The Standard Management Contract - Our Most Read Email of 2017 - Outerloop

The Standard Management Contract – Our Most Read Email of 2017

Our Most Read Email of 2017 - The Standard Contract

I was recently asked my opinion on a public dispute between a manager and client regarding a standard management contract…

I’m going to hit you with the #1 most read email of 2017 right away.
I don’t know what got all the opens – the subject line, the general
topic, that it was forwarded and shared so many times… whatever it
was, it got more people reading than any of our other emails. This email is about the standard management contract. I dissect some common elements, and mistakes, that may come up in the management contract offered to you and your band.

Subject: What’s In a Standard Management Contract?

I was recently asked my opinion on a public dispute between a manager
and client regarding a standard management contract. The band was offered the
contract, disagreed with it, were removed from a tour the manager had
set up for them, and the band went public with why they were removed.

Initially, bloggers and internet commenters predominantly sided with
the band, believing the terms of the contract were too onerous. The
truth, as usual, is a little more complicated. I weighed in on the
public portions of the contract and thought you might be interested in
both the contract itself as well as some of my opinions on it.

Here is the link to the entire article but I’ve pulled out some of my comments down below:

The band name wasn’t spelled correctly in the management contract

I don’t think it’s reflective of the work that could be done. But I do think that given all the other things that appeared, this helps make a case for the band. Like, “Yeah, dude, how much do you care? You can’t even spell our fucking name right.” I know plenty of managers, and as I’ve grown busier and busier throughout my career and go to attorneys that I trust, I don’t look over all 12 pages of the agreement if we’ve done previous agreements with the attorney. I trust that they’ve gone over the material and the terms and they know whether it’s going to be two years or ten years or whatever it may be. I might not look over it with a fine-tooth comb, but I surely would have made sure that name was right.

And, if nothing else was bad, the band wouldn’t have cared, but the fact that the name wasn’t right definitely is a feather in their cap for their argument. It’s sadly the least important thing of the agreement but is their most compelling argument to me.

We All Make Mistakes

Look, I’m a guy that’s misspelled shit and has put the wrong address and occasionally had peoples’ names in there incorrectly, and the more you do this you realize that these are simple mistakes. But for the artist, it calls into question, “Okay, you’re going to look after my entire career? What happens when my name is wrong on an admat or on a ticket face or whatever else? Are you going to catch that?” Mind you, as the band grows and becomes bigger and bigger, you better believe that they’re going to catch it. If it’s on a logo, they’re going to catch it there. So I think it is a very simple and trivial mistake, but if you’re the band, that’s your whole existence, right?

Should a standard management contract call for the manager to get business class tickets?

So to me, that’s overreaching – the business class component of it. So, let’s just say that this happens to be Megadeth’s lawyer, and maybe in Megadeth’s deal that’s what it says. Megadeth are generating enough money where that might make sense.

I think I would say this: if this was in here without the business class part, it wouldn’t raise a red flag to me. Regarding the time frame for reimbursement, where it says “immediately for such cost and expenses,” this is when the shit hits the fan. When there’s a disagreement, that’s when they’re going to pull this out. Communication between the band and management is key.

Should the artist pay for the manager’s travel?

That kind of comes back to defining the role of managers. So, let’s just say that Havok are playing at the Megadeth show in New York and Justis and his team decide that being there is a good idea. Why? I’m going to use a better example: my client Refused went on tour with the Deftones. I went to the NYC show. Did I need to be there for the band to get on stage and play the show? Not at all. They’ve got a great tour manager, tour staff and team. They’ve got everyone that they need in order to pull off that show. But, for a few reasons — one is that, as a manager, part of that is expected, meaning that the Deftones manager and agent were there — I should probably show face and say, “Hi, and thank you for the opportunity.”

Let’s flip it on its head. If Plague Vendor go out with Refused, am I going to be bummed if the manager for Plague Vendor doesn’t show up and thank me personally? No, not really. But do I think it’s a smart move for him? Say I know him and we both plan to go to a show together — is that good for him and his band? Absolutely. He was able to sit there and continue to make the relationship of Plague Vendor doing business with Refused.

Not everybody is this way, but we do business with the people that we like and the people that we see. You’re only as relevant as the last time you either talked to somebody or saw them in person. On the developmental band level, travelling on their behalf is vitally important. And paying for this travel is absolutely a part of a standard management contract.

Should management take a cut of band member revenue outside the band?

Let’s say you’re great teacher of lessons and you’ve earned that privilege because either you’ve made a name for yourself prior to your band getting large or you benefit from being in the band itself. From there you go out on the road and teach lessons. This part of the contract says, “You need to cut the manager in for all of these extraneous things.” Let’s say that you grow your band big enough and Affliction wants to make you a brand manager, the whole idea of the contract including salaries, earnings, fees, royalties, residuals, and all these extra things generated from that is that the manager is helping the band grow and therefore helping the individuals, and all the things that they’re doing grow as well so management should be entitled to compensation based on those extra activities.

What is a “sunset clause” in a standard management contract?

First of all, it’s not all band income. This is commonly misconceived. Because it is only subject to “products or services created during the term and exploited during the term.” So what this really doesn’t cover is the most financially feasible thing that bands do, which is playing live shows. This would cover, obviously, if the band makes a record during the term with management; it’s saying that we should be compensated after the term.

[That said], it’s a very long sunset clause. Ten years is a really long time, especially given the fact that the initial term is only three years. That’s one of those tough things. Even if a manager loves the band and wants to work with them regardless, the idea is that for the time that I work with you this deal was put into place, and I should be compensated with some sort of sunset provision. I would say this one is long compared to a standard management contract.

How a Sunset Clause in a Management Contract Should Be Set Up

I could see it surely being at the 15% mark for half of what the original term is (one and a half years) or at most the length of the original term (three years). Let’s say that the original term is three years, then at most I could see the sunset lasting for three years. If the original deal is six years, then I can see it being longer, but where it is currently, based on what the original term is, it’s probably overreaching. The idea of a sunset clause is definitely standard.

The sunset clause can be set up many different ways, but that would probably be a very fair way of doing it. If you went to one and a half years or rounded it up to two years at 15%, then went down for another year at 10% and one more year at 5%, I wouldn’t say, “Oh my god, that’s the worst thing in the world,” but as it is now, for ten years [and at those percentages], that’s a long fricking time.

Consider Negotiating the Sunset Clause

In the case of this, I would imagine 10 years was probably Mustaine’s starting point and after some proper arm’s length negotiation, it would have been reduced. That said, the early stages of the band is where so much of the career is set. If the manager secures a great deal based on his/her relationships, then looking for long term compensation might not be out of the question.

Can management take a percentage of additional business ventures by the band?

Let’s say that I’m an aspiring singer/songwriter. At the beginning, checks are being paid to me. I play a show, they cut me a check for 300 bucks, but my dad, all of a sudden, starts his own entertainment company. He says, “All things from my son are now payable to my corporation.” So, Mike’s Dad LLC starts demanding the money for Mike, essentially trying to skirt around the fact that Mike’s been paid. “You’re not paying me; you’re paying my dad.” Right?

So this is essentially trying to protect management from that. As you read this, it looks crazy, but the general point is they’re trying to protect from the talent kind of going rogue. In the small, metal world of things, it’s probably never going to happen, but inevitably it does happen in the entertainment business, and they’re trying to cover the off-chance that it does. As it reads, it’s a bit challenging. Once an attorney digs in and starts to actually talk about it, it’s not really that crazy.

If a member leaves a band, does management have a right to terminate the management contract?

I don’t think I have [this kind of clause] in [my management contracts], but maybe I’ll add it after seeing this. However, it’s in almost every record deal that an artist signs.

It’s pretty common. Let’s just say that a member becomes huge and decides that he or she doesn’t want to work with the manager who, presumably, was there and helped make them huge. They quit, and if they’re the ones with the brand power and go form another act and can quickly monetize it based on the former member or whatever else, then that’s what it’s there to protect you from doing.

Do managers take a pay cut during the early years of a band’s career?

I think managers do that all of the time. Sometimes it’s a waived commission, sometimes it’s a reduced commission, sometimes it’s a deferred commission. Deferred would be, “You owe us five grand, but you’re going to pay it back over time.” I think a lot of those things in the developmental process happen on a case by case basis. I would say that it is quite common if everybody agrees that there is a great opportunity for the band. They’re going to lose money, there’s no way that they’re going to pay management. If they pay management, they’re going to lose even more money. We all know that growing things is a step by step process, so if it takes us not profiting… “profit” is a whole other term, but generating money for ourselves as a manager; it’s very common to do that.

Should a manager and artist work under a verbal agreement before agreeing to a standard management contract?

It really depends. I’ve seen it go all different ways. Typically when the opportunity presents itself to manage a band or you find someone, getting the business things in order can take a while, meaning getting paperwork together or whatever else it may be. Often times there is immediate work to be done, so it’s like, “Cool, let’s agree that we’re going to work together and we’ll move to paperwork down the line.”

On the flip side, because of cases like this, I’ve seen managers say, “Look, until we get this paperwork done, we can’t work for you.” But depending on the leverage of the manager or management company, they may very well lose the client. In this case, if Justis is trying to grow his management career, this is a lateral opportunity for him — Havok left another manager, and they’re coming in. He’s excited about it because he knows he can create opportunities, and he’s going to want to hop on it because, presumably, if he doesn’t, another company very well may. If he’s bogging them down with paperwork and taking time, he might lose that opportunity.

Are standard management contracts vague?

Absolutely standard.

The challenge is that [you can’t say] “Okay, I’m going to send 200 emails a month on your behalf. I’m going to make 42 phone calls. I’m going to take 3 people out to dinner and make sure that your Facebook is updated.” First and foremost, the range of duties for a manager varies so much depending on what the band has going on or doesn’t have going on, and there’s just such a wide swath of what the responsibilities are [that it varies from band to band]. My favorite way that someone has answered “what does a manager do?” was Ben Weinman [from The Dillinger Escape Plan] when he wrote something for Alternative Press (I think?) a long time ago which said, “Actually, the question should be what doesn’t the manager do?” To narrow it down to the specifics of those things really, probably isn’t going to benefit anyone.

Summary

In summary, I just want to point out that this is one heck of a difficult business. Many people who read this website probably don’t ever have to think or worry about any of this kind of stuff. Certainly not when it comes to their favorite bands. Many of the bands don’t have the business experience to navigate through so many of these tricky issues.

I know there are three sides to every story. And in this case the “truth” of what has transpired must lie somewhere in the middle. I don’t know any of the people involved, and I don’t have any emotional attachment to this. That said, I do feel for both parties. Here you have a band that was really looking forward to the tour of a lifetime. And you have a manager who was working and creating opportunities for the band who inevitably wanted to protect the investment of his time and energy. Those can be at odds, but they don’t have to be.

Conclusion

I have worked with many artists, often times young ones. I’m able to comment on this situation because of my experience. And I’ve chosen to do so because I am passionate about both sides. I want for developing artists to succeed. But I want for them to be able to remotely grasp what it takes to help support them. Without knowing Havok, I’d guess that they just don’t have the experience to understand what the manager and his team have done thus far. If you care about your artists you’ll work every available hour to get them opportunities. And there is almost no price which can be put on that. Except maybe some business class tickets every once in a while! Kidding, I’m more of a private jet kind of guy.

I should remind you, I am not an attorney. I would not advise taking
this contract and using it as a template for one of your own. I also
know there are other managers, including the one who presented this
one to their client, who would disagree with my opinion. But, I’ve
looked at a lot of these over the years and have spent a lot of time
speaking with some of the best lawyers in the industry about contracts
like this one.
Enjoy.

And if you want to get on the email list – just sign up here!