2 SET PERFORMANCE CONDITIONS & BENCHMARKS
It is important to know who does what. Management contracts tend to be notoriously vague and ambiguous. Most simply state that a manager is only obligated to advise, guide and direct an artist’s career, and may be even less specific regarding the artist’s duties, other than reimbursing the manager for any expenses advanced.
“Obviously, it would benefit the artist if the manager must accomplish a specific result,” McLane counsels. “By inserting performance conditions with time limits, the artist can have the option to terminate the agreement if the results (e.g., a record deal, income, an endorsement) are not obtained.”
The performance conditions depend on what the artist wants and needs. McLane likes to negotiate earnings. “I try to negotiate earned income. By the end of the second or third year the artist should be making a net income of $100,000.” Morgan likes to set benchmarks, i.e. an opportunity or particular service. “You should be very specific,” she advises. “That way you can measure the effectiveness of a manager.” Indeed, both counsel are in agreement that without performance conditions and benchmarks an artist could be locked into a dead end deal with no way out.
When it comes to an artist’s duties, Blasko laughs, “Other than recouping expenses, it’s relatively nebulous. You can’t force artists to do things. But,” he says, “I expect them to be professional, show up on time and do what they need to do.” Sometimes, however, artists are stubborn and refuse to do what they should––even if it will benefit their career. “When that happens,” Blasko relates, “you improvise and overcome. That’s when managers really earn their money.”
3 GROSS IS GROSS
The average commission for managers today is 20% (of all income streams). That is negotiable, depending on the status of the manager and the artist. Elvis Presley’s manager, Colonel Parker, displayed a ruthless devotion to his client’s interests and made Elvis a superstar. He also took 50% of everything Presley made. How a manager assesses commissions is most critical. Back in the dark ages of the music business, managers often commissioned “gross income” across the board. That frequently resulted in a manager making more than the artist, sometimes much more if expenses (for example, recording and touring budgets) were significant.
Nowadays, modern managers use a different formula to calculate their commissions. In fact, today, managers who only commission gross income are considered dinosaurs who probably don’t know the music business has changed. They can do as much damage to your career as they do to your pocket book.
Fortunately, according to McLane, “You don’t see many managers who only commission gross income anymore. Today, most use an ‘adjusted gross’ or ‘net income’ formula. Adjusted gross,” McLane explains, “is gross income minus reasonable, customary and specific expenses.”
“The only problem,” Morgan reports, “is that sometimes the formula for determining an adjusted gross or net can be complicated and confusing. It’s always better if you can keep it simple but fair.”
4 ACCOUNT FOR INCOME & EXPENSES
Expenses are part of this business and, occasionally, a manager may advance an expense. When that happens, artists must usually reimburse a manager, either from earnings or personally. Morgan suggests that you put a “cap” (a maximum amount) on expenses so it doesn’t get out of hand.
She also informs, “Artists should require a manager to get their approval for expenses over a certain amount––say $200––before they incur the expense.”
And, if a manager is advancing expenses, or expects the artist to pay a certain amount for overhead, an “accounting provision” should be included in the contract.
Such a provision is especially important if management receives, processes and distributes income the artist generates. It would require the manager to send statements on a regular basis and allow the artist to audit management’s books.
