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What's in a music management agreement?11th April 2018 Media Law
The announcement earlier this year that the Spice Girls are not only reuniting, but are also joining forces with their former manager Simon Fuller, has brought the topic of management agreements in the music industry into sharp focus. The Spice Girls began working with Fuller in 1995. After guiding them to superstar status, Fuller was sacked by the group in 1997.
New artists with no track record usually have limited bargaining power when it comes to signing their first management agreement, record deal or publishing contract. This time around, with a legion of adoring fans ready to support the reunion, the Spice Girls are in a much better bargaining position.
Reports suggest that there will be no new recorded music from the Spice Girls, although there will be a limited number of live performances. There are also likely to be many other deals offered to the group, including television appearances, sponsorship deals and endorsements. Arranging and negotiating deals is the remit of the artist manager, who should always act in the best interests of his or her artists. Of course, managers expect something in return for utilising their skills and contacts to develop an artist's career, and at some point a management agreement will be needed to formalise the relationship and ensure both sides know where they stand.
So what can you expect to see in a music management agreement? As you might expect, such contracts can vary in complexity depending on the requirements of the parties. Below we discuss four areas that will usually be dealt with in artist management agreements, from the perspective of both new and established artists.
The manager's commission
The rate of commission which a manager would expect to receive is typically 20% of the artist's gross income, after deducting certain allowable expenses such as money advanced by a record label to pay recoupable recording costs. This figure is of course negotiable, and may vary depending on the income stream in question. For example, the commission payable on revenue from live performances may be calculated on net earnings, rather than gross.
An unknown artist signing a management deal with an established artist manager may be expected to agree to a rate of commission greater than 20%. This could reflect the value of the manager's experience and contacts, and the risk the manager takes by spending time and perhaps money on an artist that may never succeed in the industry. There are limits to this of course, and an unreasonable contract may in some circumstances be found by the courts to be voidable.
As a possible compromise, it could for example be agreed that the manager's commission should start at 25%, then reduce to 20% after a certain milestone has been reached, such as the manager having earned a pre-agreed level of income. Ultimately, this is a commercial decision for the artist to make. After all, it could be argued that 75% of something may be better than 80% of nothing.
An established act can potentially negotiate better terms than a new band or solo artist. After all, there is less risk for the manager, and he or she may be competing with other managers who wish to work with the act.
The definition of 'activities' is a crucial aspect of the contract, as it sets out the income streams against which the manager can expect to receive their commission. It also relates to the manager's obligations and responsibilities under the contract. Management contracts are often drafted so as to cover all of an artist's activities in the entertainment industry. Whilst a musician may focus primarily on recording and playing live, their success may lead to other opportunities such as modelling contracts or the chance to publish their autobiography.
An artist may wish to restrict the scope of the management agreement to music-related activities only. A manager may argue however that they will play a key role in raising the artist's profile to the point where other deals are offered, and so would expect to receive their commission on the income resulting from the artist's activities in the broader entertainment industry.
On the other hand, an established artist appointing a new manager, or a well-known celebrity with an established career in another industry, may wish to be very specific about the activities the manager can become involved in and from which they can expect to receive commission. They may limit the manager's role to music-related activities only and exclude additional income streams, on the basis that these opportunities are based on their current status and reputation, which the manager did not help them to achieve.
In the case of the Spice Girls, is seems a significant proportion of their forthcoming revenue will be from non-music related activities. It is therefore likely that the management contract would cover the entertainment industry as a whole. However, care would have to be taken when drafting the agreement to exclude areas for which the individual members already have representation, and also to exclude income streams that the manager is not to be involved in, such as those from pre-existing business interests.
The sunset clause
This pleasantly named clause relates to the post term commission period. It sets out the rate of commission the manager will be entitled to receive once the parties are no longer working together, and the length of time for which it is payable. The principle here is that the manager should be entitled to continue earning from work done and deals struck during the period in which they were acting as manager. By way of example, artists can earn royalties resulting from record deals for years to come, so the argument is, why shouldn't the manager who arranged the deal also continue to benefit?
A 20-year post term commission period is not uncommon, although artists may push for something shorter. In any case, provisions can be included in the contract to ensure that the rate of commission to which the manager is entitled reduces over the period, before being extinguished completely.
To illustrate, let's imagine that the original management contract between Fuller and the Spice Girls contained a post term commission period of 20 years. The Spice Girls released numerous recordings during the period in which Fuller was their manager, and we can assume that these recordings are still generating income. If the contract was successfully terminated in 1997, this would mean that Fuller was still receiving commission from the group up until last year.
There is often a clause in recording contracts and management agreements which ensures that if a member leaves the band, their obligations to the manager or label do not necessarily come to an end. It may give the manager the choice either to require the leaving member to sign a new agreement on the same terms as the agreement in question (and so potentially manage their solo career), or to release them from the agreement entirely.
These clauses, depending of course on the exact drafting, may also give the manager the right to terminate the agreement with the remaining members of the band if one or more members decide to leave. This could happen if the manager thinks that the leaving member is the one with all the talent, and so decides not to waste further resources on the remaining members. This might mean that a departing member essentially pulls the rug out from under the rest of the group.
The Spice Girls have all enjoyed success in their own right since the group was formed, and many fans will be curious to see if this reunion leads to another flurry of solo activities. If so, it will be interesting to see which manager is at the helm.
Have you been offered a music management agreement or recording contract?
Contracts in the music industry are often complex agreements, and management contracts are no different. The above discussion touches only on a small number of the issues that musicians and lawyers should take into consideration. If you need assistance with the drafting or negotiation of any music-related contracts, contact Rob Eakins on 0345 872 6666.