Music management, contracts and commission

Written by Briffa | September 26, 2018

IP Contracts

Whether you are an artist who has chosen a manager, or a manager wishing to represent an artist, you need to discuss and agree the terms of this agreement before getting started.

The first issue which is usually discussed is payment – how will the manager be paid, and how much?

How and how much are managers paid?

Managers are usually paid on commission, meaning they are paid a percentage of what their artist earns. The commission rate varies slightly from manager to manager, but the standard rate is 20% of the gross income, net of some expenses.

As an artist, it will generally be difficult to negotiate the rate down much, although in cases where an artist is already very successful and is generating considerable income, 10-15% is not unheard of. Conversely, if as a manager you feel that you will need to invest countless hours and large amounts of your own cash before the artist becomes profitable, you can try to ask for a higher 25% rate, although this is rare and should always be considered carefully.

But numbers aren’t everything – a common mistake is to get too hung up on the numbers, without realising what the percentage is actually calculated on.

The commission is usually calculated on the gross income, net of some expenses. In short, the manager gets paid on the income, and not on the artist’s profit. This means that a manager may get paid their commission even if the artist ends up making no profit after having paid expenses from an event or project. This can sometimes be avoided by negotiating special contract terms for live work or other specified expenses. A properly drafted management agreement would also usually exclude recoupable advances received from a record label used to record material.

Another question which needs to be discussed is whether the manager only get his 20% on money made from music, or if they also get a cut if their artist appears in a promotional campaign as a model for example? Because so many artists are active across the creative industries and in all media, it is important to have this conversation early to avoid costly disagreements later on.

Other terms of the agreement

Discussing money is a good start, but there are many clauses and terms in a management agreement which are just as important (if not more) than the commission rate. Both the manager and the artist need to make sure that they understand key aspects of the agreement, like the duration, territory, and scope of the contract.

One of many issues which need to be discussed and agreed in advance is the question of termination of the contract. This deals with the when, why and how the contract can be ended before it has run its full course, for example in the event of a major argument. Both parties need to know whether certain conduct from one of the parties can put an end to the contract, and what the consequences will be – for example, if an artist sacks their manager, do they need to pay them compensation? And can the manager just walk away one day without notice? A lawyer or legal adviser will be able to explain and advise in detail, and ensure the agreements protects your interests.

Whether you are a manager or an artist, it is important that you fully understand the terms of any agreement you are entering into. Always look to get the terms of your deal in writing, ideally in the form of a formalised management contract.

Best practice would be for both the artist and the manager to seek independent legal advice, to make sure both parties fully understand the agreement and get impartial advice. Having an agreement in writing makes future disagreements much less likely, as it forces both parties to discuss and negotiate any potential issues well in advance.

Finally, a reminder that even if you have not signed a document you can still have entered into an agreement. For this reason, as with any contract or deal, always make sure you fully understand all terms before agreeing, verbally or in writing.

For any enquiries, or advice drafting or reviewing management agreements, get in touch with one of our music lawyers.

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