Understanding the Terms of Manager-Artist Agreements
Manager-artist contract agreements are written legal agreements between professional and amateur artists, and their managers to formalize and memorialize the business terms of any manager-artist deal. No matter if it is a full-fledged contract or a two-paragraph e-mail exchange, it is important to at least have something in writing to avoid any unexpected or undesired results. The reason why a written agreement is so critical is that it allows both parties to have a clear understanding of what terms they are agreeing to, since music industry clients frequently run into disputes down the road regarding their manager-artist relationship. For example, artist clients often come to us with a manager-artist agreement that has vague or missing terms regarding payment and compensation to the manager, which can cause havoc down the line when a manager is anticipating a percentage of the artist’s earnings that was not agreed upon by both parties. Some common issues that arise within the manager-artist relationship include the duties, obligations, and responsibilities of each party during the term of the agreement, including payment issues, exclusive versus non-exclusive relationships, and mutual termination rights.
Manager-artist agreements are commonly utilized in the entertainment industry in music, sports, film, modeling, and fashion, and are often very similar to employment or services contracts. The manager-act relationship is a fiduciary relationship, which means that the manager operationalizes a special role for the benefit of the artist . It is imperative to understand, that unlike the other agreements that we discussed above, the relationship is a quintessential combination of principal and agent, or employer and employee. Therefore, the manager-principal can only delegate authority to the extent of the agent-principal relationship. This means that an agent (or manager) has a duty to act within the boundaries and parameters of the business terms and clearly agreed to by the artist.
Certain jurisdictions have employment laws that regulate the manager-artist relationship. California is the only jurisdiction that has laws in place to regulate the relationship, but many states either have clear employment law guidelines or employ other professional service distinction laws to regulate manager representation. State law vary when determining whether a contract is enforceable or not, such as the New York Statute of Frauds or the California Talent Agency Act.
The legal fallout from the disintegration of a manager-artist relationship is legion. As mentioned above, manager-artist agreements should include the terms of engagement, authority of the manager, and other duties of the artist, in order to avoid any internal conflict on the part of either party. Parties should also make sure that they understand the scope of authority of any agent, or manager, in any situation and that their actions and contractual obligations do not violate any applicable federal or state law.
Key Components of a Manager-Artist Contract
Term Duration: In all cases, it is important to set the length of the contract (Term) as well as the circumstances under which it can be terminated (this is often overlooked). Many managers want long-term contracts (3-5 years) so that they can see some return on investment and artists want 1-2 year contracts either on a month-to-month basis or renewable every year so that they have flexibility. The most important thing is to negotiate what will work for you.
Commission Structure: Since most managers are compensated based on a percentage of their artists’ gross income, it is imperative to discuss the commission structure upfront and determine whether the manager is entitled to a percentage of all income or just after specific events are "secured." It is important to note whether musicians are entitled to a guaranteed fee without the manager entitled to a commission or if the manager has the right to assert their claim to that income. Remember, more importantly than how much the manager receives, is how much more the artist will be getting by having the manager deliver for them.
Specific Services: While many else provisions in manager-artist contracts are fairly straightforward and self-explanatory, this provision can vary from case to case significantly. You may already have a pretty good idea of the kind of services you need from your manager, but make sure to discuss and consider all of the possible options, while not being too prescriptive. The manager should have the freedom to pursue his or her own course of action while the artist should feel confident in his or her return on investment.
Termination Provisions: Most contracts, whether in the entertainment world or outside the entertainment world, are terminable at will by either party. However, you must also consider what happens if someone commits a material breach and how long either party has to fix a problem.
Legal Considerations and Compliance in Agreements
When managing an artist, it is important for the manager to be familiar with basic legal concepts and requirements that may apply to their agreement. If this is not done, an artist can potentially be taken advantage of and end up in a contract that hinders their ability to benefit from their own work. To begin with when negotiating any type of entertainment related contract, the artist should always have a lawyer review the contract before signing it to ensure that their rights are protected. A few other areas that a manager should take note of when drafting a contract are: ensuring that the contract is in writing; that all of the terms essential for a basic contract are present in the contract; and that the contract does not contravene any relevant laws. In addition to these, an artist must exercise caution when negotiating contracts with an agent regarding performing, merchandising, and appearance rights. In this regard, an artist’s right to negotiate as per their state’s labor law is vital. For example, in California, Section 1703 of the Labor Code states that with respect to private managers, an artist cannot enter into a contract with a manager for longer than two years, after which time the contract becomes void. Furthermore, after the two year period has lapsed, the artist has to wait one year before entering into a new contract with the same manger. Unless otherwise stated there is a presumption that the contract was for the maximum allowable time, which is two years. This also applies to dancers that are hired by a manager. Accordingly, managers must take care to avoid violating labor laws when entering into a contract with an artist or dancer.
Common Pitfalls to Avoid with Manager-Artist Contracts
Common mistakes to avoid in manager-artist contract agreements include the following: trying to bind an artist without a signed agreement; failure to clearly define the scope of the manager’s services; unreasonable and excessive compensation terms; failure to include specific duties to be performed by the manager including defining the parameters of equipment and commitment of time to the artist’s matters, etc.; unreasonable recoupment provisions and limits on reimbursement requests; unreasonable events of default provisions; overly vague requirements for an accounting; unreasonable mileage caps; unreasonably short periods for the artist to respond to complaints and adequately respond to accountings; unreasonable waiver of time limits for performance; and taking exclusive control of the artist’s creative output.
Taking these factors and common mistakes into account can help managers and artists set themselves up for more professional and beneficial relationships.
Negotiation Strategies for Artists and Managers
Negotiating contract terms without clear communication can lead to problems down the road. Therefore, it is critical that both parties keep an open dialogue. The following are some tips for both artists and managers while negotiating contracts:
- Have detailed conversations before drafting a contract. Too often contracts are drafted and then modified based on the corners of the contract that need to be filled in. A better approach is to sit down at the beginning and have a conversation about what each party expects from the relationship. This way both parties can draft the contract together and avoid misunderstandings.
- Discuss whether contracts with sub-agents will be used. If a manager will rely on agents to negotiate record or publishing deals, that should also be discussed and clearly set out in the initial negotiations.
- Determine how records will be marketed. During the initial discussions, discuss how a record will be marketed and what services will be provided by the manager. This can range from just serving as a conduit to more active involvement such as involving the manager in meetings with record labels, etc.
- Draft a wishlist for what an ideal contract looks like. Both parties should be prepared to negotiate from a wishlist of what they believe is fair and realistic. Sometimes determining a ballpark figure on what the artist wants to make per album can help during negotiations.
It is important for managers to understand that the types of services they want to provide will most likely determine how the manager will be paid. The following are considerations that will determine how a manager will be compensated:
- Will the manager be paid upfront a percentage of the royalties and/or advances that the artist will receive? If so , the manager is essentially working as a traditional employee and is taking all the risks. In this type of scenario, a manager would typically want to negotiate a flat commission off of the top, a larger flat fee, and ownership rights in the copyright.
- Will the manager be paid a flat fee plus commission? If the manager is paid a flat fee plus received a commission, the manager would not be accountable for the amount of money the artist makes, but would not receive any extra money if the album is extremely successful.
- Will the manager be paid primarily by solely by commission? Although it is not unreasonable for a manager to wish to receive 20% commission from royalties and 20% commission from advances, in practice, many record labels want the manager to be paid as an employee.
It is important for artists to understand the following when hiring a manager:
- If the artist has not engaged an attorney to review the contract, the manager needs to make sure the artist understands that he or she should get the contract reviewed by an experienced entertainment attorney.
- The manager should be prepared to work with the artist’s attorney to modify the contract so that it will be fair and workable for both parties.
- If the artist only wants to negotiate on certain terms, the manager should explain each term to the artist so that the artist understands the consequences of leaving specific terms of the contract open to negotiation.
It is essential that both parties clearly understand what services the manager will provide.
The Role of the Lawyer and Agent in Manager-Artist Agreements
When it comes to manager-artist contract agreements, legal counsel and agents can play important roles in both the negotiation and drafting of the agreement. If a record label or management company is engaged in such negotiations, a lawyer can assist in the drafting of provisions that best protect the client, as well as advise the client on common terms of such agreements. Even in reviewing a contract that has been offered by a third party, it can be beneficial to have legal counsel review the substance of the agreement to ensure it is in the best interest of the client. A lawyer may also control the negotiation of such agreements on behalf of the client, and a great deal of negotiating talent can be utilized to obtain favorable terms for clients that may dictate the terms of the agreement.
An agent can also be important in such negotiations. If an artist has a formal agreement with an agent, the agent should negotiate manager-artist contract agreements on behalf of the artist. A manager may retain an attorney to assist in the negotiation of a particular contract or seek the advice of counsel on specific issues. It is important to recognize that if there is an agent involved, the agent may defer to the legal counsel of the artist and not take an active role in the majority of the negotiations.
Ultimately, whether the artist engages with an attorney depends on the structure of the artist’s particular business or financial interests, and whether a lawyer or an agent has taken the lead on the negotiation. However, reflecting back on some of the important topics discussed in this article, it is strongly recommended that an artist does engage counsel of some kind to assist in such negotiations. In today’s complex industry, particularly when negotiations may involve a label, management company, and high-profile artists and attorneys on each side, having counsel of any kind verified by the major players can be the difference between a strong contract and a weak one.
Anticipating Future Trends and Evolving Practices
A significant move that can be seen as a future trend is the decision made by Universal Music Group to drop "360 Deals" reducing widely the idea that artists assign their ownership interest, either exclusively or on a long term basis, to record labels. However, it is important to note that such deals, based in theory on the idea that the artist would receive 360 revenue streams, remain alive and well due to the ability of those same record labels to still reach long term deals with international affiliates.
Similar to record label 360 deals, digital distributors take a percentage on almost all sources of income . Digital platforms like Spotify and Pandora take a 30 percent cut of artist royalties. YouTube has a content protection system that can result in 30 percent of all royalties going to record labels (who may already have agents working to take their share from the labels).
Any way you cut it, whether by choice or contract, the artist’s interests are being subjugated to the third party’s business model. In order to ensure this is not the case, however, artists will need to closely scrutinize digital distributor contracts regarding the calculation of gross revenues, foreign subdistributors, incentive payments, non-competition provisions and other key details.