Many artists in Israel and around the world have personal managers who play a very significant role in their careers. This function, called in the music industry “Management” (Artist Management), can be filled by a certain person or by a company. For simplicity, we will refer to both in this article as “Manager”.
In this article we will briefly explain what the role of the personal manager is and discuss important issues that must be considered when drafting and editing an agreement between an artist and a manager – an Artist Management Agreement.
The role of the personal manager
The main role of a personal manager is to serve as a liaison between the artist and parties with whom the artist wishes to maintain commercial relations and to assist in the growth of the artist’s career. In the music industry, these groups and individuals can include the record company or “label”, the publishing company (publisher), booking agent, public relations office, media, radio stations and more.
The manager’s role can be limited to certain aspects such as representation in front of the label and can expand to all aspects of the artist’s career, such as organizing performances, sales promotion, managing social media pages, contacting media sources for coverage and scheduling interviews, creating sources of income (such as producing and selling merchandise, presenter agreements and commercial partners, synchronization deals), and promotion of singles on radio, television and streaming platforms. Some of these aspects can be performed by the manager himself and his team, and other aspects can be performed by freelancers who specialize in them.
The scope of the manager’s role may be affected by the manager’s field of expertise and experience, the existence of agreements between the artist and other parties that handle other aspects for him and the degree of involvement agreed upon by the artist and the manager.
There are also cases where all the possible functions of the manager are filled by the label (within the framework of an agreement known as the “360 agreement”) and then there is no need to appoint a personal manager, but for the purpose of representation in front of the label.
Artist Management Agreement
When an artist and a manager decide they want to work together, they will usually sign a written agreement known as an artist management agreement. The purpose of the management agreement is to define the relationship between the artist and manager, the obligations and responsibilities of each party and the division of rights (and profits) between the parties.
In light of the complexity and multiplicity of the artist’s fields of activity, the possible income channels and the various parties with whom the artist is expected to contract during his career, it is of great importance to clearly define the responsibility of the manager, the remuneration he is entitled to and the period of the agreement, clearly within the framework of a written agreement, and this to avoid disputes and conflicts with other agreements that the artist signs.
Important highlights in the negotiation procedures and the agreement
It is important to remember that a management agreement is an agreement in which the profitability of the parties is uncertain, since the degree of success of the artist and his profitability depends on many variables over which the artist and the manager have very limited control. Therefore, in management agreements, the manager assumes a certain risk in investing in the artist, believing that the artist’s potential can result in a return on investment and making profits. To justify taking the risk on the part of the manager, the agreement usually includes the distribution of a certain percentage of the artist’s profits to the manager (or keeping a certain percentage with the manager, if the income goes to him).
The most important issues to address in an artist management contract are:
– The time frame of the agreement, and the existence of an option to extend the agreement
– The services that the manager gives to the artist and his responsibilities
– The obligations of the artist
– Regulating the payment of ancillary expenses
– The manager’s powers (what he is allowed to decide for the artist and in which matters he must obtain explicit consent)
– The remuneration due to the manager from the profits
In negotiations between a manager and an artist at the beginning of his career, there are often power differences to the detriment of the artist, which tend to reduce his bargaining power, and may end up in agreeing on terms that are unfair to the artist. However, often agreements with beginning artists will be more beneficial to the manager due to the risk he takes on himself, and as the artist progresses and proves himself in the industry, his bargaining power will increase and thus he will be able to obtain better terms.
Among other things, it is very important to regulate the following issues:
Restricting the manager to a certain area
As part of an artist representation agreement, it is important to limit the manager’s involvement in the artist’s career to the artist’s activities in the relevant field and stemming directly from that field. In addition, it is important to limit the manager’s field of action to the manager’s area of expertise and leave to the artist the right to participate in making significant decisions concerning his career. The broader the manager’s responsibilities, the more important it is to limit the period of the agreement and leave the artist with the possibility of being released from the agreement in a situation where the manager does not reach certain goals.
Limiting the period of the agreement
The management agreement should ideally last for a few years (up to three years, and preferably no more than five years) and there should be various mechanisms by which the artist can terminate the agreement if the manager does not achieve various goals, as well as option mechanisms for extending the agreement with the consent of both parties. In this context, it should be noted that the Law for the Protection of the Rights of Artists in Music, 2017 (also known as the “Aya Korem Law”), states that an exclusive contract with an artist for an unreasonable period of time may not be entered into, when the law creates a presumption that a period of more than seven years for the contract is not reasonable, whereas in a comprehensive contract (360 agreement), a period of more than five years is not reasonable.
Defining duties and goals of the manager
In many cases, managers will prefer to avoid clearly defining their duties or setting measurable performance goals, in order to leave themselves flexibility in the performance of their duties and reduce the situations that can be considered a breach of agreement from their point of view. However, the longer the agreement is valid and the more areas it covers, the more important it is to define clear and measurable goals and obligations in relation to the manager’s role, in order to avoid a situation where the artist remains bound to a manager who does not fulfill his obligations and in fact “jams” the artist’s career. Although there are goals that are affected in a very limited way by the manager’s work (for example, entering radio playlists) and the manager will be less comfortable to include them in the agreement, but there are goals that can be directly dependent on the manager’s work (for example, producing a certain amount of music videos) so there is no obstacle to their inclusion in the agreement.
Value
A fundamental rule is that the compensation for the manager’s work should be calculated from profits and not from revenues. In addition, the compensation for the manager’s work must be limited to the areas of activity for which the manager is responsible. In certain agreements, the manager will ask to offset his expenses for the benefit of the artist from the first profits that the artist will generate through the manager, so that the artist will pocket the first profits only after offsetting all the manager’s expenses.
The compensation is usually determined as a certain percentage of the total profits that will be generated from the artist’s activities related to the manager’s management area. Most of the time the proceeds will go to the manager, and he is the one who will have to transfer, after offsetting his expenses, the determined percentage of the profits to the artist. However, there can also be opposite cases. In any case where it is about revenues that go directly to the artist that the manager is entitled to share in, the transfer of the relative consideration to the manager should be made from the profits after offsetting the artist’s expenses (for example, performances).
The extent of the percentage that the manager receives from the artist’s profits should depend on the extent of his involvement and the areas of activity in which he is involved. It is important to pay attention not to give the manager the right to a share of the income (different from profits) that comes to the artist through separate channels – for example royalties from Akum (unless the manager also fulfills the role of a publisher and then he is registered as such with Akum and receives his share of the royalties directly from them) or From revenues that are the product of another party’s activity (for example revenues received from the label for playbacks on streaming platforms).
Bookkeeping
In an agreement in which the income from the artist’s activity reaches the artist through the manager, it is important to clearly define appropriate safeguards regarding the review of any relevant financial data, bank account details, transfer details, ability to copy bank statements, audit rights and access to the account.
Agreements with third parties
It is important to limit the cases in which the manager is authorized to sign agreements with third parties on behalf of the artist, so that significant agreements that have a material impact on the artist will only be signed with the artist’s consent. For example, in agreements that create obligations for the artist towards a third party, involving image aspects of the artist, it is important that the artist knows in advance what he is signing and gives his consent. On the other hand, there are cases when certain business opportunities require a quick response and then it is better to allow the manager to act independently on behalf of the artist (for example, signing a synchronization agreement for the integration of the artist’s music in a film or series).
Termination of representation
It is important to define in the agreement the circumstances under which the artist will have the right to terminate the management agreement.
Restriction on alternate manager
Usually the artist who signs a representation agreement with a manager is interested in the representation of that specific manager and not an alternative party. That is why it is important to include a section that defines that if the specific manager stops providing the service, it will not be possible to force another alternative manager on the artist. It is also important to define that the manager will not be allowed to assign the representation agreement to any other entity.