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Specimen Management Agreement

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Specimen Management Agreement (PDF 143.05 bytes)

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The relationship between an Artist and Manager is one that is primarily based upon trust. If the Artist does not have faith in the Manager and his ability to progress the Artist’s career then it is unlikely that the relationship will be a successful one. As an extension of this basic fact many Manager/Artist relationships are not governed by a written agreement and yet work perfectly well. However, whilst this may be fine when things are going well, the major reason for having a written agreement is to protect both sides in the event that things do not run so smoothly. Ideally, once an agreement has been negotiated and signed it should be put in a drawer, forgotten about and only referred to when clarification is needed as to the parties’ rights and obligations. It is at times such as these that time spent at the outset of a Management/Artist relationship pays off as a sensible management agreement which clearly sets out the entitlement of the parties can help to avoid stressful and expensive litigation if and when the relationship becomes troubled or comes to an end.

The accompanying agreement has been drafted in the form of a letter from the Manager to the Artist which we believe is slightly less daunting and more accessible to both parties. We have tried to make the language reasonably user friendly whilst still maintaining an appropriate level of precision.

Below is a brief “guided tour” around the important elements of the agreement.

Clause 1: Appointment

As drafted, this clause limits the Manager’s involvement with the Artist’s career purely to the Artist’s activity within the music industry or to activities (such as merchandising and sponsorship) which arise directly because of those musical activities. If you are signing to a Manager who professes to be an expert in music industry management it is sensible to limit his involvement with your career to his field of expertise. Obviously, if your career develops in such a way that the Manager becomes involved in areas outside his remit he is likely to expect to be paid his commission but this agreement leaves it open to you to appoint different Managers who are expert in their own field to look after areas such as acting or non-musical writing.

Managers will on the whole resist this limitation of the scope of the relationship and will often argue that since any success in other areas of the entertainment world is likely to flow from success in music (which they have helped create) they should be entitled to share in such success. However where possible you should limit the scope as far as you can – it can always be expanded (by agreement) at a later stage.

Another point to bear in mind if the Artist is a band is that it is a good idea, if you can, to limit the Manager’s appointment to the individual members performing together as that band, and not Members’ individual solo activities. In the event that the band split up, individual members will not necessarily want to have to stick with the same Manager which could be awkward and could lead to conflict of interest. Managers may not concede this point but it is always worth asking.

This clause also deals with the Territory of the appointment. It is now fairly standard for a Manager to be appointed for the whole World, (as is the case here) but, depending what sort of Artist you are and where your market is likely to be it may be that you want to exclude, for example, the territory of North America where you may want to appoint a separate Manager for that territory only.

Clause 2: Terms

The Management Agreement should ideally run for no more than three years (and certainly for no more than five years) and there should be various mechanisms by which the Artist can terminate the agreement if the Manager does not achieve various goals. You will see that in the agreement these are tied to the achieving of a recording agreement. It is often the case that Managers tie financial performance provisions in but on the whole these are not particularly helpful as there is always argument as to whether gross income or net income should be used and the level of appropriate financial targets.

Clause 3: Managers Obligations

It is notoriously difficult to get Managers to commit to meaningful obligations in writing. This does not necessarily mean that they will not do their job, they just seem to have an aversion to committing to do it on paper! This is in some ways understandable as, by its nature, a Manager’s duties are nebulous and difficult to reduce to a written job description. However, the Manager should commit to the general obligations included here which should also help to focus their attention.

Clause 4: Commission

A commission of 20% of gross income is now generally accepted as the industry norm and you should really not pay more than this. There are three other major points which are dealt with in this clause:-

(i) commission on live performance
- some Managers still try to insist upon being paid their commission upon gross income from live performances including gigs and tours. This should be resisted if at all possible as, although fees for live performances can be fairly substantial, expenses, especially for a new artist, can be even more so and many tours make a loss. If the Manager is charging his commission on gross income it could be that not only does the Artist make a loss on the gig or tour but then, to add insult to injury, is forced to pay commission to a Manager from monies which they do not have. Most Managers, if pressed, will agree to levy their commission only upon net receipts and this is what appears in the draft agreement. Sometimes Managers wish to receive a higher percentage (typically 25%) of net receipts and although this should be resisted it is better generally than paying on gross receipts.

(ii) items to be treated as non-commissionable:

- (Clause 4.5.1) Artist should not be expected to pay commission on monies advanced for recording costs, video costs, third party producer’s advances or royalties, tour support or monies due to Artist but not received (bad debts). The rest of the list which is not exhaustive, is really limited only by your imagination and your negotiating power and will depend on how much the Manager is prepared to concede.

(iii) sunset clauses:
(Clauses 4.2 and 4.3) Until comparatively recently many Managers would try to insist that they were paid their commission at full rate upon all income generated by any agreement entered into prior to or during the Term of the Management Agreement for as long as such income was generated (which could be 50 years in relation to your royalties under your record contract, or your life plus 70 years in relation to your royalties under your publishing contract. Few Managers now expect this and most accept that after the Term of the Agreement is over there should be some limit upon the scope of their commission. However, where that limit should fall is probably the most contentious part of the negotiation of a management agreement.

In practice there are two issues to address:

(a) What income is commissionable post term?

(b) What rate should that commission be charged at?

Dealing with the first issue, we have in this agreement limited the scope quite severely by tying commission to “release”. The general principle is that commission should only be levied upon recordings/compositions recorded or written during the Term, which would widen the scope. There are no hard and fast rules – it is simply a matter of negotiation.

Turning to the rate at which commission should be charged, again there are no rules written in stone. Many Managers, if they accept limitations on the scope, will hold firm on maintaining the full rate of commission for as long as the Artist is paid. Others will agree to a sliding scale but will want longer time periods than are given here. Many managers will agree to reduce commission rate over quite a short period of time but want to be paid at a lower rate (typically 3 – 5%) for as long as the artist is paid. It can also be effective to link the length of post term commission to the time spent managing. So that you could start out with a short period of entitlement which could be increased as the agreement is renewed.

Clause 5: Accounting

The specimen agreement assumes that the Artist (or the Artist’s accountant) will collect all income. It may be that it is more appropriate for a Manager to collect income and if this is to be the case, appropriate safeguards with regard to copy bank statements, auditing rights and access to the account need to be included.

Clause 6: Expenses

The figure included here is merely by way of example only and it may be that management and band will be happy with a higher figure. The important thing is that the limit should be practical from the Managers point of view so that he is not constantly referring requests for relatively minor expenses to the Artist but also set at a level at which the Artist feels comfortable. In many instances money will be paid into a bank account in the name of the Artist but upon which the Manager can draw cheques. If this is to be the case, it is probably wise to limit the amount the Manager can withdraw upon his sole signature.

Clause 7: Third Party Agreements

It is very important that the Manager should not be able to sign recording, publishing or merchandising agreements on your behalf. However, most major record companies and publishers would be unhappy with any situation where a Manager purported to do so.

Clause 9: Termination

Again it is important that in the circumstances set out in this clause the Artist should have the right to terminate the management agreement.

Clause 10: Keyman

Where the Artist is signing to a management company or partnership it may be that the only reason they are signing is to obtain the services of a particular Manager. If this is the case it is important to include a keyman clause so that, if the individual leaves the agreement can be terminated and the Artist does not have another Manager foisted upon them.

Clause 11: Assignment

Following on from the above it is important that the Manager is not allowed to assign the agreement to anyone else as the Artist must be able to have control over who manages them.