Top 5 Tips for Negotiating Artist Management Agreements

5 March 2019
Posted by Tony Grujovski

For an artist, getting an offer for professional management is usually a pay-off for many years of hard work in the fickle entertainment industry. Because of this, artists can sometimes think that the management agreement they are presented to sign is a “take it or leave it” situation, or that the terms of the agreement sound fine.

It is very important for artists to seek legal advice from an entertainment lawyer on any management agreement they are wanting to sign, as these agreements will affect an artist’s career for many years to come (even for years after the agreement has ended).

At Studio Legal, we review a lot of management agreements, especially for up-and-coming musicians. Here’s our top 5 tips on common negotiation points for management agreements.

Tip 1 – Limit the initial term of the management agreement as much as possible

Managers always want to “lock in” artists to a management agreement for as long as possible. Usually, there is a long “initial term” for the agreement to stay in force (sometimes up to 5 years). The artist has no way to easily get out of contract during the initial term if they are not impressed with the services provided by the manager, or just don’t get along with them.

We usually recommend for artists to shorten the length of the initial term, especially if the artist has never worked with the manager before. If the artist wants to move on to a different manager after the initial term, they can do so easily, instead of getting in an expensive legal battle to try and break the contract early.

Tip 2 – Limit the scope of career management being provided to the artist

If you are a musician, appointing a manager who is skilled to manage musicians as your exclusive manager for a potential acting or modelling career in future may not be a smart move.

Managers usually want to exclusively manage the artist’s activities in the “entertainment industry”. If you are appointing a manager with the skills to manage artists in one particular field of the entertainment industry, ideally that is the only field which they should manage the activities of the artist. If the artist takes up an acting career in the future, they will be able to appoint a manager skilled in managing actors instead of being forced to use their music career manager.

Tip 3 – Use a professional bookkeeper

The role of a management agreement is not only to set out how the manager is going to manage the day-to-day activities of the artist, but also how the artist’s finances will be managed. This is because the manager is going to be paid a commission from the artist’s earnings.

Usually, a separate bank account is set up where the artist’s earnings are deposited.

For smaller artists, managers will usually seek to become the bookkeeper for the artist’s bank account. In this situation, the manager will have a lot of control of the funds coming out of the artist’s bank account, while having an interest in those funds being used to pay the manager’s commission and other agreed management expenses.

We recommend that artists appoint a professional bookkeeper to take over all accounting duties for the artist’s bank account and payment of management commission. It is always better to leave it to the professionals to keep accurate books and records for transactions using funds in the bank account. Also, having an impartial third party administering the bank account in accordance with the management agreement terms is much preferred to the manager doing this.

Tip 4 – Deductions, deductions, deductions!

Artists will usually need to invest some of their own income into furthering their entertainment industry career. For musicians, there are a host of expenses associated with running live performances and recording new music. These expenses are either paid out of the artist’s own pocket, or record labels and publishing companies may give loans to the artist to help out with expenses.

Where the artist is using a loan or their own income to pay for expenses, these amounts should be deducted from the income which is commissioned by the manager. The rationale is that it is unfair for a manager to commission on the artist’s income or loans which is being paid to third parties for the purpose of investing in the artist’s career. Otherwise, the income intended for payment of expenses is reduced before the artist gets to use it.

Management agreements usually have long and complicated clauses for calculating commissionable income, and the list of expenses as allowable deductions can be limited in a management agreement prepared by a manager. It is important that as many industry-standard deductions for artist expenses are permitted in order to limit the amount of income which the manager can commission.

Tip 5 – Limit post-term commission rights

Management agreements affect the careers of artists for many years after they have expired, because managers receive commission even after they have stopped managing the artist. This commission can be paid up to 3 years after the contract has ended. If the artist appoints another manager after the existing management relationship has ended, this can mean paying two lots of management commission at once.

In some instances, management agreements end early because the artist has terminated for a breach of the manager’s obligations. In this instance, the manager should not be entitled to receive post-term commission, because the manager is being rewarded for their breach. This type of commission should only be paid to the manager when the agreement ends naturally, for example where the artist decides to appoint another manager after the contract term ends.

If you are an artist or band, or perhaps a manager or agent in need of legal advice, talk to us!  Please contact us on 03 9521 2128, or email us at hello@studiolegal.com.au.

DISCLAIMER

The information in this article is of a general nature. It does not constitute formal legal advice, and should not be relied on as such. Please see the full disclaimer in our website terms. Please contact Studio Legal if you are seeking advice about a specific legal matter.