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Talk To Our Lawyer | 09.06

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One of the manager's most important functions is to act as the artist's representative with industry players (i.e., record company and publishing company) to ensure that these industry entities are maximizing the artist's opportunities. Ideally, the manager handles every aspect of the artist's career so that the artist may concentrate on creative obligations.


If you are serious about your career in the entertainment industry, one of the first people you will likely add to your team is either a manager or a lawyer. There is a chicken-and-the-egg debate in the industry as to when each should be brought onto the team. Regardless of which came first, if you start working with a manager, you would be wise to have a lawyer draft or review the Artist/Manager Agreement that will govern your relationship.

The personal manager is to the artist's team what a chief operating officer is to a corporation. An effective manager will map the strategy the artist uses to further the artist's career, measure the artist's success along the way, tell the artist "no" when necessary, and hold the artist accountable for achieving goals. The manager managers the artist's entire team; he counsels the artist as to image; selection of material; appropriate avenues for promotion; he handles the band, and many times the hiring of employees, including road crews, attorneys, and business managers. One of the manager's most important functions is to act as the artist's representative with industry players (i.e., record company and publishing company) to ensure that these industry entities are maximizing the artist's opportunities. Ideally, the manager handles every aspect of the artist's career so that the artist may concentrate on creative obligations.

An artist should be very careful when selecting a potential manager. The decision often comes down to balancing the manager's experience and connections versus the amount of time the manager will be able to spend with you...and many artists will find that well-connected managers don't provide a great deal of personalized service and vice versa. Unlike lawyers and some other industry players, managers are not licensed or regulated by any organization or governmental entity, so anyone can claim to be a manager. Therefore, the artist's agreement with the manager may be the most important contract the artist has-especially if the relationship disintegrates.

In the typical artist/manager contract, the artist wants to give away as little as possible and the manager wants to get as much as possible. Although there are a number of ways to compromise-and a lawyer familiar with the entertainment industry should be able to suggest solutions that make everyone relatively happy-the key management contract provisions to negotiate are as follows.

Compensation

The manager's compensation is generally based upon a percentage of gross income earned by the artist. This percentage may vary anywhere from 10% to 30%, depending on the bargaining power of the parties involved, but 15% to 20% is the generally acceptable standard in the music industry.

Exclusions/Deductions

It is important to note that in calculating the manager's compensation, gross income means any and all monies earned from the artist's activities in the entertainment industry before deducting any expenses-unless exceptions are made. If a manager takes 15% off the top, the band ends up splitting 85% of its earnings after all other expenses are deducted...which can often mean the manager is making more than each member of the band. Therefore, an artist should attempt to limit as much as possible the definition of "gross income" by clearly stating what will be taken out of the equation before the manager's commission is calculated (i.e., recording costs, tour support), defining the territory covered by the agreement, and/or carefully defining what is included in the term "entertainment industry."

Post-Term Compensation

Many artists have found that they continue to owe the manager a percentage even after the management agreement has been terminated or expired. Without an appropriate limitation of post-term compensation (known as a sunset clause), if a new manager is hired, an artist may end up paying double. Post-term earnings can be limited by years, income-streams, and/or activities occurring during versus after the term.

Term

Will the term of the agreement be for a certain number of years or album cycles (commencement of album recording to the end of album promotional activities)? Will there be a set number of years/album cycles and an option for future years/album cycles? How will the option be exercised? Will there be a performance standard (i.e., money earned or albums sold during the prior period) in order to trigger the option for extending the term? Under what circumstances can either party terminate the contract?

Key Man

If the artist has a relationship with a particular manager, the management agreement should include language stating that that manager (the "key man") must personally act as your manager or you can terminate the contract (i.e., if the management agreement is with a corporation or partnership or the manager joins a management company).

Services

What are the manager's responsibilities to the artist? What is the artist responsible for under the contract? For example, an artist is usually only represented by one manager, but a manager is usually permitted to represent other artists. Furthermore, the artist will usually be responsible for reimbursing the manager's related expenses, but limits should be placed on what constitutes a "related expense," and the manager should only be allowed to spend a certain amount each month, have to obtain permission from the artist before exceeding this amount, and have proper documentation for every reimbursement. These and other responsibilities and expectations should be clearly defined so there is no question as to each party's role and obligations.

Power of Attorney

Managers often want the right to hire and fire the artist's team members and sign any agreement or document on the artist's behalf, including checks. While this may be convenient in some situations, the artist should be signing agreements and checks and should be consulted on and actively involved in all but the most minute details of the artist's career. A good compromise may be that the manager may only sign agreements on artist's behalf for brief (i.e., two- to three-night) personal appearances, if the artist is unavailable to sign the document; the manager has informed artist of the major deal points and has received verbal approval from the artist to finalize the deal; etc.

Accounting

If at all possible, the artist and manager should hire a business manager to collect and keep track of all monies earned by the artist. Business managers are often accountants, certified public accountants (CPAs), or other finance professionals who are licensed and regulated. They may be paid under a conventional hourly rate or on a percentage basis (i.e., 5% of gross income). Regardless of who receives the money, procedures should be in place for the artist and/or manager to receive accounting statements and be allowed to review related books and records on a regular basis.

This checklist provides some issues that you should consider if you are engaging in activities in the entertainment industry. There is no such thing as a "standard" contract, so please consult with an attorney who has industry experience for advice regarding your particular needs and issues.

| Danica L. Mathes is an entertainment and intellectual property attorney with Blackwell Sanders Peper Martin LLP and an adjunct professor of entertainment law at Washington University School of Law in St. Louis. For more information, contact Danica at This e-mail address is being protected from spambots. You need JavaScript enabled to view it . If you have topics you'd like to see addressed in future columns, let us know at This e-mail address is being protected from spambots. You need JavaScript enabled to view it

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