What can I negotiate in a management deal?

December 18, 2012

Dear Music Lawyer,

I'm in a band, and we have a manager that's interested in us. They've sent over a long contract for us to sign. What kind of things can we negotiate in a management deal?

—Oliver

Dear Oliver,

Congratulations! Finding management is often a big step for a band. Assuming you have a good rapport with the would be manager/company (think of your manager almost like a spouse), following are ten terms to concentrate on when negotiating with a potential manager:

1. Length of Management Term: How many years would you be tied to the manager/company? Are there options to extend the term? If there are options, who has the right to exercise those options and what, if any, conditions must be met to require term extension (e.g., record deal secured and/or minimum income)?

2. Scope of Representation: Is the manager just representing you in music or all types of entertainment (e.g., acting, modeling, book publishing)? Does the manager have connections in all of those fields?

3. Commission Rate: What percentage of your income would the manager take? 15%? 25%?

4. Commissionable Base: What exactly is being commissioned? Does the manager participate in all income or are there exclusions (e.g., publishing, touring)? Can you deduct for sound and lights, opening acts, booking agent fees, etc. before you calculate your manager's commission?

5. Post-term Commission: This is a common source of negotiation. Many managers are entitled to a percentage of income even after they are no longer your manager. The rationale is that they increased the value of your brand and that value continues even after they no longer manage you.

Does that "sunset" income continue for a finite period of time or indefinitely (beware the word "perpetuity")? Does the commission rate stay the same or does it step down over time (e.g., 20% during management term, but then 15% for first year post-term, 10% for second year post-terms, etc.)? Does the manager get to collect on all income after the term or just on income earned from deals substantially negotiated during the term?

6. Management Expenses: What management expenses are reimbursable, and when do they need to be reimbursed? Do you get prior approval of expenses to be reimbursed? If the manager represents multiple acts, do they agree to pro rate any expenses between those acts (e.g., manager attends SXSW on behalf of multiple bands and wants to charge travel expenses)?

7. Accounting: Who collects artist's income -- artist, manager, or business manager/accountant? If the manager, can the manager endorse checks and deduct expenses and commissions before paying out to the artist?

8. Power of Attorney: Can the manager negotiate and execute agreements on your behalf? Can manager endorse checks? Sign booking contracts? Approve artwork/advertising materials? Sue people on artist’s behalf?

9. Key Person Provision: If the offer is from a management company, do you have a particular "cheerleader" at the company whose departure would make you unlikely to get the attention you need? If so, consider asking that the person be listed as a "key person" such that you can terminate the deal if that person is no longer available to you on a regular basis.

10. Dispute Resolution: If you get into a dispute with your manager, does the contract specify how you must try to resolve the dispute (arbitration, mediation, courts)? Does it specify where you would need to seek dispute resolution? Bear in mind that some forms of dispute resolution are more expensive than others. Also, say you live in Texas and would be forced to file any sort of grievance against your manager in New York, consider the added expense and time.

Of course, there are many additional considerations, but these are terms that crop up in almost every artist management deal. This is definitely an area where I would recommend hiring an entertainment lawyer to help you get the best deal.

—Amy E. Mitchell