SURVEY of the MUSIC BUSINESS

The Management Team

The Management Team

1. Personal Manager

2. Booking Agent

3. Business Manager

4. Attorney

The Personal Manager

The Personal Manager

- The single most important person in your professional life.

New York & California

Booking agents must be licensed in New York and California.

The personal manager is not permitted to obtain work or secure employment for the artist, only agents can do that.

7 Aspects to Manager’s Job

1) Helping the artist make major business decisions. For example, whether to sign a record deal with a particular label. Whether to make a publishing deal, etc.

2) Helping with the creative process. Selecting a demo producer, choosing songs to record, hiring band members, etc.

7 Aspects to Manager’s Job

3) Promoting your career. Promoting you to everyone he meets, help coordinate publicity, etc.

4) Assembling and heading your professional team by introducing you to booking agents, lawyers, business managers, publicists, and overseeing their work. (The manager is the quarterback of your team.)

7 Aspects to Manager’s Job

5) Coordinating your concert tours by working with your agent to make the best deals with promoters, routing the tour, developing a budget for the tour, assembling your road crew, supervising you road and tour managers (if you have them) to make sure everything runs smoothly.

7 Aspects to Manager’s Job

6) Pounding the artist’s record company to maximize the marketing and radio promotion campaigns. Making sure the artist’s records are treated as priorities.

7) Being a buffer between the artist and the outside world.

Manager’s Commission

Managers typically receive 15% - 20% of the artist’s gross earnings. The majority get 15%.

Options: The manager may get 15% of gross up to a certain amount, say $2 million dollars, and then 20% afterwards. Or a manager may get 20% of the first $2 million and 15% after that.

Manager’s Commission

Sometimes the manager’s commission is a percentage of the artist’s net income (after expenses), rather than gross.

What is Commissionable?

In the personal management agreement, between the artist and the manager, a key concept is “what is commissionable?” That is, what types of the artist’s income will the manager share in.

Manager’s want their 15% to include all forms of income: records, concerts, songwriting, acting in movies, etc.

Exclusions

If possible, exclude the artist’s songwriting income from the personal manager’s commission.

Exclude expenses that the label pays for, such as hairdressing, make-up, etc. The artist doesn’t receive cash for these, so the manager shouldn’t get a percentage of the value.

Deductions

Certain monies are customarily deducted from the artist’s earnings before calculating the manager’s percentage, for example:

Recording Costs (The record company pays these, but the artist doesn’t receive money.)

Producer’s Fees (Where the record company pays the artist, who must pay the producer.)

Deductions

Tour Support This is money paid by the record company to offset your losses if your tour loses money.

Collection Costs If you have to sue someone to get paid on a contract, the manager should only commission your net. For example, if you spend $10 to collect $50k, your net income is only $40k. So manager should only be paid on the $40k.

Deductions

Sound & Lights For large concerts, it’s common for the artist to supply her own sound system and lights. The promoter “rents” them from the artist for a dollar amount. This money should be considered an expense reimbursement, not income.

Deductions

Opening Acts For a major artist, a concert deal may include money to pay an opening act. Since this money just passes through the artist’s hands, it shouldn’t be commissionable.

Term of the Management Agreement

Manager wants the term to be as long as possible, artist wants as short as possible.

Generally, 3 to 5 years.

May also be for album cycles, instead of years.A cycle is from recording the album to when the record company stops promoting it.

Earnings After the TermManagement contracts say that the manager gets paid on income received after the term if the income is generated under “contracts entered into or substantially negotiated during the term.” Meaning:- For records made during term, manager

gets paid on sales made after the term.- For records made after the term, manager

gets paid if the records are recorded under a contract signed during the term.

Sunset ClauseA sunset clause limits the commissions a manager can receive after the term of the management contract. For example:

1st Year after term: Manager receives 50% of commission.2nd Year after term: Manager receives 25%3rd Year: Manager receives 10%Fourth Year: Nothing

Key Man ClauseConcerns people who work at booking agencies or personal management companies. A key person clause states that the person with whom the artist has a relationship must personally act as the artist’s manager; otherwise, the artist can terminate the deal. Protects the artist if the agency or management company is bought out and people are fired.

Power of AttorneyThe management contract may include a POA.A POA authorizes another person to act for you, including signing your name to contracts.

This authorizes your manager to hire and fire people, to cash your checks, etc.

The artist should limit the manager’s power to sign contracts, e.g., for gigs in the next 6 weeks, for up to 3 nights, if artist is unavailable to sign.

Choosing a ManagerEstablished managers rarely sign new artists because the artist is not generating revenue.

So the artist’s first manager may be someone with less experience, but with great enthusiasm for the act.

Requirements: Manager must be trustworthy, have a strong rapport with the artist, etc.

The Booking Agent

Agents in the Music Business

Agents in the music business are regulated by the unions:AFM: American Federation of MusiciansAFTRA: American Federation of TV & Radio Artists (for singers). AFTRA has merged with the Screen Actors Guild (acting in movies) and is now SAG-AFTRA.Actor’s Equity: For live stage (theater).

Agents in the Music Business

Agents in the music business are regulated by the unions:AFM: American Federation of MusiciansAFTRA: American Federation of TV & Radio Artists (for singers). AFTRA has merged with the Screen Actors Guild (acting in movies) and is now SAG-AFTRA.Actor’s Equity: For live stage (theater).

Agents Fees

Agents in the music business receive 10% of the artist’s income from gigs that the agent books.

Agents in film, TV, commercials, receive 10% of the work that they obtain for their artists.

Term of the Agency Agreement

Agency will ask for 3 or more years, the artist will want 1 year, it will be determined by their bargaining power.

If more than 1 year, the agent should have to meet minimum income levels. For example, $100,000 a year from concerts, or the artist can terminate the agency agreement.

Scope of Representation

Some booking agencies only handle music.

Larger agencies include William Morris Endeavor and CAA (Creative Artists Agency). They have a music department, a film department, a TV department, etc. Usually they will represent the artist in all these areas.(These are called “full-service” agencies.)

Termination of the Agency Agreement

Union requirements provide that you can fire your agent if they don’t get you an offer of work for 90 days.

Choosing an Agent

To interest an agency, you must demonstrate that you’ve been successful booking your own shows (and that you have a following who will come to your shows).

The Business Manager

Qualifications

BUSINESS MANAGERS ARE NOT LICENSED, DO NOT REQUIRE A JD OR A CPA, AND ARE NOT LICENSED STOCK OR INVESTMENT ADVISORS

Role of the Business Manager

“The business manager is the ‘financial watchdog’ for the artist.”

Jamie Cheek at Flood, Bumstead, McCready & McCarthy

Role of the Business Manager

Handles the artist’s money:- Collects money- Pays the artist’s bills- Sets tour budgets- May invest the artist’s money- May do the artist’s taxes (pros and cons)

Fiduciary Relationship

Business manager has a fiduciary relationship to the artist. A fiduciary relationship involves trust, and requires that the fiduciary avoid any “conflict of interest” that would benefit the fiduciary but hurt the artist. Business manager must be loyal to the artist and act in the artist’s best interest.

Choosing a Business Manager

- The business manager will be the Chief Financial Officer (CFO) or the artist’s career.

- Understand the services being offered:- ASK:

- What kind of reports will you get and how often?

- Ask for samples. If they’re not clear, hire someone else.

Choosing a Business Manager

- ASK- Does the manager have any

certifications?- CPA (Certified Public Accountant)- Certified Financial Planner- Registered Financial Advisor

Choosing a Business Manager

- Understand How the Firm Tracks & Collects Royalty Payments- Do they have a system to review

contracts to know which royalties you should be receiving?

- When are payments due?- Are royalty payments tracked?

Taxes

Business managers must be aware of tax issues. For example, when touring you are paid in different states, each with its own tax laws.

Most artist have a CPA or tax attorney handle their taxes.

Business Manager’s Fee

Percentage of artist’s income (5%)

Combination:- A monthly minimum payment of $500 to

$2500, plus an hourly rate or a percentage of income.

Who Will Do the Work?

Will the business manager handle your work, or a staff member do the work?

Do you need a key person clause?

The Attorney

Entertainment Attorneys

- Lawyers are involved in every aspect of the business.

- Usually have multiple clients, so they see a lot of deals.

- Influences choice of other team members:- Personal Manager- Business Manager- Record Label

Choosing an Attorney

- May be the first person hired by the artist.- Sources of referrals:

- Other artists- Magazines and journals- Industry conferences and events

Attorney Fees

- Hourly fees: $250 and up.

- Flat fees: A set amount of money for a project.

- Retainer: Monthly fee guarantees a minimum number of hours.

- Percentage of income (usually 5%).- Value billing: What was the lawyer’s

contribution to the deal?

Conflict of Interest

Occurs where the lawyer represents, or has a financial interest in, both parties to the deal.

Conflict must be removed: use a different attorney for the deal.

It is the attorney’s duty to inform you of any conflicts of interest.

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