management contract

1.) Subject

The real management contract regulates the cooperation between artist and manager on a conceptual level, i.e. the career- and image-building work. Mostly, however, the contracts also contain provisions on the placement of the artist in gigs and therefore overlap with booking and agency contracts.

2.) Cooperation

The principles of cooperation can be reduced quite well to two things: we trust each other and inform each other. If the relationship of trust is not right, the relationship between artist and manager is doomed to failure from the start. That is why the choice of manager in particular should be made dependent on the much-vaunted “gut feeling”.

It is customary and absolutely necessary for the cooperation to stipulate that the artist will inform the manager in good time about holidays, absences from the venue, being prevented from working, etc. The artist must also inform the manager of any changes to the contract. Sometimes there are contracts that provide for 24-hour availability by mobile phone (rather the exception). However, one should then consider whether such cooperation is desired. Such availability will rarely be necessary.

3.) Task management

Many contracts are very vague at this point and only contain formulations such as “development, conception, coordination and promotion of all activities of the band worldwide in all areas of the entertainment industry”.

Somewhat more concrete is the following wording:

  • Acquisition / coordination / preparation of live performances, tours, TV and radio appearances.
  • Acquisition of sponsors and advertising partners
  • Coordination of sponsor and advertising appearances
  • Coordination and preparation of press appointments and autograph sessions
  • Initiation/preparation of contracts with recording companies and music publishers
  • General coordination of appointments

4.) Duties of the artist

The artist usually undertakes in the management contract that he/she will not to entrust any other management with the performance of tasks during the term of the contract always indicate the representation by the management to the outside world to fulfill all contracts concluded by the management not enter into any contractual obligations without the prior consent of the management.

Especially the last-mentioned regulation is quite drastic for the artist if he adheres to it 100%. He or she must obtain the management’s OK for all contracts related to his or her artistic career. However, a contractual relationship exists not only in the case of written contracts, but also in the case of oral agreements. If, for example, the artist wants to be a guest musician on the recordings of a band of friends, he must, strictly speaking, ask the manager for permission beforehand. An alternative would be to ask the Replace the term “consent” with “agreement”. According to this, it would be sufficient if the artist merely informed the manager.

The unconditional fulfilment of all contracts concluded by the management (c. above) should be critically questioned. For example, the artist cannot be forced to perform if he is unable to do so, e.g. due to illness or exhaustion. In this case, the artist undoubtedly has a right to refuse performance, which should be included in the management contract. Such examples tend to be the exception, but have unfortunately also occurred.

In some contracts, the artist is obliged to follow instructions from the management in artistic matters. This is a considerable restriction, which is not acceptable at first. If the artist nevertheless agrees to this, he must be aware of the consequences. In principle, he loses his right of artistic self-determination and can be moulded at will (this often happens with so-called “casting bands” in the relevant TV series).

5.) Power of attorney

The manager’s power of attorney should in any case be expressly limited to the tasks specified in the contract. In individual cases the wording of the power of attorney is rather vague and must therefore be specified. If the management contract states, for example, “the artist grants the management the power to negotiate and conclude all legal transactions”, this is much too broad.

The manager needs at least a negotiating power from the artist in order to work. This means that he can first negotiate contracts on behalf of the artist. Most contracts also include a power of attorney to conclude the contract. This means that the manager can then also conclude the contracts in the artist’s name in a binding manner. It is debatable whether the power of attorney is necessary, especially for management contracts. If the manager does not have a power of attorney, the artist would have to sign all the contracts himself, and the manager would not even be able to book a flight for the artist. An alternative here would be to limit the power of attorney to at least a certain contract value, e.g. up to a contract sum of € 2,000. All legal transactions with a higher contract value then require the artist’s consent. Finally, it is customary to stipulate that the manager may also use third parties to fulfil his or her tasks, as otherwise he or she would not be able to employ staff.

In any case, the artist should expressly reserve the right to conclude long-term binding contracts such as publishing or band acquisition contracts (although in practice it hardly ever happens that a manager signs such contracts for the artist). This can also be ruled out as a general rule by stating that the management is not entitled to grant copyrights or neighbouring rights to third parties on behalf of the artist.

If the manager has power of attorney, the artist should at least receive a copy of each contract (especially the concert contract) (even better: the original), which must also be mentioned in the management contract. This gives the artist a better overview and control. Clauses should be avoided according to which the manager will only inform the artist upon request. The manager should always keep the artist informed without any special request.

6.) Remuneration

The manager’s remuneration is between 15% and 20% of the artist’s income.  It is a matter of negotiation whether the manager will share in all or only part of the artist’s income. It is not unusual, for example, for income from GEMA and GVL to be left out of this. This can be justified by the fact that the manager has nothing to do with the creative process of songwriting. Alternatively, the manager’s participation can be reduced here: Instead of 20%, he or she receives only 10% of the GEMA income.

The manager often wants to be compensated for in-kind contributions (e.g. sponsoring in kind). For this reason, it is sometimes agreed that the artist must pay the manager his or her corresponding share if the contribution in kind is monetised (i.e. sold). A payment before monetisation is to be rejected, as the artist would then have to tap his own sources of money.

If the manager participates in all the artist’s income and there is no list or only an exemplary list, this should be limited to “income from artistic activity”. Otherwise, one could argue whether the manager also participates in other income (e.g. rental income).

The term “income” basically includes gross income, so that related expenses are not deductible. At least for the live sector, this should be restricted, since the artist always has expenses here that are deducted from his fee (travel costs, accommodation, meals). However, if the manager shares in the gross income, it is quite possible that in the end there is not much left for the artist after deducting all costs. The same applies to the production of recordings. If the band has costs for studio, mixing and mastering, it is hard to see why the manager should not also bear these costs. Consequently, it is recommended that the manager should share the costs for live performance and recording production. The same applies to the merchandising area if the artist incurs costs in the production.

Clauses according to which the artist is to bear the manager’s expenses are also popular. It is debatable whether this is still necessary. The artist should at least question this. A distinction must be made here between the manager’s regular costs such as office rent/telephone/shipping costs and the more irregular costs such as hotel/flight when accompanying a tour. The assumption of irregular costs can at least be made dependent on the prior written consent of the artist. Thus, if the manager wants to book flight and hotel for a concert of the artist, he has to get the OK of his protégé beforehand. If other agencies are involved in a transaction (e.g. booking), it is quite common to generally reduce the manager’s involvement. Finally, many management contracts stipulate that the artist must bear 100% of the collection or legal costs. Since collection also involves the manager’s participation, it is quite fair to share these costs between the artist and the management.

Some contracts provide for the manager’s participation after the end of the contract period (so-called “sunset clause”). The reason for this is that in many cases the manager has to build up the artist first and the fruits of his or her labour only come to fruition later. Contracts in which the manager was involved during the term of the contract often result in significant payments only after the end of the contract. The manager wants to be involved in this. There are different ways of structuring post-contractual participation:

Option 1:

The manager participates in all income from contracts “which came into being during the term of the management contract”. In the case of contracts for the acquisition of bands and publishing contracts, this may mean for the artist that the manager still has to participate for decades. This is without doubt the most unfavourable variant for the artist and should therefore be rejected. Quite treacherous in such clauses is also the harmless wording, the implications of which are not apparent at first glance.

Option 2:

The manager’s participation is limited in time and amount.

This could look like this, for example:

In the 1st year after the end of the contract: 80% of the original amount of remuneration.

In the 2nd year after the end of the contract: 60% of the original remuneration amount

In the 3rd year after the end of the contract: 40% of the original remuneration amount.

The manager will receive a share of all the artist’s income, regardless of whether the contract was concluded during the term of the management contract or not. After three years, however, this is also the end.

Option 3:

A sliding scale as in variant 2, but here a distinction is made according to whether the contract was concluded during the term of the management contract. In the case of sound carrier productions, a further distinction can be made as to whether the sound carrier was also produced and published during the term of the contract. In the case of GEMA income, a distinction can also be made according to whether the work was published during the term of the contract.

7.) Accounting

Binding settlement and payment dates should be agreed. Quarterly settlement and payment is customary. The consequence of this is that the manager must actually forward the income to the band on a regular basis, provided he has taken over the collection. A right to inspect the contracting party’s documents is also recommended together with the right to audit. According to this, the artist can inspect the manager’s accounting documents and have them audited. This examination may then usually only be carried out by a tax advisor, lawyer or accountant. The reason for this is that these persons are bound by law to secrecy. This is because the accounting documents represent sensitive information that should not be made public. It is also customary here to agree that the costs of the audit will be borne by the other party if the audit reveals a discrepancy of more than 5% to the disadvantage of the artist.

In some cases, it is also agreed that there is no accounting obligation if the artist’s income does not exceed 100 euros. Unfortunately, such a provision is sometimes abused in practice to avoid billing at all, even though the income exceeds 100 euros. It is understandable if the manager does not want to account for every small amount in writing in order to keep his workload manageable. On the other hand, even 100 euros can be important for an artist, so one should reconsider such a clause.

However, invoicing and payment can also be agreed exactly the other way round. This means that all payments go 100% to the artist and he has to settle and pay out to the manager his share. The advantage is obvious: the artist retains control and cannot be taken advantage of. The disadvantage, however, is certainly the amount of work involved.

8.) Liability / indemnity clause

The manager naturally wants to minimise his risk and so he will usually demand that the artist indemnify him against third party claims. To be fair, this should be limited to such culpable breaches of duty by the artist that result from the management contract or from contracts concluded on the basis of the management contract.

9.) Term

Terms of two to three years with an option to extend are customary. Both the term of the contract and the renewal option can be made conditional on a certain minimum level of income from artistic activities having been achieved. If, for example, the band’s income falls below €10,000 after one year of management activity, an extraordinary right of termination can be agreed upon for this case. This right of termination can also apply to both sides, so that the manager also has the option of terminating the contract.

It is also possible to agree on a right of termination in the event that no record contract is acquired with a “renowned” record company within a certain period of time (e.g. 6 to 12 months). However, this term is open to interpretation and one can concretise it in such a way that it must be a record company that has had a chart placement in the Media Control Top 20 (albums) in the two years preceding the conclusion of the contract with the artist.

The renewal options are always unilateral (i.e. they can only be exercised by the manager) and imply a long overall contract period. So if the artist has agreed to a management contract with a three-year term and two options to extend for another year, the maximum contract term is 5 years in total if both options are exercised. One should always be aware of this when concluding a contract.

Often you will find the provision that termination is excluded according to § 627 BGB. According to this provision, it would be possible to terminate the contract without notice even if the term is fixed, which the agency understandably wants to avoid.

However, the right of extraordinary termination according to § 626 BGB remains. According to this, the artist can terminate the contract if the contractual partner has blatantly violated his or her duties and a continuation of the contractual relationship until the end of the term is unreasonable. An example would be repeated and deliberate accounting fraud. However, not every breach of duty by the manager entitles the artist to extraordinary termination. In practice, the examination of the right to extraordinary termination therefore usually causes problems. One has to look closely at what happened and whether the artist is not also partly responsible for the problems. However, since hardly any management will admit its mistakes after a termination by the artist, the inevitable consequence is a state of limbo. This means that the artist initially has no certainty as to whether his termination was justified or unjustified.  This situation can only be clarified through a mutually agreed termination agreement or court proceedings. In both cases, costs are incurred (lawyer’s fees and/or court costs), part of which the artist usually has to bear. It is not uncommon for a termination agreement to include a “compensation sum” for the manager’s lost income.

Bands often don’t understand why they still have to pay the manager even though the contract is being terminated. However, the manager will argue that he is losing income due to the premature termination of the contract. This could be income from record sales, among other things, where the manager’s service (arranging the conclusion of the contract / assisting with the recordings) has already been rendered. On the other hand, any saved expenses (e.g. office costs etc.) as well as potential income due to freed-up labour should be taken into account when calculating the “redemption sum”.

The advantage of “buying” legal security in this way is obvious. The artist can look for a new management without the old management interfering. Otherwise, the old management could sue the artist for violation of the exclusive relationship to the old management contract (which, according to the former management, still exists). Consequence: great inconvenience, costs and the deterrence of a new manager who in turn could sue the artist even if a contract has already been signed. This is because the artist usually guarantees that he is free to sign the new management contract. However, if he is still bound to the old contract, this is not the case …

If the former manager has also taken over the collection of the artist’s income, he can react to a termination without notice by stopping all payments to the artist, whether justified or unjustified. In the worst case, the artist then not only incurs costs but also loses income. This can lead to the artist at some point no longer being able to continue legal proceedings because he or she lacks the money to do so. This may sound like a horror scenario, but it has actually happened.




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