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A
management contract is designed to protect both the artist and
the manager and the most successful ones are those you comfortably
file away and rarely, if ever, have to look at because the relationship
is working. If you set up specific terms relating to commissions,
goals to be reached and agree on fair exclusions before signing,
it's very likely this could be the case for you. If you're thinking
it sounds like you can get away with an oral contract then, don't
be fooled. No matter how good the chemistry is between you and
your manager, let's face it, it's human to disagree. This piece
of paper sets the framework for some sort of reasonable and equitable
resolution should things get heated. More important, if it becomes
necessary to part ways, this contract may become your saving grace.
Always get a contract.
Judy
Tint has been an entertainment attorney and consultant for
over twenty years. She represents a broad variety of artists,
songwriters, managers, producers, independent labels and other
music-makers; from newcomers to members of the Rock & Roll
Hall of Fame. In part two of Womanrock's management series, she
explains ways to protect your relationship with your manager in
writing.
WOMANROCK:
What
is a fairly standard management commission?
JUDY
TINT:
There's
a range. I've seen it as low as 10 percent and occasionally it
goes as high as 25 percent, but the vast majority of management
agreements will show a commission rate of somewhere between 15
and 20 percent.
WOMANROCK:
Will
you explain why an artist should calculate their manager's commission
on a "modified gross" and offer an example of how that
works in the contract?
TINT:
Once
you start talking about gross earnings in an individual contract
there's a little bit of negotiating in respect to that definition.
You don't want to be in a situation where the artist is paying
commission on sums they never really saw to begin with.
An
example of this would be recording costs. Back in the old days,
the way most record deals were structured would be that a record
company would sign the artist and say, 'OK, we're going to pay
for the cost of recording the album and we're going to give you,
just picking a number out of the air, $25,000 as a signing advance
and we're going to spend $175,000 in the studio to do your album.
Again, these are not necessarily perfect numbers, but just for
the purpose of the hypothetical. Under that scenario, the artist's
manager would take their 20 percent off of the $25,000 signing
advance but they would never go near the recording cost which
would have been paid straight out of pocket by the record company.
The artist would have no obligations to pay commissions on that
$175,000 because they never received that money.
Over
the course of time, the prototype for the artist agreement has
evolved so much that more likely than not these days you'll see
a situation where a record company will say, 'OK, we are giving
you $200,000 and that is inclusive of the cost to record your
record. Whatever is left over after the record is done you can
keep.' On paper the numbers might end up exactly the same. The
artist spends the same $175,000 to make the record and there's
$25,000 left over for them to put in their pocket. If a manager
expects a straight 20 percent on that $200,000 though, an artist
ends up paying commission on money that they never even had.
What
most managers will agree to in their management agreement is a
modified gross, defining gross earnings in such a way that things
like recording costs, or recoupable tour support or video production
costs are not included for the purposes of calculating commission.
WOMANROCK:
While
it's important to outline exclusions, artists should also be cautioned
not to just try to throw everything in there. You don't want a
manager to have a vested interest in keeping costs down too low,
correct?
TINT:
Sometimes
an artist will come back and say I also want to deduct agency
commissions, opening acts, sound and lights and a laundry list
of other items. There you are sort of getting into a gray area.
You don't want too many exclusions. You don't want to have a manager
get paid on the net because you create a dynamic where the manager
is always trying to keep the costs down because that's the only
way they're going to make any money. Sometimes money has to be
spent in order to further the artist's career. You don't want
the manager saying, 'Nah, you don't really need to get the good
light system. Just use these crappy lights.'
A
middle ground has evolved whereby certain very obvious exclusions
are taken off the top before the manager's commission is calculated,
but it is still essentially a gross earnings formula rather than
a net earnings formula, otherwise it could be endless.
WOMANROCK:
How
should emerging artists be expected to pay their management commissions
when they're most likely not generating a lot of revenue yet.
TINT:
With
an up-and-coming band, managers will sometimes agree to put a
floor on the types of engagements that they'll commission. In
other words they'll say, 'If you're making $100 playing at Kenny's
Castaways, I'm not going to commission that. Only if the personal
appearance pays over XYZ dollars, will I commission that.' Or
another thing that sometimes a manager will do is say, 'Until
you get a record deal, I'm not going to collect my commissions,
but they will accrue and be deferred until such time as you get
a record deal.' The manager is still getting paid, even on the
small gigs, but they run a tab. All of that is negotiable and
falls to the artist's lawyer to ask for those things and the manager's
lawyer draws the line where they feel comfortable.
WOMANROCK:
Do
artists owe managers commissions for projects that existed prior
to entering the contract?
TINT:
Say
you have an artist who is trying to make it in this rock band,
but in the meantime, they are teaching music or doing some jingles
or sessions on the side. They have specific things that they've
been earning their bread and butter by for a while before the
manager came on board. There's usually room to draft certain exclusions
so that if there's something that pre-dates a manager's involvement
and has nothing to do with the manager's efforts, an artist can
say, 'I don't want to pay commissions on things that I was doing
before.' Or if there is a certain club that an artist always plays
and there's a history with that club, it's not unreasonable to
exclude that.
Now
a manager may come around and say, 'Fine, you have these gigs
already, but if two years from now, I've made you a big star your
price on these other things is likely to go up,' then that's the
sort of thing that the lawyers would need to negotiate so that
there's an appropriate compromise created. You don't want the
artist to overpay, but in fairness if the manager works his butt
off and makes the artist very successful, it's going to carry
over into all their other stuff. It's not unreasonable for a manager
to say, 'This club has been paying you $300 for your band for
the last year and a half, but after a year from now, if I've been
involved with this thing and your price for that same club goes
up to $1500 a night, then it's reasonable for me to be at least
commissioning the overage if not the entire payment.' These things
can be broken down when the agreement is negotiated, but an artist
wants to have a laundry list of things they've done before the
manager got involved. The time to do it is before you sign, not
six months later.
WOMANROCK:
In
some instances managers will front bands money, taking them out
for drinks, dinner, or even helping pay for equipment. Eventually
the bands will be reimbursing managers for those expenses. How
do you monitor those costs and cap what managers put out of pocket?
TINT:
It's
a nice problem to have if you have a manager who is willing to
make some advances on your behalf and that's not something to
be taken for granted. At the end of the day though, it is the
artist's money and most management agreements will say that while
the manager is responsible for their own overhead, any expenses
that have to do specifically with the band ultimately has to be
paid by the band.
Specifically
what you'll see is a clause saying that the manager can't be reimbursed
for more than a certain amount. Some people structure it as 'X'
amount of dollars per month. Some people structure it as 'X"
amount of dollars per series of expenses. It could be $500. It
could be $1000. Some bands are very freaked about money and say
$200. Whatever number is it should feel comfortable.
WOMANROCK:
You
should build that language regarding caps on costs into the contract,
but also create an adjustment in that amount for down the road
when the band hopefully gets bigger and needs more money to operate.
TINT:
To
a baby band that doesn't have as much going on, maybe $500 is
a lot for starting out. Once a band is signed and a success those
expenses start to jump pretty significantly. What you don't want
is a situation where the manager has to pick up the phone and
call the artist every time they want to send a Fedex out because
that can be an administrative nightmare. Your manager has to schmooze
the record company and has to travel occasionally. I mean you
don't want your manager telling you she just got back from L.A.
and she stayed at the Four Seasons supposedly working on everything
for your career and here's the bill for $11,000. There's got to
be a comfort level. For some bands that's going to be $500, for
some it's going to be $2500, for others it's going to be $75.
You want to set the number in such a way that the manager can
do business and make her phone calls and send out Fedexes and
do a business lunch from time to time or spend money making press
kits or whatever but have balance so the artist doesn't get surprised
with some enormous bill that is later going to come out of her
earnings.
One
thing I ask for on behalf of young bands signing management agreements
is a provision that says, 'If a manager spends money, that money
can only be recouped from the artist's gross earnings as that
term is defined within the contract.' Now if a band never gets
signed or if the gross earnings are not sufficient to pay back
what is spent, it's not like the artist has to go out and drive
a cab and pay the manager for the cost of the press kits out of
their survival money. If the manager isn't even capable of helping
generate enough money to cover their own expenses, I think it's
reasonable for the artist to say, 'You know what, that's on you.
If we make money on what we're doing together, you can pay yourself
back out of that money. If we never even get that far, I don't
want to be responsible for those costs.'
WOMANROCK:
How
do you structure provisions in your contract to make sure your
manager is actively looking for work for you or seeking out a
record deal to the best of his ability?
TINT:
When
you're talking about someone who is looking and trying, that's
a little difficult to quantify contractually. A better way to
do it is to set an initial term. Specifically the way the term
would work is a manager has a certain period of time in which
to get the ball rolling. That is usually about a year. I wouldn't
recommend an artist sign with a new manager longer than eighteen
months, especially in this day and age. It's an uphill battle
even if you have the greatest act in the world and the greatest
manager. It's not easy and people shouldn't underestimate the
amount of time and energy and effort that it takes to achieve
success.
If
certain things aren't happening within a reasonable amount of
time though, you do want the right to get out. More often than
not the contract would be structured so that if the initial term
is a year and you hit your mark within that first year, then the
manager has the right to an option to extend for an additional
period. Typically it would be for a year plus four options for
another year. Sometimes instead of marking options by the calendar
year, they make them in album cycles as defined by the record
company. It's simpler to talk about it in terms as calendar years
here though. So if you're talking about a new or young band more
often than not what you'll see as the initial benchmark is to
get them signed by a major label or at least a nationally distributed
label within the first year.
If
you're talking on the other hand about a band that's already signed
and has a track record, but they're changing managers or they
left one label and just signed to another label, it's not as simple
as saying, 'We want a deal '… Very often what you'll see
is somebody setting the benchmark at a certain level of gross
earnings or another way to do it is by album sales.
WOMANROCK:
We
discussed that these benchmarks you're setting should be achievable,
not your ideal world scenarios?
TINT:
You
have to set goals that are realistic. You're not looking to say,
'What in our wildest dreams would we like to achieve within a
certain period of time?' It's more like, 'What is the minimum
we need to achieve in order to see that this relationship is effective?'
In fairness to the act and the manager you want to set goals whereby
if everything is going at least reasonably well, you should be
able to achieve and then if you can't then the artist has the
opportunity to get out. When I draft contracts I don't set it
up so that if you don't hit your mark by the end of the year the
agreement automatically terminates. What I prefer to do is say
if you don't hit your mark by the end of the year then the artist
has the option to get out. There are plenty of situations where
you may not achieve what you all hoped to achieve through no failing
of anybody on the team and everybody is still very committed to
the project. But the artist does have that option to pull the
plug. A smart manager knows that if the artist doesn't want to
be there, it's in nobody's best interest to force the situation.
On
the other hand, if the manager does hit their mark, but the artist
still wants to end the relationship for whatever reason, at least
the manager has a contract so they can say, 'I'm not going to
go away without appropriate compensation or a continuing interest
of an override or some sort of payback for what I've done.' At
that point you're better off with an amicable divorce than continuing
an unhappy marriage. A manager's much better off having that agreement
otherwise the artist can get up and say, you know what, I'm done
here and then the manager's has to sit back and watch someone
else reap the benefits of their efforts.
WOMANROCK:
Can
you give an example of some red flag language to watch out for
in management contracts?
TINT:
Look
at the Power of Attorney clause carefully. The Power of Attorney
clause in this day and age should only really be there for the
purpose of signing off on short-term personal appearance contracts.
So for example, if the band's on the road and they're doing three
nights in Oklahoma and an opportunity comes up to do another gig
in Texas and the band is in the van, the manager can contractually
commit to pick up additional work. Back in the days when a lot
of the relationships started, it was pre-fax, email, Fedex and
cell phones. It was much more important for a manager to be able
to transact business on behalf of an artist, otherwise the business
couldn't get done. These days with all of the technological advances
that have come down the pike, it's much easier. It's rare that
an artist is going to fall of the face of the earth and not be
able to take care of their business. You should not have a situation
where a manager has a broad power of attorney to sign everything
and anything. A manager shouldn't sign a record deal, shouldn't
sign an exclusive publishing deal, or anything that is exclusive
and long term. Those are things you really should understand,
talk to your own lawyer about (not necessarily the manager's lawyer),
and know what you're getting yourself into. The scope of the power
of attorney should be no broader than is absolutely necessary
to keep the act working and keep things flowing.
Another
immediate red flag is if you have a situation where a manager
is asking for a 25 percent or 30 percent commission, then you're
not dealing with somebody who is really being straight up. Also,
if you're dealing with someone who says it's got to be a three
year term and is not willing to negotiate some sort of out clause
in that initial period, that too is a sign that you're dealing
with somebody who's less than reputable.
WOMANROCK:
While
a contract with all of the appropriate provisions is invaluable,
you're also a big believer in gut instinct?
TINT:
I
really can't stress enough what I call the vibe test. You can
meet somebody and they can be charming and say all the right things
and present you with a contract that seems to be in the right
ballpark, but you just have a funny gut feeling about them and
you can't put your finger on it. If something about the look in
their eyes or something about the way that you feel when you're
talking to them doesn't feel quite right to you, that to me is
an extremely good reason not to move forward … You want to
make sure that you feel this is a person you can put your trust
in and not always have to be looking over their shoulder because
that's a really bad use of an artists time.
Tina
Whelski is a NY-based freelance writer/photographer who's a regular
columnist for the Aquarian Weekly/East Coast Rocker and WOMANROCK.
She also contributes to Music Connection, Starpolish, Good Times
and others.
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1999-2004. WOMANROCK.com. All Rights Reserved.
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