What To Consider In A Management Contract

» Posted by on Nov 15, 2013 in Music Business | Comments Off

Management agreements are not the most complicated agreements an Entertainer will face, but they are certainly among the most important agreements an Entertainer will sign. A personal manager is the closest member of an Entertainer’s team, and needs to understand the entertainment industry to be able to guide an Entertainer through the variety of pitfalls in the industry. Here are the five most important things to think about when discussing a management deal from the Entertainer’s perspective.

1. Term. It may sound simple, but how long the Manager will be in charge of the Entertainer’s career is a very important question. The Entertainer wants the shortest period and the Manager wants the longest. Usually there is an initial period with options for the Manager to ask for more terms. Terms of one to two years are not unusual and thus a total of three to five years is common. An artist will want to ask for a “performance clause” to require the Manager to achieve a defined goal in order to exercise additional options, i.e. if the Entertainer is a musical act, the Entertainer will have to be signed to a major record label or sell X number of units for the options to be available to Manager.

2. Managers Authority. A manager will want a power of attorney over Artist to sign legal documents, collect income and operate bank accounts, and be able to make certain expenditures (travel, etc.) without authorization. It is important for both sides to well define what a manager can and cannot do because without express written authority by an Entertainer, the Manager might have to much or to little control to sufficiently manage the Entertainer’s career.

3. Managers Compensation during Term. Typically, a personal manager will make 15-20% GROSS of all commissionable income. The range could be higher for an unknown act and can be lower if an Entertainer has already reached some level of success. An Entertainer typically carves out certain activities, such as preexisting relationships with clients, side man, gigs, and normal expenses from commissionable income, thus lowering the pool of money a Manager can draw their commission from. As well an artist will want to define certain non commissionable items which can include compensation for opening acts, light and sound, vocal coach, etc.

4. Managers Compensation Post Term. This is often know as a – Sunset Clause, most managers will want a percentage of Artist’s income after their term of Management. The theory behind this ancillary compensation is, since Manager helped “break” the artist, Manager is entitled to some of the revenue generated years down the road. A well negotiated sunset clause diminishes the manager’s commission in the years after the term ends. The sunset period is usually in the 3 to 5 year range and sometimes the commission reaches zero.

5. Key Man Provision. Many Entertainer’s sign with Management Companies, who may be free to hire and fire employees, including an Entertainer’s Manager. The problem with this for an Entertainer is, they may have signed with the Management Company only to work with Mr. X, and if Mr. X no longer works there, Entertainer might get stuck with someone they do not trust running their career. That’s why an Entertainer should demand a “Key Man” clause which basically will say, if Mr. X no longer works there (or becomes disabled or dies), the agreement may be terminated by the Entertainer. This is a very standard provision, but one a novice to the industry could overlook.There are a variety of other issues also important to Management Agreements, but the ones outlined here are the big bold main points to consider when thinking about bringing a Manager on board.