clients.

Term. Most management contracts call for a 3 – 5 year term. This may be expressed as a series of one year options, usually the manager’s. The artist should want a shorter term. The manager will want a longer term. A common compromise is for the term to expire if a specified performance level is not achieved. For instance, if a major label recording agreement is not secured within 18 months after the commencement of the term, or if the artist doesn’t earn $200,000 in the first two years, the contract may be terminated. Variations might concern whether the contract terminates automatically or only on timely notice from the artist, or whether the artist’s minimum earnings should include offers rejected by the artist.

Compensation. The manager’s compensation package is normally expressed as a commission – typically 10-25% of the artist’s gross earnings. Representing the artist, you should try to chip away at the definition of “gross earnings.” Exclusions from commissionable income might include:

  • music publishing income retained by or payable to third parties including, without limitation, songwriter royalties payable to co-writers and publishing company administration fees;
  • bona-fide third party costs incurred in connection with motion picture and television synchronization licenses;
  • actual recording costs, (including applicable union scale payments to artist) of artist’s master recordings and audiovisual works;
  • recoupable tour support payments;
  • fees, advances, royalties, and other payments paid to third parties other than band members including, without limitation, record producers, audiovisual work producers and directors;
  • income derived by any entity in which manager has a proprietary or income interest, which such entity acts as an entrepreneur, packager, or promoter of an entertainment program or project in which artist is engaged;
  • that portion of motion picture or television income which is payable in commissions to a talent agent or is otherwise payable to third parties as part of the cost of production;
  • moneys payable by artist for “sound and lights” in connection with live engagements;
  • income derived by artist from any business investments, entrepreneurial activities, or other non-entertainment related activities;
  • income derived from agreements substantially negotiated and entered into after the termination or expiration of the term of the management agreement

A reduced percentage might apply to earnings not “worked” by the manager, such as books or production work.

A manager will want to receive commissions in perpetuity from earnings derived from agreements entered into during the Term, even after that manager is no longer working with the artist. Because an artist will need to hire a replacement manager, who will also expect a commission, the departing manager’s commission should be limited by using a decreasing commission percentage, limiting commissionable income to earnings from records released during the term, or using a time or money cap. Similarly, a replacement manager may be limited to a reduced percentage on pre-existing sources.

Authority. Whether the manager merely offers advice or makes decisions which bind the artist will depend on the manager’s authority. A manager will often want an unlimited power of attorney to sign contracts for the artist. This should be resisted, so that a manager may only bind the artist to short term ( 1 – 3 days) personal appearance contracts of a kind previously approved by artist, and then only when the artist is unavailable to sign. Sample language might include the following:

Manager may, on Artist’s behalf, and subject to his prior approval, approve and permit any and all publicity and advertising, and execute for Artist in his name and/or on his behalf routine “one-night” agreements for live performances by Artist in the continental United States, provided that such agreements are identical to the form already signed in the past by Artist for such performances and only if Artist is consistently unavailable to execute such agreements, (“unavailable” meaning that Manager diligently but unsuccessfully endeavored to have Artist execute such agreements). Subject to Artist’s advance written approval, Manager may approve and permit the use of Artist’s name, likeness, voice, sound effect, caricature, or other identifying features or characteristics in the promotion, advertising, or publicity of products or services or otherwise in any merchandising endeavors. Other than as expressly set out herein, Manager is neither authorized nor permitted to execute any agreements on Artist’s behalf except to the extent expressly authorized in writing to do so by Artist.

Loans & Advances. A manager will want to be reimbursed for all out of pocket expenses. The artist should limit reimbursable expenses to a specified monthly amount, ($50-500) without the artist’s prior approval. The manager’s general office overhead should not be included. If possible, the manager should only be reimbursed out of commissionable income.It should also be made clear that the artist is free to hire his or her own independent legal counsel, business manager, and CPA.

Receipts. Most first drafts have the manager receiving all income for the artist and remitting artist’s portion after deducting the manager’s percentage. While this may be the only practical way to handle things at first, it invites trouble. Remember, the manager is the artist’s personal manager, not businessmanager. I urge the artist to engage a business manager/accountant at once. Gross compensation received by either the artist or the manager on the artist’s behalf, should be paid directly to the artist’s business manager, who will then compute the manager’s commission and remit it to the manager. This protects both artists and managers, neither of whom may be well-versed in the proper accounting processes involved. Of course, the artist should have the right to examine the manager’s books and records pertaining to the artist upon reasonable notice.

Key Person. The artist’s faith and trust in a particular manager is probably what motivates the artist to enter into a management contract. Yet, the contract itself may define the parties as the artist and the manager’smanagement company, often a corporation. The individual you are comfortable with may leave the company or be put on another account. For this reason, it is desirable to ask for a “key person” or “key man” clause. Such a clause allows the artist to terminate the deal if the individual manager leaves the management company or is no longer actively engaged in the day to day management of the account.

Talent Agency Laws. Many states have enacted statutes regulating talent agencies and talent agents. These statutes may require anyone who procures employment for an entertainer to obtain a license from the state. For example, in Texas, anyone who engages “in the business of obtaining or attempting to obtain employment for artists, including a person that counsels or directs an artist in the development of the artist’s professional career” must first secure a certificate of registration issued by the Texas Department of Labor and Standards. A $400 application fee and $10,000 surety bond are required.

For this reason, your contract language will often say that the manager actually denies that he or she is a talent agent or is in any way engaged in obtaining employment for the artist. At present, the Texas statute applies to those representing actors and models, as opposed to musicians, (See 16 TAC §78.30), so the legal fiction is not necessary where I live, but this is not true of some other states. A best practice is to carefully draft performance criteria clauses phrased as “if Artist enters into a major label recording contract…” rather than “if Manager procures a major label recording contract…” and to carefully draft the manager’s duties clause in terms of advice and counsel rather than procurement.

For more information, see Texas Occupations Code Chapter 2105 and 16 Texas Administrative Code §78.