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Management Agreement

by Ben McLane, Esq.

Once an artist has decided to work with a manager in which there is mutual trust and belief, it is advisable to memorialize a management agreement ("Agreement") in writing. Such an Agreement has certain elements an artist should be familiar with. This article will discuss the most important components.

The Agreement will contain a description of what the manager will do for the artist. The standard terminology is that a manager will "advise and consent" the artist in all aspects of the artist's career. Although this is vague, the manager will be performing creative functions, such as formulating an image, selecting material, and finding ways to promote the artist. Further, the manager will act as the artist's liaison with record companies, publishing companies, attorneys, agents, the press, etc.

The Agreement will also set forth that the manager is "not a talent agent". This means that the manager is not agreeing to find live gigs for the artist. There is a law in California which requires a talent agency license in order to procure live engagements for an artist. A talent agent must abide by strict standards which most managers do not want to be shackled by (i.e., posting a bond, limited commission percentage, cannot work out of home). If a manager violates this law, the artist can terminate the Agreement and require the manager to pay back all commissions collected from the act in the past.

Additionally, the manager is usually granted a "power of attorney" to act on behalf of the artist on business matters. This allows the manager to approve such things as ads and publicity. However, it also allows for abuses because this power lets the manager sign documents on behalf of the artist. Thus, it is best to limit the signing authority only to live appearance documents, and only then once the artist has consented to the terms.

Further, the Agreement will have a time limit, or "term". The average term is three years. Normally, there is an initial number of years and then "options" for additional years, with the manager generally having the option power. The artist can limit the term by requiring "performance standards" whereby, for example, if the artist does not obtain a recording agreement or does not make a certain amount of money in the initial period, then the manager cannot pick up an option for more years.

Moreover, the Agreement will set forth the manager's fee, which on average is fifteen percent "of gross earnings" (i.e., before deductions) from all aspects of the artist's career. Yet, the artist can exclude certain monies from the manager's commission. If the artist, for example, is already a successful songwriter or actor, the manager should not be able to commission those earnings. Further, there are other monies which only "pass through" the artist's hands and which the artist never really earns. These, too, should be excluded and consist of: recording costs, tour support, independent promotion money, producer fees, and live gigs where the "net" is minimal.

Finally, with respect to commissions, the Agreement should have what is known as a "sunset clause" on activities which occur after the termination of the Agreement. Although a manager normally wants to be paid perpetually on sales of records released during the term, the band can negotiate that the percentage is reduced over a span of a certain number of years until the manager is no longer entitled to any commission.

Although this is not an exhaustive list of the important points, an artist needs to at least have a grasp of these concepts before he or she signs on the dotted line.

Copyright 1998, Ben McLane
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